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Cornell Studies in Money
Tax Havens: How Globalization Really Works
If you are looking to understand how tax havens and offshore financial centers work, how they are governed (or not!), and what kind of economic and political impacts they have, then this book is for you! This recent text by well-recognized experts in the field is a most welcome addition to the literatures.... It fills an important void, since there was not until now a general but nevertheless detailed reference text on tax havens... it should be mandatory for courses in IPE, international finance, and international business. ― Patrick Leblond ― Political Science Quarterly From the Cayman Islands and the Isle of Man to the Principality of Liechtenstein and the state of Delaware, tax havens offer lower tax rates, less stringent regulations and enforcement, and promises of strict secrecy to individuals and corporations alike. In recent years government regulators, hoping to remedy economic crisis by diverting capital from hidden channels back into taxable view, have undertaken sustained and serious efforts to force tax havens into compliance. In Tax Havens , Ronen Palan, Richard Murphy, and Christian Chavagneux provide an up-to-date evaluation of the role and function of tax havens in the global financial system—their history, inner workings, impact, extent, and enforcement. They make clear that while, individually, tax havens may appear insignificant, together they have a major impact on the global economy. Holding up to $13 trillion of personal wealth—the equivalent of the annual U.S. Gross National Product—and serving as the legal home of two million corporate entities and half of all international lending banks, tax havens also skew the distribution of globalization's costs and benefits to the detriment of developing economies. The first comprehensive account of these entities, this book challenges much of the conventional wisdom about tax havens. The authors reveal that, rather than operating at the margins of the world economy, tax havens are integral to it. More than simple conduits for tax avoidance and evasion, tax havens actually belong to the broad world of finance, to the business of managing the monetary resources of individuals, organizations, and countries. They have become among the most powerful instruments of globalization, one of the principal causes of global financial instability, and one of the large political issues of our times.
280 pages, Paperback
First published December 1, 2009
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Displaying 1 - 7 of 7 reviews
August 23, 2013
An excellent definition of what tax havens are, as well as their historic origins and evolution. Tax havens, in their essence, are preferential tax regimes (PTRs), largely used by small or tiny countries (but also by the UK and the US to provide) to create loopholes that allow corporations and HNWIs (usually secretly) to avoid having their profits accrue higher tax zones of the global economy. For countries that offer these services, tax haven legislation is a "conscious, intentional, and long-term developmental strategy" — for the small countries that are the archetypal offshore tax havens often their sovereignty is the only comparative advantage they have in a globalized world economy.
The book provides a useful typology of different kinds of tax havens, including (1) primary offshore financial centers such as London and New York that acted as international financial intermediaries for their market regions; (2) booking centers such as the Bahamas or the Cayman Islands that do not themselves have Capital Market capacity but allow themselves to serve as a site for the creation of dummy corporate vehicles; and (3) collection centers like Bahrain that engage primarily in outward financial intermediation.
According to the authors, the defining feature of tax havens is their secrecy. "Low tax is not the sole lure: rather, secrecy is the key attraction, and in many cases tax advantage would not be available if secrecy did not protected from discovery." (239) Indeed it may be more accurate to describe tax havens as "secrecy havens" or "opacity havens." This opacity is created in three ways. First and most common are banking secrecy laws. The book provides an excellent historical account of the evolution of banking secrecy. In Switzerland, baking secrecy was already the norm by the early 20th century. As various European countries in the wale of WWI tried to raise tax revenues, more and more rich people sought to stash their money in Alpine banks. Led by the canton of Zug and directed by bankers in Zurich, Switzerland realized it could effectively offer a shelter. "Foreign trusts and foundations initially used Swiss banking less for taxation reasons and more for fear of political reprisals in their volatile home countries. Many noble families and much old money were looking to protect their assets from the revolutionary forces that was sweeping through Europe— And in Swiss bankers and cantons they found perfect partners to assist them to protect themselves." (118) The Swiss like to perpetuate the myth that they formally codified their bank secrecy laws in 1934 in order to protect the assets of Jews fleeing the Third Reich. In fact, the authors show, the 1934 law was a response to the accidental disclosure in 1932 of 4000 rich French clients names; the Swiss decision to criminalize disclosure of banking client information was a way to reassure nervous depositors in the wake of that disclosure.
Another interesting aspect of the book, is the way that they frame the rise of offshore tax havens as a consequence of the decay of the British Empire. Britain's many small dependencies were in essence told that they would have to pay their own way starting in the 1950s and 1960s. Bankers in London wanted to maintain financial control over global assets, even in the wake of Britain's declining military and political heft. In essence, by allowing all of its various small island dependencies, from the Bahamas, to the Caymans, to Bermuda, to the Channel island, Britain invented a way for them to pay for themselves. (Another factor was the invention of jet airplanes and improved communication channels which allowed these island locations to be much more accessible than they had been previously.) Today places like the Caymans or the British Virgin Islands are home to hundreds of thousands of shell corporations, established simply for the purpose of providing a nontransparent no or low tax environment for corporations that wish to engage in global investments of various sorts. These corporations pay no tax but the islands benefit by charging a nominal registration fee as well as a nominal directors fee which at the scale that they are operating provides significant income to the islands. More recently some countries, such as Singapore after the 1998 Asian financial crisis, have a very explicitly adopted a strategy of becoming a tax haven as a developmental program.
Another key moment occurred in 1957. Faced with mounting speculation against the pound after the Suez crisis the British government impose restrictions on the use of the pound sterling in trade credits between nonresidents. Faced with the prospect of their business disappearing overnight commercial bankers in the city responded by using US dollars in their international dealings and arguing that this had no bearing on the UK balance of payments and therefore was not something that fell under the Bank of England's regulatory purview. As the authors say, "it is inconceivable that the market could have flourished without the blessing of the bank of England. The bank could've intervened and opposed this new unregulated market. The Bank, however, never objected nor are we aware of its issuing any statement in support of the new market." (132) In essence the Bank of England established the Eurodollar market through an act of benign neglect.
So why should we care about tax Havens? Two major reasons according to the authors. First it encourages a race to the bottom in terms of both tax and financial regulation. Second the secret nature of tax savings provide a perfect vehicle for the supply-side of corruption. The corruption piece is critical: offshore tax Havens with all their buttoned up lawyers bankers and accountants are critical vehicles for facilitating global corruption. But in fact tax evasion anticorruption are really twin phenomena: "they share the same political and social dynamics. Both involve elites avoiding and invading their responsibilities to the societies that sustain them. This 'Revolt of the Elites' has two main components: first, elites remove themselves from carrying the costs involved in maintaining healthy societies; second, they remain actively involved in democratic (or other) processes of government, notably through lobbying."(181) In short, tax havens are critical strategic sites in the global plutocratic insurgency.
The book provides a useful typology of different kinds of tax havens, including (1) primary offshore financial centers such as London and New York that acted as international financial intermediaries for their market regions; (2) booking centers such as the Bahamas or the Cayman Islands that do not themselves have Capital Market capacity but allow themselves to serve as a site for the creation of dummy corporate vehicles; and (3) collection centers like Bahrain that engage primarily in outward financial intermediation.
According to the authors, the defining feature of tax havens is their secrecy. "Low tax is not the sole lure: rather, secrecy is the key attraction, and in many cases tax advantage would not be available if secrecy did not protected from discovery." (239) Indeed it may be more accurate to describe tax havens as "secrecy havens" or "opacity havens." This opacity is created in three ways. First and most common are banking secrecy laws. The book provides an excellent historical account of the evolution of banking secrecy. In Switzerland, baking secrecy was already the norm by the early 20th century. As various European countries in the wale of WWI tried to raise tax revenues, more and more rich people sought to stash their money in Alpine banks. Led by the canton of Zug and directed by bankers in Zurich, Switzerland realized it could effectively offer a shelter. "Foreign trusts and foundations initially used Swiss banking less for taxation reasons and more for fear of political reprisals in their volatile home countries. Many noble families and much old money were looking to protect their assets from the revolutionary forces that was sweeping through Europe— And in Swiss bankers and cantons they found perfect partners to assist them to protect themselves." (118) The Swiss like to perpetuate the myth that they formally codified their bank secrecy laws in 1934 in order to protect the assets of Jews fleeing the Third Reich. In fact, the authors show, the 1934 law was a response to the accidental disclosure in 1932 of 4000 rich French clients names; the Swiss decision to criminalize disclosure of banking client information was a way to reassure nervous depositors in the wake of that disclosure.
Another interesting aspect of the book, is the way that they frame the rise of offshore tax havens as a consequence of the decay of the British Empire. Britain's many small dependencies were in essence told that they would have to pay their own way starting in the 1950s and 1960s. Bankers in London wanted to maintain financial control over global assets, even in the wake of Britain's declining military and political heft. In essence, by allowing all of its various small island dependencies, from the Bahamas, to the Caymans, to Bermuda, to the Channel island, Britain invented a way for them to pay for themselves. (Another factor was the invention of jet airplanes and improved communication channels which allowed these island locations to be much more accessible than they had been previously.) Today places like the Caymans or the British Virgin Islands are home to hundreds of thousands of shell corporations, established simply for the purpose of providing a nontransparent no or low tax environment for corporations that wish to engage in global investments of various sorts. These corporations pay no tax but the islands benefit by charging a nominal registration fee as well as a nominal directors fee which at the scale that they are operating provides significant income to the islands. More recently some countries, such as Singapore after the 1998 Asian financial crisis, have a very explicitly adopted a strategy of becoming a tax haven as a developmental program.
Another key moment occurred in 1957. Faced with mounting speculation against the pound after the Suez crisis the British government impose restrictions on the use of the pound sterling in trade credits between nonresidents. Faced with the prospect of their business disappearing overnight commercial bankers in the city responded by using US dollars in their international dealings and arguing that this had no bearing on the UK balance of payments and therefore was not something that fell under the Bank of England's regulatory purview. As the authors say, "it is inconceivable that the market could have flourished without the blessing of the bank of England. The bank could've intervened and opposed this new unregulated market. The Bank, however, never objected nor are we aware of its issuing any statement in support of the new market." (132) In essence the Bank of England established the Eurodollar market through an act of benign neglect.
So why should we care about tax Havens? Two major reasons according to the authors. First it encourages a race to the bottom in terms of both tax and financial regulation. Second the secret nature of tax savings provide a perfect vehicle for the supply-side of corruption. The corruption piece is critical: offshore tax Havens with all their buttoned up lawyers bankers and accountants are critical vehicles for facilitating global corruption. But in fact tax evasion anticorruption are really twin phenomena: "they share the same political and social dynamics. Both involve elites avoiding and invading their responsibilities to the societies that sustain them. This 'Revolt of the Elites' has two main components: first, elites remove themselves from carrying the costs involved in maintaining healthy societies; second, they remain actively involved in democratic (or other) processes of government, notably through lobbying."(181) In short, tax havens are critical strategic sites in the global plutocratic insurgency.
May 17, 2013
The books Treasure Islands: Tax Havens and the Men who Stole the World and The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business. Richard Brooks were a great introduction to tax havens but if you really want some detailed explanation this is the book to read.
It is written in an academic but very accessible style and presents an objective viewpoint on the current operation and impact that tax havens are having on the developed and developing world. It exposes the hypocrisy of how the OECD attempts to regulate and eradicate tax havens in small states while ignoring the tax avoidance that is made possible by their own countries.
It is written in an academic but very accessible style and presents an objective viewpoint on the current operation and impact that tax havens are having on the developed and developing world. It exposes the hypocrisy of how the OECD attempts to regulate and eradicate tax havens in small states while ignoring the tax avoidance that is made possible by their own countries.
June 21, 2010
Excellent read and survey of the subject. I expected a dry academic tome and was pleasantly surprised to read a well-researched, well-documented, balanced treatment that I truly enjoyed reading. Explores the role that tax havens play not only in tax avoidance and/or evasion, but also regulatory avoidance, "cooking the books," hiding of assets for a variety of purposes and money-laundering. Shows how such havens are now important perhaps for most major international corporations, and thus important in their impact on the global economy.
April 6, 2018
Tax havens are paradises for the rich, where you can cut your taxes to zero, and sometimes help them do illegal stuff. This is the typical stereotype of these places. But what are the true meaning actually? How do they work? What is the origin of their existence? You can expect to find answers to these questions in the single volume. It's said to one of the first book to deal with the comprehensive issues of tax. I learn a great deal from the book. I will highly recommend everyone who wants to learn the the business world to read the book.
The book is essentially an academic publication. Therefore, the writing could be dry to some readers. I personally think it's fluent and informative. The scholars are certainly experts in the field as they can easily explain complex concepts clearly to readers. This is not a technical book that requires deep knowledge. Of course, if you have financial and accounting background, you will find it useful.
Authors discuss a lot of information here. They introduce what tax havens are. They are places that meticulously attract foreigners to set up companies there, aiming to earn profits. They are the conduits of global funds. Money goes through tax havens to achieve many goals. Generally speaking, these people value the confidentiality tax havens offer, the low tax rate, and lax regulatory environment. They don't want to be scrutinized. The authors show us these reasons and how tax havens cater to their needs.
Everyone agrees tax havens are part of the global economy. But its scale is not clear and hard to estimate. Their roles in the world are both criticized and complimented. In the past few decades, the research on tax havens have been slowly gaining momentum, but there are much more to be researched. International organizations and more people are increasing paying attention to tax havens. For example, part of the 2008 financial crisis can be attributed to the unregulated activities in tax havens. IMF, EU, American, and other NGO are still trying to understand what's going on. Many initiatives seem unpromising, yet there are increasing awareness for these issues. However, based on the current environment, the progression could be very slow.
In addition to the tools they use, authors also spend some paragraph on its history. It has hundreds of years of history, but there boom happen only in the recent past (1970s afterward). It's human nature to keep more of what you earn, therefore smart people start to invent techniques to make it happen. Mostly, sovereign countries have the freedom to set up its own tax rules. Other countries can't interfere, right? Some nations promulgate laws that encourage foreign investment. When they succeed, other nations follow suit. That's why there are dozens of tax havens now. The dissolved British Empire has a big influence on them. Historical reasons make these former colony rely on tax industries to earn a living. The over-reliance of tax also leads to some problems: the profits are not equally distributed, the living expense soars, the rent sky-rockets, which adversely affect local residents.
There are much more nice coverage on tax havens in this book. The only drawback is it's a bit outdated as it was published in 2010. I am sure many new things happen in the past 8 years. It would be nice to have a update. Overall, it's a great book to learn about global business.
The book is essentially an academic publication. Therefore, the writing could be dry to some readers. I personally think it's fluent and informative. The scholars are certainly experts in the field as they can easily explain complex concepts clearly to readers. This is not a technical book that requires deep knowledge. Of course, if you have financial and accounting background, you will find it useful.
Authors discuss a lot of information here. They introduce what tax havens are. They are places that meticulously attract foreigners to set up companies there, aiming to earn profits. They are the conduits of global funds. Money goes through tax havens to achieve many goals. Generally speaking, these people value the confidentiality tax havens offer, the low tax rate, and lax regulatory environment. They don't want to be scrutinized. The authors show us these reasons and how tax havens cater to their needs.
Everyone agrees tax havens are part of the global economy. But its scale is not clear and hard to estimate. Their roles in the world are both criticized and complimented. In the past few decades, the research on tax havens have been slowly gaining momentum, but there are much more to be researched. International organizations and more people are increasing paying attention to tax havens. For example, part of the 2008 financial crisis can be attributed to the unregulated activities in tax havens. IMF, EU, American, and other NGO are still trying to understand what's going on. Many initiatives seem unpromising, yet there are increasing awareness for these issues. However, based on the current environment, the progression could be very slow.
In addition to the tools they use, authors also spend some paragraph on its history. It has hundreds of years of history, but there boom happen only in the recent past (1970s afterward). It's human nature to keep more of what you earn, therefore smart people start to invent techniques to make it happen. Mostly, sovereign countries have the freedom to set up its own tax rules. Other countries can't interfere, right? Some nations promulgate laws that encourage foreign investment. When they succeed, other nations follow suit. That's why there are dozens of tax havens now. The dissolved British Empire has a big influence on them. Historical reasons make these former colony rely on tax industries to earn a living. The over-reliance of tax also leads to some problems: the profits are not equally distributed, the living expense soars, the rent sky-rockets, which adversely affect local residents.
There are much more nice coverage on tax havens in this book. The only drawback is it's a bit outdated as it was published in 2010. I am sure many new things happen in the past 8 years. It would be nice to have a update. Overall, it's a great book to learn about global business.
October 27, 2022
Toks truputi vadovėlis, akademiška ir kiek atsargiai surašytas, bet su mokesčių rojų tema ir problematika visai gerai supažindina. Vietomis buvo kiek sunkoka ar perdėm biurokratiška, tačiau iš principo išlaikytas balansas tarp išsamaus mokslinio pristatymo ir gebėjimo sudominti paprastesnį ir mažiau suprantantį skaitytoją.
March 24, 2026
“They say in financial circles that those who know do not talk and those who talk don’t know.” In tax, it feels inverted—those who understand the system occasionally reveal just enough, while most discussions miss how capital is actually structured and moved. Tax Havens sharpened my view on that gap.
December 20, 2017
Good but dated(based on 2009) overview of Tax Heavens industry.
Would be interested to read an update
Would be interested to read an update
Displaying 1 - 7 of 7 reviews