Tax havens facilitate important types of harmful activity: money obtained from crime, from corruption, money sent abroad to avoid taxes, and for corporate tax avoidance schemes which falsely but often legally enable corporations to transfer profits earned in higher tax destinations to these low tax destinations, thus reducing or avoiding taxes. It is a vital part of these types of harm.
According the estimates of Gabriel Zucman, money in offshore destinations, with ownership obscured from the public, amounts to about 8 per cent of the global financial assets of households, equivalent to at least $7.6 trillion. The figure is much worse for developing countries. For Africa, Zuckman estimates that tax havens hold about 30 percent of Africa’s financial wealth, and in Russia, 50 percent or more.
“A tax haven provides facilities that enable people, corporations and other entities escape (and frequently undermine) the laws, rules and regulations of other jurisdictions, using secrecy as a prime tool. Those rules include taxes, but also criminal laws, disclosure rules (transparency), financial regulation, inheritance rules, and more” (Tax Justice Network). “A global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients” (Tax Justice Network)
CPI 2019: Trouble at the topTransparency International January 20, 2020 Top scoring countries on the Corruption Perceptions Index (CPI) like Denmark, Switzerland and Iceland are not immune to corruption. Multiple scandals in 2019 demonstrated that transnational corruption is often facilitated, enabled and perpetuated by seemingly clean Switzerland and Nordic countries.
The Financial Secrecy Index ranks jurisdictions according to their secrecy and the scale of their offshore financial activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight.
The Financial Secrecy Index complements our Corporate Tax Haven Index, which ranks the world’s most important tax havens for multinational companies.
Shining light into dark places
An estimated US$21 to $32 trillion
of private financial wealth is located, untaxed or lightly taxed, in
secrecy jurisdictions around the world. Secrecy jurisdictions – a term
we often use as
an alternative to the more widely used term tax havens – use secrecy to
attract illicit and illegitimate or abusive financial flows.
Illicit cross-border financial flows have been estimated at US$1-1.6 trillion per year, dwarfing the US$135 billion or so in global foreign aid. Since the 1970s, African countries alone have lost over US$1 trillion in capital flight, while combined external debts are less than US$200 billion. So Africa is a major net creditor to the world – but its assets are in the hands of a wealthy elite, protected by offshore secrecy; while its debts are shouldered by broad African populations.
Doors wide open: Corruption and real estate in four key marketsMaíra Martini Transparency International 2017 (40 page PDF file) The United States, Canada, Great Britain, and Australia are the real estate markets analyzed. The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds. Not only do expensive apartments in New York, London or Vancouver raise the social status of their owners and enhance their luxurious lifestyles, but they are also an easy and convenient place to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behavior and the proceeds of crime. According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 and 2013.
Tackling tax havensNicholas ShaxsonFinance and Development September 2019 Tax havens collectively cost governments between $500 billion and $600 billion a year in lost corporate tax revenue … through legal and not-so-legal means. Of that lost revenue, low-income economies account for some $200 billion—a larger hit as a percentage of GDP than advanced economies and more than the $150 billion or so they receive each year in foreign development assistance. American Fortune 500 companies alone held an estimated $2.6 trillion offshore in 2017, though a small portion of that has been repatriated following US tax reforms in 2018. And individuals have stashed $8.7 trillion in tax havens.
The rise of phantom investmentsJannick Damgaard, Thomas Elkjaer, and Niels JohannesenInternational Monetary Fund September 2019 Some worthwhile and interesting (even astounding) points in this article including:
Luxembourg has as much Foreign Direct Investment (FDI) as the United States, and more than China.
In practice, FDI is defined as cross-border financial investments between firms belonging to the same multinational group, and much of it is phantom in nature—investments that pass through empty corporate shells.
Total world FDI is $40 trillion. Phantom investments are $15 trillion or 30 percent of FDI, a percentage which has increased in recent years in spite of efforts to crack down on tax avoidance.
A few well-known tax havens host the vast majority of the world’s phantom FDI. Luxembourg and the Netherlands host nearly half. And adding Hong Kong SAR, the British Virgin Islands, Bermuda, Singapore, the Cayman Islands, Switzerland, Ireland, and Mauritius to the list, these 10 economies host more than 85 percent of all phantom investments.
The firms, individuals and others who set up these empty corporate shells abroad receive substantial investments from such entities, with averages across all income groups exceeding 25 percent of total FDI.
Corporate Tax Haven Index 2019 Tax Justice Network May 28, 2019 The Corporate Tax Haven Index ranks the world’s most important tax havens for multinational corporations, according to how aggressively and how extensively each jurisdiction contributes to helping the world’s multinational enterprises escape paying tax, and erodes the tax revenues of other countries around the world. It also indicates how much each place contributes to a global ”race to the bottom” on corporate taxes. The top three tax havens were the British Virgin Islands, Bermuda and the Cayman Islands, which are either a British overseas territory or crown dependency. If Britain’s network were assessed together, it would be at the top.