Category Archives: Tax Havens

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 (The Hidden Wealth of Nations), 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, Zucman 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)

Tax havens

The United Arab Emirates: A key piece in the global money laundering puzzle Transparency International May 11, 2020

Doors wide open: Corruption and real estate in four key markets Maíra 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.

Shell companies let a ‘parade of horribles’ into the U.S. financial system Scott Greytak Transparency International February 4, 2020

How U.S. firms helped Africa’s richest women exploit her country’s wealth Michael Forsythe, Kyra Gurney, Scilla Alecci and Ben Hallman New York Times January 19, 2020

Tech giants shift profits to avoid paying taxes. There is a plan to stop them. Jim Tankersley New York Times October 9, 2019

Tackling tax havens Nicholas Shaxson Finance 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.

 In less than a decade, phantom FDI has climbed from about 30 percent to almost 40 percent of global FDI. Credit: IMF
In less than a decade, phantom FDI has climbed from about 30 percent to almost 40 percent of global FDI. Credit: IMF

The rise of phantom investments Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen International 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. 

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Caption: View of Fort-Louis, Mauritius. Credit: Dietmar Reigber

Tax havens and illicit financial flows

Two  excellent new articles:

Mounting illicit financial outflows from the South Jomo Kwame Sundaram and  Zera Zuryana Idris Inter Press Service October 31, 2017

Tax haven Mauritius’ rise comes at Africa’s expense Will Fitzgibbon International Consortium of Investigative Journalists November 7, 2017

Caption: View of Fort-Louis, Mauritius, where financial firms that administer tax havens are located.  Credit: Dietmar Reigber


Caption: The offices of Appleby, an offshore law firm, in Hamilton, Bermuda. The company is at the center of leaked documents being called the Paradise Papers. Credit: Meredith Andrews for The New York Times

Tax havens of the elite exposed by Paradise Papers

A principal way the ultra-rich and corporations pay less taxes is by shifting where they declare income to places like Caribbean islands with a very low or non-existent tax rate.  The New York Times has run an excellent series of articles describing how Wilber Ross, the Commerce Secretary, Apple and others have benefited, summarized in the following article.

Paradise Papers shine light on where the elite keep their money Michael Forsythe New York Times November 5, 2017

Tax havens are also used to cover up bribery, stealing government assets and other illegal transactions.

Paradise Papers reveal how tax havens damage Africa  Kate Hairsine DW November 11, 2017

The Paradise Papers hacking and the consequences of privacy Jake Bernstein New York Times November 7, 2017

…a lawyer at Mossack Fonseca candidly wrote in a confidential internal memorandum, “95 percent of our work” is “selling vehicles to avoid paying taxes.” The amounts involved are staggering. An estimated 8 percent of household financial wealth is held offshore, representing a loss in annual global tax revenue of about $190 billion. But this pales in comparison to the tax avoidance and tax evasion by the large multinational companies that use this system. All told, more than $7.6 trillion may well be hidden in tax havens around the world, according to Gabriel Zucman, an economist at the University of California, Berkeley, who studies the issue. Read full story.

Also see  Understanding harmful economic systems., especially the section on obtaining income.

Caption: The offices of Appleby, an offshore law firm, in Hamilton, Bermuda. The company is at the center of leaked documents being called the Paradise Papers. Credit: Meredith Andrews for The New York Times

Paul Manafort’s Guide to Laundering Income and Sereptious Spending

Very interesting revelations as the result of a federal indictment on how Paul Manafort hid income he had earned from the U.S. government, yet spent money lavishly in the United States,  Also noteworthy was how he earned the money in the first place.

Manafort is the tip of the iceberg Richard Gordon New York Times October 31, 2017.

How a federal inquiry says Paul Manafort laundered $18 million 

The indictment.

Also valuable were articles describing Manafort assistance to  deposed Ukrainian president  Viktor F. Yanukovych, who was closely allied with the Russian government,

Charges against Paul Manafort resonate in Ukraine  Andrew E. KrameNew York Times October 31, 2017

With Manafort, it really is about Russia, not Ukraine Evelyn N. Farkas New York Times November 5, 2017

Also see  Understanding harmful economic systems., especially the section on obtaining income.

How vulture funds make money by harming ordinary citizens

Why investors can’t get enough of Tajikistan’s debt

Landon Thomas, Jr. New York Times October 17, 2017

Who owns Puerto Rico’s debt?  We’ve tracked down 10 of the biggest vulture firms.

Joel Cinteron Arbasetti and Carla Minet, Centro de Periodismo Investigativo,
and Alex V. Hernandez and Jessica Stites, In These Times October 17, 2017

The central mosque in Dushanbe, the capital of Tajikistan. A former Soviet republic, Tajikistan has rarely interacted with global investors but is offering an interest rate of just over 7 percent for a 10-year bond. Credit: James Hill/The New York Times