Tag Archives: Tax Havens

News about countries that through secrecy and low tax rates provide safe havens for assets including those earned from corruption, crime and tax avoidance. “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).   They  provide a haven for important types of harmful activity:  for money obtained from crime, from corruption, for 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.  “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

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.

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.

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. 

Financial secrecy index 2018 Tax Justice Network May 28, 2019
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 top three countries for secrecy are Switzerland, the United States, and the Cayman Islands.
An estimated $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 $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 $1 trillion in capital flight, while combined external debts are less than $200 billion. So Africa is a major net creditor to the world – but its assets are in the hands of a wealthy élite, protected by offshore secrecy; while the debts are shouldered by broad African populations.

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.

Portugal dominated Angola for centuries. Now the roles are reversed.

Norimitsu Onishi New York Times August 22, 2017

LISBON — How the roles have reversed: The colonizer, some Portuguese contend, has been colonized. On the Portuguese coast of Cascais, where the nation’s royal court used to summer, a new 14-story condominium building looms confidently by the sea. So many of its apartments have been bought by Angola’s ruling class — sometimes a handful at a time — that the development has a nickname: the “Angolans’ building.” Along the grandest shopping boulevard in the capital, Lisbon, Angola’s elite buy designer suits and handbags by the armful. And on one corner, above Louis Vuitton, sits the local office of Africa’s richest woman, Isabel dos Santos, a billionaire from Angola who has become one of Portugal’s most powerful figures by buying large chunks of the country’s banking, media and energy industries.  See full story.

Photo caption: Retiring Angola President José Eduardo dos Santos (on the right) has ruled Angola for close to four decades and will remain head of the ruling MPLA party. Dos Santos’s billionaire daughter Isabel heads Sonangol, the state oil company, and his son José Filomeno runs the country’s $5 billion sovereign wealth fund.