Treasure Islands: Tax Havens and the Men who Stole the World

by Nicholas Shaxson

Companies and capital migrate not to where they are most productive, but to where they can get the best tax break. There is nothing efficient about any of this.

The inherent problem seems to be taxation.

The European havens got going properly during the First World War, as governments raised taxes sharply, to pay for war costs.

If that is the case, why blame the corporations. In essenced the governments were resposible for the war... and what followed.

The Irish musician Bono, while browbeating western taxpayers to boost aid to Africa, shifted his band’s financial empire to the Netherlands in 2006, to cut its tax bill.

Sanctimonius hypocrite!

When the fox says it has done an excellent job of beefing up the security of the henhouse, we should be very cautious indeed.

Ha ha ha ha!

‘the difference between tax avoidance and tax evasion is the thickness of a prison wall.’

Well put! Though ihave not understood why anyone should pay tax.

But of course what is legal is not necessarily what is right: slavery and apartheid were both legal in their day.

In fact on a 2 x 2 of morality and legality the largest number of business activities would find their way into the immoral/ legal quadrant.

‘Those who know don’t talk. And those who talk don’t know’.

Let me have men about me who are well fed and portly. Yond Cassius has a lean and hungry look, he thinks too much. Such men are dangerous.

‘You kill an animal and the product of that animal is sold in fifty different countries. You cannot say how much is made in England and how much abroad.’

This is the crux of the biscuit!

Trusts are silent, powerful mechanisms, and it is usually impossible to find any evidence of them at all on public record. They are secrets between lawyers and their clients. What a trust does, at heart, is manipulate the ownership of an asset.

So much for calling it a trust.

Trusts make two main things happen. First, they create a solid legal barrier that separates the different components of ownership. Second, this legal barrier can become an unbreakable information barrier.

Legitamacy wrapped under secrecy, whoa, that just seals it.

Even then, some places allow flee clauses – the asset will automatically hop elsewhere at the first whiff of an investigation.

This is the icing on the cake. An additional protective layer on steel armour of secrecy

When the Queen finally started paying income tax in 1993 after a public outcry, the latest Lord Vestey smiled and said, ‘Well, that makes me the last one.’

The queen finally started paying tax in 1993???!!!

‘the Swiss began to associate neutrality with profit, virtue and good sense’.

That has always been the case. War only benefits the war profiteers.

There may be some theoretical calculation showing that shuffling pieces of paper around the world according to market supply and demand is efficient, Keynes said. ‘But experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.’

Very deep and astute observation. This is what makes Keynes the genius that he is.

Offshore prevents effective oversight of financial markets, makes crises more likely and enables rich insiders to shift all the risks and the costs of bailouts onto the working majority and away from the investing minority.

Thia is how the taxpayer funds the illicit wealth of the rich.

Capital no longer flows to where it gets the best return, but to where it can secure the best tax subsidies, the deepest secrecy, and to where it can best evade the laws, rules and regulations it does not like.

Evading taxes super charges the returns.

One favourite was bond washing: a high-taxpayer would sell a bond just before it was due to pay a coupon, then buy it back afterwards at a lower price, creating a tax-free capital gain.

An early version of dividend stripping.

The Bank of England has also remained a powerful lobbyist within the British state, a sort of praetorian guard protecting the City of London and its libertarian world view – and by extension the global offshore system.

Wow, that much power to a crew of motley, self serving bankers...!!!

‘a regulatory vacuum, which is called the Euromarket, or the offshore financial market’.

Interesting to know now what a Euromarket really means

The Soviet Union in those days did not want to hold too many dollars in New York, where they risked being confiscated if the Cold War turned nastier. But they did not want to invest in sterling either, the risky money of a collapsing empire. They saw their chance in this new market: they could hold dollars in London. So, starting with a deposit of a few hundred thousand by the Moscow Narodny bank in 1957, they began to pile in. Karl Marx would have raised his prodigious eyebrows at the irony of an avowedly Marxist nation nurturing the most unfettered capitalist system in history.

One of the most educative examples of sheer hypocrisy.

The modern offshore system did not start its explosive growth on scandal-tainted and palm-fringed islands in the Caribbean, or in the Alpine foothills of Zürich. It all began in London, as Britain’s formal empire gave way to something more subtle.

Insightful indeed.

the formal empire did not quite disappear; fourteen small island states decided not to seek independence, becoming British Overseas Territories, with the Queen as their head of state. Exactly half of them – Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos islands, are secrecy jurisdictions, actively supported and managed from Britain and intimately linked with the City of London.

At the moment of its apparent destruction, the British empire began to rise from the dead.

... and the sun never set!

Dutch Sandwich – set up an offshore finance subsidiary in the Netherlands Antilles, use it to issue tax-free Eurobonds and send the proceeds up to the American parent.

That's a new one!

One can argue about the relative evil of usury, but in a deregulated market the poor and vulnerable inevitably pay the most.

The problem was not that we ‘deregulated the New Deal’ but that we deregulated a much older, even ancient, set of laws … the laws against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter’s term, and which had been so taken for granted that no one ever even mentioned it to us in law school. That’s when we found out what happens when an advanced industrial economy tries to function with no cap at all on interest rates.

Yes we meddled with and dismantled a system evolved over centuries incorporating the collective wisdom of many generations system without understanding its ramificatios. There was no precedence to learn from.

an auditor’s ultimate aim: ‘to use the state to shield it from the consequences of its own failures’.

The best definition of a limited liability partnership. In essence, hell unleashed on corporate governce.

Already there was evidence from the US that when LLPs are introduced, less time is allocated to each audit, and quality suffers. It is nearly impossible to identify a smoking gun in cases like this, but these concessions were undoubtedly important factors in the Enron and WorldCom disasters and in the destruction of Enron’s auditor, Arthur Andersen LLP.

And how many suffered as a result of this.

conservative economists such as James Buchanan and Vernon Smith, who explored a branch of economics known as public choice theory, which rejects the notion that politicians act on behalf of people or societies and instead looks at them as self-interested individuals.

The playpen for avarice, unshackled and unmitigated!

The IASB is not a public rule-setting body, accountable to democratic parliaments; it is a private company registered in Delaware, financed by the big four accountancy firms and some of the world’s biggest multinationals. This is an example of what Professor Prem Sikka of Essex University calls the privatisation of public policymaking.

Well put!

London is two cities: a large, vibrant and troubled population centre plus a supremely wealthy offshore island in its midst.

What the Dickens? About time, the "Tale" needs a rewrite!

‘We used to have a priority to collect tax,’ my informant said, ‘now we have a priority to have a good relationship. We have got into a situation of persuading ourselves that it is a win-win to have businesses pay their taxes voluntarily, rather than have us take them to litigation.’

The essence of modern day institutions which further the Anglo-American form of cpitalism is encapshlated in this statement. Its the complete spirit of cooperation.

In 2009 it emerged that the government minister in charge of cracking down on corporate tax avoidance had set up a business in Bermuda to avoid tax.

If you can't beat them, join them!

English libel laws are among the comforts for those with dirty money who come to London. There is no constitutional protection here for free speech, like the First Amendment in the US; there is no defence in cases of high public interest; and unlike nearly everywhere else the burden of proof is deposited squarely on the shoulders of the defendant.

As draconian as it can get. This is quite unusual.

Here, in the birthplace of the Industrial Revolution, vast financial sector salaries empty manufacturing industries of their best-educated people, and politicians, hooked on the City’s money-making machine, sneer at the dirty and difficult smokestack industries.

This has happened similarly and nearly simultneously, all over the world. The best minds hve been redirected to making money and clever schemes. In the new tech driven economy a similar parallel can be drawn, where the cleverest minds and maximum energy are directed to clickbaiting instead of building better products for humanity.

Britain and the US, the two leaders of modern global finance, are now among the most unequal societies in the developed world. In Britain 0.3 per cent of the population owns two-thirds of the land; in famously unequal Brazil 1 per cent of the population owns only half of the land.

This is all about optics. The latin countries are derided for their inequality.

Tax is the most sustainable, the most important and the most beneficial form of finance for development. It makes rulers accountable to their citizens, not to donors, and the right kinds of taxes stimulate governments to create the strong institutions they need for getting their citizens and corporations to pay tax.

The most morally justifiable firm of financing government

There is a great deal of clubby chortling about these things, and everyone sort of joins in: because the audience is mainly men too. It reminds me of that American frat boy saying: Bros before Hos.

Toxic male bro culture that does plenty of harm. What is apalling is how unabashedly smug it is.