excerpts from the book
Treasure Islands
Tax Havens and the Men Who Stole
the World
by Nicholas Shaxson
The Bodley Head, London, 2011,
paperback
p2
Gabon became independent in 1960, just as it was starting to emerge
as a promising new African oil frontier, and France paid it particular
attention. The right president was needed: an authentic African
leader who would be charismatic, strong, cunning and, when t mattered,
utterly pro-French. Omar Bongo was the perfect candidate - he
was from a tiny minority ethnic group and had no natural domestic
support base, so he had to rely on France to protect him. In 1967,
aged just thirty-two, Bongo became the world's youngest president,
and France placed several hundred paratroopers in a barracks in
Libreville, connected to one of his palaces by underground tunnels.
This deterrent against coups proved so effective that by the time
Bongo died in 2009 he was the world's longest-serving leader.
... In exchange for France's backing,
[Gabon's president] Bongo gave French companies almost exclusive
access to his country's minerals on highly preferential terms.
He would also become the African linchpin of a vast, web of global
corruption secretly connecting the oil industries of former French
African colonies with mainstream politics in metropolitan France,
via Switzerland, Luxembourg and other tax havens. Parts of Gabon's
oil industry had been serving as a giant slush fund, making hundreds
of millions of dollars available for the use of French elites.
... France's biggest corporations were
able to make use of this west African oil pot as a source of money
that enabled them to pay bribes from Venezuela to Germany to Jersey
to Taiwan, while ensuring that the money trails did not lead to
them. Elf's [Elf Aquitaine] dirty money also greased the wheels
of French political and commercial diplomacy around the globe.
... This immensely powerful system helped
France punch above its weight in global economic and political
affairs, and flourished in the gaps between jurisdictions. It
flourished offshore.
p5
The first foreign leader President Nicolas Sarkozy of France telephoned
after he came to power in 2007 was not the president of Germany,
the United States or the European Commission, but
[Gabon's president Bongo.
p5
Eva Jolly
The personal accounts of monarchs, elected
presidents-for-life and dictators were being protected from the
curiosity of the magistrates. I realised I was no longer confronted
with a marginal thing but with a system of both French politics
and the offshore world. I do not see this as a terrible, multi-faceted
criminality which is besieging our [onshore] fortresses. I see
a respectable, established system of power that has accepted grand
corruption as a natural part of its daily business.
p6
The US government needs foreign funds to flow in, and it attracts
them by offering tax-free treatment and secrecy. This had become
central to the US government's global strategy. Tides of financial
capital flow around the world in response to small changes in
incentives. Not only did almost nobody understand this but almost
nobody wanted to know.
p6
Africa's supposedly natural or inevitable disasters all had one
thing in common: the movement of money out of Africa into Europe
and the United States, assisted by tax havens and a pinstriped
army of respectable bankers, lawyers and accountants. But nobody
wanted to look beyond Africa at the system that mad this possible.
p6
Offshore connects the criminal underworld with the financial elite,
the diplomatic and intelligence establishments with multinational
corporations. Offshore drives conflict, shapes our perceptions,
creates financial instability and delivers staggering rewards
to les grands -- to the people who matter. Offshore is how the
world of power now works.
p8
More than half of world trade passes, at least on paper, through
tax havens. Over half of all banking assets and a third of foreign
direct investment by multinational corporations, are routed offshore.'
Some 85 per cent of international banking and bond issuance takes
place in the so-called Euromarket, a stateless offshore zone.
The IMF estimated in 2010 that the balance sheets of small island
financial centres alone added up to $18 trillion - a sum equivalent
to about a third of the world's GDP. And that, it said, was probably
an underestimate. The US Government Accountability Office (GAO)
reported in 2008 that 83 of the USA's biggest 100 corporations
had subsidiaries in tax havens... The Tax Justice Network discovered
that ninety-nine of Europe's hundred largest companies used offshore
subsidiaries. In each country, the largest user by far was a bank.
p8
Tax haven['s] don't just offer an escape from tax; they also provide
secrecy, an escape from financial regulation, and a chance Ito
shrug off laws and rules of other jurisdictions, the countries
where most of the world lives.
p8
A loose definition of a tax haven is a 'place that seeks to attract
business by offering politically stable facilities to help people
or entities get around the rules, laws and regulations of jurisdictions
elsewhere. The whole point is to offer escape routes from the
duties that come with living in and obtaining benefits from society
-- tax, responsible financial regulation, criminal laws, inheritance
rules and so on. This is their core line of business. It is what
they do.
p9
[A] way to spot a secrecy jurisdiction is to look for whether
its financial services industry is very large compared to the
size of the local economy. The IMF used this tool in 2007 to finger
Britain, correctly, as an offshore jurisdiction.
p9
The most important feature of a secrecy jurisdiction ... is that
local politics is captured by financial interests.
p10
New York millionairess Leona Helmsley
Taxes are for the little people.
p10
Offshore is a project of wealthy and powerful elites to help them
take the benefits from society without paying for them.
p12
Two-thirds of global cross-border world trade happens inside multinational
corporations.
p13
The British Virgin Islands, with fewer than 25,000 inhabitants,
hosts over 800,000 companies.
p14
The world contains about sixty secrecy jurisdictions, divided
roughly into four groups. First are the European havens. Second,
comes a British zone centred on the City of London, which spans
the world and is loosely shaped around Britain's former empire.
Third is a zone of influence focused on the United States. A fourth
category holds a few unclassified oddities, like Somalia and Uruguay,
which have not been greatly successful.
p15
The City of London [is] the centre of the most important part
of the global offshore system. The City's offshore network has
three main layers. Two inner rings - Britain's Crown Dependencies
of Jersey, Guernsey and the Isle of Man; and its Overseas Territories,
such as the Cayman Islands - are substantially controlled by Britain,
and combine futuristic offshore finance with medieval politics.
The outer ring is a more diverse array of havens, like Hong Kong,
which are outside Britain's direct control but nevertheless have
strong historical and current links to the country and the City
of London. One authoritative account estimates that this British
grouping overall accounts for well over a third of all international
bank assets; add the City of London and the total is almost a
half.
p16
Three [British] Crown Dependencies [Jersey, Guernsey and the Isle
of Man] are substantially controlled and supported by Britain
but have enough independence to allow Britain to say: 'There nothing
we can do' when other countries complain of abuses run out of
these havens. They channel very large amounts of finance up to
the City of London.
p16
Fourteen [British] Overseas Territories ... are the last surviving
outposts of Britain's formal empire. With just a quarter of a
million inhabitants between them they include some of world's
top secrecy jurisdictions: the Cayman Islands, Bermuda, the British
Virgin Islands, the Turks and Caicos islands and Gibraltar.
p17
[The Cayman Islands] is the world's fifth largest financial centre,
hosting 80,000 registered companies, over three-quarters of the
world's hedge funds, and $1.9 trillion on deposit .
p17
Hong Kong, Singapore, the Bahamas, Dubai and Ireland are fully
independent though deeply connected to the City of London.
p18
Eva Jolly
The expansion in the use of ... tax havens
... is a modern form of colonialism.
p18
The offshore option helped Wall Street get around strong US financial
regulations, progressively regain its powers and its influence
over the US political system, and then, mostly from the 1980s,
turn the US itself into what is now the world's single most important
tax haven in its own right.
p20
The offshore world is not a bunch of independent states exercising
their sovereign rights to set their laws and tax systems as they
see fit. It is a set of networks of influence controlled by the
world's major powers, notably Britain and the United States. Each
network is deeply interconnected with the others. Wealthy US individuals
and corporations use the British spider's web extensively.
p21
Marshall Langer, a prominent supporter of secrecy jurisdictions
The most important tax haven in the world
is an island... the name of the island is Manhattan. The second
most-important tax haven in the world is located on an island.
It is a city called London.
p21
Instead of opening bank accounts in their own names, fraudsters
and money launderers form anonymous companies, with which they
can then open bank accounts and move assets.
p26
In 2005, the Tax Justice Network estimated that wealthy individuals
hold perhaps $11.5 trillion worth of wealth offshore. That is
about a quarter of all global wealth, and equivalent to the entire
gross national product of the United States.
p27
the findings of a comprehensive study of illicit cross-border
financial flows done by Raymond Baker's Global Financial Integrity
(GFI) programme at the Center for International Policy in Washington
Criminal money - from drug smuggling,
counterfeit goods, racketeering and so on - amounted to $330 -$550
billion, or a third of the total.
Corrupt money - local bribes remitted
abroad or bribes paid abroad - added $30-50 billion, or three
per cent.
The third component, making up two-thirds,
was cross-border commercial transactions... The drugs smugglers,
terrorists and other criminals use exactly the same offshore mechanisms
and subterfuges - shell banks, trusts, dummy corporations - that
corporations use.
p27
Drugs smugglers, terrorists and other criminals use exactly the
same offshore mechanisms and subterfuges - shell banks, trusts,
dummy corporations - that corporations use.
p27
Raymond Baker's Global Financial Integrity (GFI) programme at
the Center for International Policy in Washington
Laundered proceeds of drug trafficking,
racketeering, corruption, and terrorism tag along with other forms
of dirty money to which the United States and Europe lend a welcoming
hand.
p28
The offshore world is the biggest force for shifting wealth and
power from poor to rich in history, yet its effects have been
almost invisible.
p30
Big finance ... has deployed [the offshore system] in its battle
to capture political power around the world.
p43
William Vestey had bought himself a peerage. There was nothing
particularly unusual about this. Plenty of people who had made
fortunes in the Great War [WWI] desperately craved the respectability
of a peerage to mask the taint of [war] profiteering, and [British]
Prime Minister Lloyd George was only too happy to oblige, selling
off official honours willy-nilly.
p45
Secrecy jurisdictions constantly tailor their laws to let the
wealthy perfect their deceits and to stay one step ahead of the
tax collectors. Over the years, offshore trust subterfuges have
proliferated and grown more sophisticated. Many offshore jurisdictions
allow things called revocable trusts -- trusts that can be revoked
and the money returned to the original owner. If the owner can
do that, then they have not really separated themselves from the
asset. Until it is revoked, though, it looks as if the asset has
been passed on, and the authorities cannot tax it.
p51
Amid the Great Depression, Swiss farmers' and workers' movements
began in 1931 to clamour for more control over the banks. Bankers
... pressed fiercely for a new law, to make it a crime to violate
Swiss bank secrecy... The Swiss law finally adopted in 1934 for
the first time made it a criminal offence punishable by fines
and prison to violate bank secrecy.
p61
Switzerland remains one the world's biggest repositories for dirty
money. In 2009 it hosted about $2.1 trillion in offshore accounts
owned by non-residents, about half from Europe--this had been
$3.1 trillion in 2007 before the global financial crisis.
p67
industrial capitalists are subservient to financial capitalists,
and their interests often conflict. Financiers, for instance,
like high interest rates, from which they can derive considerable
income; but industrialists want low interest rates, to curb their
costs.
p67
The Great Depression that had started in 1929 was the culmination
of a long period of deregulation and economic freedom and a great
bull market built on an orgy of debt and mind-bending economic
inequality. In the late throes of the boom the richest 24,000
Americans, for example, received 630 times as much income on average
as the poorest six million families, and the top 1 per cent of
people received nearly a quarter of all the income - a proportion
slightly greater than the inequalities at the onset of the global
crisis in 2007.
p68
from a report to the president by US Treasury secretary Henry
Morgenthau (1957) about the systemic tax evasion by the wealthy
The ordinary salaried man and the small
merchant does not resort to these or similar devices. Legalized
avoidance or evasion by the so-called leaders of the business
community... throws an additional burden upon other members of
the community who are less able to bear it, and who are already
cheerfully bearing their fair share.
p69
When a company or government sells bonds or shares, investors
hand over money in exchange for pieces of paper that give the
holder title to a future stream of income. When bonds or shares
are first issued, savings are mobilised, funds are raised, and
they flow into productive investment. This is generally healthy.
Next, however, a secondary market appears, where these shares
and bonds are traded. These trades do not directly contribute
to productive investment; they merely shuffle ownership. Well
over 95 per cent of purchases in global markets today consist
of this kind of secondary activity, rather than in real investment.
p71
Rampant international capitalism had preceded and created the
Great Depression, as private and central bankers, led by Wall
Street and the City of London, had sought to restore the laissez-faire
pre-1914 financial order in which they had been so prominent,
an order that had involved freely floating currencies, balanced
government budgets and free flows of capital around the world
- a little like the modern global financial system.
The Great Depression had destroyed their
dream and thoroughly discredited the liberal financial order.
p73
There is a basic tension between democracy, on the one hand, and
free capital movements, on the other. In a world of free capital
flows, if you try to lower interest rates to boost struggling
local industries, capital will drain overseas in search of higher
returns. Investors hold veto power over national governments and
the real lives of millions of people are determined by ... speculators...
Freedom for financial capital means less freedom for countries
to set their own economic policies: from this particular kind
of freedom, a form of bondage emerges.
p73
Investors hold veto power over national governments and the real
lives of millions of people are determined by speculators.
p73
Capital controls had first emerged in the First World War. Governments
had sought to stop capital fleeing their countries in order to
be able to tax capital income, and keep interest rates low, so
as to finance their war efforts. [Capital] controls evaporated
after the war then returned partially during the Great Depression,
and finally swept the world after the Second World War and the
Bretton Woods arrangements. They slowly became leaky, and then
were progressively dismantled around the world from about the
1970s.
p73
John Maynard Keynes
Control of capital movements should be
a permanent feature of the post-war system [WWII].
p82
[The] few years after the Second World War were the only time
in several hundred years when politicians had any kind of control
over the banking sector. Before the [British] bankers slammed
the political shutters down, the politicians had sneaked in the
National Health Service, which, for all its faults, has been one
of the country's most popular institutions ever since.
p82
[The] few years after the Second World War were the only time
in several hundred years when politicians had any kind of control
over the banking sector.
p84
[John Maynard] Keynes had called the Bank of England "a private
institution practically independent of any form of legal control".
p88
The Euromarket [is] the offshore financial market.
p88
As the head of the Bank of England's foreign exchange department,
[George] Bolton was in the perfect position to midwife the new
unregulated dollar market in London. The bank could easily have
decided to regulate this market. In deciding not to do so, and
in preventing other nations from trying to do so, it can only
be concluded that the Bank of England actively created it... This
was the birth of the Euromarket or the [London] offshore financial
market.
p90
Fourteen small [British] island states decided not to seek independence,
becoming British Overseas Territories, with the Queen as their
head of state. Exactly half of them--Anguila, 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.
From these beginnings, the London offshore
market exploded.
p90
Countries had been relatively well insulated against financial
calamities that happened elsewhere, but the Euromarket [Euromarket
= London Offshore Market] connected up the world's financial sectors
and economies. A shock rise in interest rates in one place would,
as if transmitted by electricity almost instantly affect anywhere
else plugged into the system. And, as it grew and grew, tides
of hot money began to surge back and forth across the globe.
p91
Eurobonds [are] unregulated offshore bearer bonds--whoever bears
the pieces of paper in their hands, owns them. They are a bit
like ultra-valuable dollar bills: no records are kept of who owns
them, and so they are perfect for tax evasion.
p91
Bank of England memo from 1963
However much we dislike hot money, we
cannot be international bankers and refuse to accept money.
p92
By 1975 [the Euromarket] was reckoned to have grown to exceed
the size of the entire world's foreign exchange reserves. As the
oil shocks hit in the 1970s, the [Euro]market was the route through
which the oil-rich states' surpluses were routed to deficit-plagued
consumer countries. As the Euromarket bonfire raged ever higher,
capital began its assault on the citadels of power and the democratic
nation state.
... By 1997, nearly 90 per cent of all
international loans were made through this market [Euromarket].
It is now so all-enveloping that the Bank for international Settlements,
which oversees global financial flows, has given up trying to
measure its size.
p93
[A] bank's offshore customers will almost always be the world's
wealthier citizens and corporations. Free money for bankers and
the representatives of the world's wealthy at the expense of everyone
else is a basic leitmotif of the offshore system.
p94
A bank can expand its balance sheet by extending credit to others.
In the banking world, money can be created merely by the act of
lending it.
p95
In the unregulated London-based Euromarkets, a bank isn't required
to hold any reserves.
p98
The Euromarket had become a global transmission belt making short-term
capital movements more sensitive, rippling interest-rate changes
instantly around the globe and allowing enough money to pool together
in one place to allow large speculative attacks against currencies
that speculators decided were vulnerable.
p98
The offshore Euromarkets are to a large degree the enabling environment
for [a] shadow banking system.
p99
The US dollar is the world's main reserve currency. While less
privileged nations are periodically constrained by shortages of
foreign exchange, the USA can borrow in its own currency - it
can print money to acquire real resources, and live beyond its
means for a long time.
... The ability to pay foreign debts in
its own currency - which it can print - helped America fight and
pay for the Vietnam war; it helped President George W. Bush cut
taxes and rack up huge deficits. And when the time comes one day
to pay for the mess, you can shift a lot of the burden of adjustment
onto other states.
Countries use dollars for their reserves
because dollar markets are large and liquid, and the dollar is
trusted to be relatively stable. Oil is priced in dollars. People
trade in dollars... Today two-thirds of the world's official foreign
exchange reserve are held in dollars. Dollars make the world go
round.
p100
The Euromarkets, [a] huge new, unregulated and highly profitable
dollar arena, whose liquidity was growing explosively, were perfect
to support this imperial role for the US. currency... Eurodollars
helped America cement its exorbitant privilege, finance its deficits,
fight foreign wars and throw its weight around.
p100
Eric Helleiner
With the creation of the Euromarket, bankers
in both countries [United States and Britain] ambled on a solution
to the problem of how to reconstruct the London-New York financial
axis that had been prominent in the 1920s.
p101
The Bank of England after 1945 set about re-establishing the hegemony
of international financial capital. And all the time, Britain's
offshore satellites, Jersey, Cayman, and their like, had their
own special parts to play in this great financial game.
... From the 1960s, the island semi-colonies
and other assorted satellites of London came into their own as
offshore Euromarket booking centres ... where the world's wealthiest
individuals and corporations, especially banks, could park their
money, tax free and in secrecy, and where they could grow faster
than their regulated onshore counterparts.
... The umbilical, two-way relation between
London and its overseas satellites has remained a defining feature
of the entire offshore system ever since.
... A new market had emerged, ushering
in the rebirth of London as the world's largest financial centre...
The financial establishment in London was piecing together the
means by which London would restore its position as the capital
of a world ruled in the interests of an elite of investors...
the British empire began rise from the dead.
p103
From the 1960s, [Euromarkets] grew hand in hand with a second,
more deliberately constructed counterpart a London-centred web
of half-British territories scattered around the world that would
catch financial business from nearby jurisdictions by offering
lightly taxed, lightly regulated and secretive bolt holes for
money. Criminal and other money could be handled by the City of
London, yet far enough from London to minimise any stink.
... The British Crown Dependencies of
Jersey, Guernsey and the Isle of Man would form the inner ring
of the spider's web and would focus mostly on Europe, while the
Caribbean members of its fourteen Overseas Territories, the last
outposts of the formal empire, would focus mostly on the Americas.
A scattering of other territories elsewhere would expand the network's
global reach: British-controlled Hong Kong, as a gateway to China
and the sub-region; and some ex-colonial oddities in the Pacific,
the Middle East and elsewhere.
... Financial institutions from London,
al' Street, Amsterdam, Frankfurt and Paris, would spread into
these territories at high speed. An offshore explosion which began
with the rise of the Euromarkets in London in the mid-1950s would
spread first to the Crown Dependencies near the British mainland,
then to the British-held Caribbean jurisdictions, then to Asia,
and finally to British-held Pacific atolls.
p115
veteran US crime-fighter Jack Blum
Hong Kong is where most of the corruption
in China is accomplished.
p115
When Britain handed it over to China in 1997 China preserved this
offshore centre as a 'special administrative zone', and Hong Kong's
Basic Law states that it shall 'enjoy a high degree of autonomy'
from China in all matters except foreign relations and defence'...
Chinese elites want their own offshore centre, complete with political
control and judicial separation.
p115
When Britain handed it over to China in 1997 China preserved this
offshore centre as a 'special administrative zone', and Hong Kong's
Basic Law states that it shall 'enjoy a high degree of autonomy'
from China in all matters except foreign relations and defence'.
p115
Despite Chinese control [of Hong Kong], City of London interests
remain closely engaged, not least through Britain's largest bank
HSBC - the Hong Kong & Shanghai Banking Corporation... HSBC
moved its CEO from London to Hong Kong in March 2010 to reflect
its shifting focus.
p116
Hong Kong ... is still a fairly small player in the offshore world:
its $149 billion in non-resident deposits in 2007 were just one-eleventh
as big as the Cayman Islands' $1.7 trillion.
p116
Singapore set up its financial centre in 1968, while it was still
part of the British Sterling currency zone. Singapore's success
came mainly from being the money-laundering centre for corrupt
Indonesian businessmen and government officials.
p116'
Andy Xie, Morgan Stanley's Asia economist, in an internal email
in 2006
To sustain its economy, Singapore is building
casinos to attract corruption money from China.
p121
By the early 1980s the Caribbean was the world's main offshore
drugs turntable, as Colombian Medellin cartel kingpin Carlos Lehder
smuggled industrial quantities of cocaine from Norman's Cay in
the Bahamas... As cocaine flooded into America, money flew back
out in shrink-wrapped bills loaded on wooden pallets and the Cayman
islands would then return it to the Federal Reserve.
p126
By 2005 US banks were free to receive the proceeds from a long
list of crimes committed outside the country, including alien
smuggling, racketeering, peonage and slavery. Profiting from crime
is legal, so long as the crime itself happens offshore.
p126
A US bank can knowingly receive the proceeds of a wide range of
foreign crimes.
p117
The US had some tax haven characteristics - from 1921, the United
States has let foreigners deposit money with American banks and
receive interest tax-free, as long as the deposit isn't connected
with a US business.
p117
From the 1950s and 1960s Florida became a pivot for the French
Connection heroin route, for Kuomintang drugs flowing into the
US via Hong Kong, which [was] laundered through Florida real estate,
for Latin American flight money, and for Colombian drug money,
often routed via the Bahamas, Panama and the Netherlands Antilles.
p128
By the 1980s, 40 per cent of the money on deposit in Miami banks
was reckoned to originate overseas, particularly in Latin America...
Half the property in Miami is owned by offshore shell companies,
and the largest yachts on the Intracoastal waterway are registered
offshore. Miami is the facility of choice for Latin ex-heads of
state, generals and former friends of the CIA.
p129
Corporations hold their profits offshore, indefinitely, and only
when they bring it back home to pay out as dividends to shareholders
does it get taxed [deferred tax]... This sharply reduces multinationals'
cost of capital ... and this in turn gives them a huge competitive
advantage against smaller, locally based firms. US corporations
alone were believed to hold a trillion dollars' worth of untaxed
foreign profits offshore in 2009.
p129
In 2004 George W Bush's administration offered his corporate friends
a chance to repatriate tax and pay just five per cent tax rate
instead of the normal 35 per cent. Over $360 billion whooshed
back to the US, much of which went into share buybacks, boosting
executive bonuses.
p138
The second smallest state in the USA, Delaware is the home to
many of the world's corporations... Over half of US publicly traded
companies and nearly two-thirds of the Fortune 500 are incorporated
here.
p140
Corporations were once explicitly regarded as vehicles to serve
the public good. Delaware, however, cast that notion aside and
adopted what one official Delaware account calls 'a decidedly
freewheeling, private enterprise mode' in which corporations and
individuals pursue their own goals, and government is kept out
of the way under the assumption that the public good will advance
automatically.
p141
Delaware ... [grants] corporate bosses extraordinary freedoms
from bothersome stockholders, judicial review and even public
opinion.
p144
After the brutal Nigerian president Sani Abacha died in 1998,
it was revealed that he had skimmed off billions of dollars of
oil money. Two countries in particular soaked up his embezzled
wealth - Britain and Switzerland.
p145
Transparency International's ranking suggests that Britain and
Switzerland - not to mention the United States - are among the
world's 'cleanest' jurisdictions. In fact, about half the top
twenty in the index are major secrecy jurisdictions, while the
nations of Africa - the victims of the gargantuan illicit flows
- are ranked 'dirtiest'.
p145
In November 2009 the Tax Justice Network published a new index...
The Financial Secrecy Index ranked countries according to how
important they are in providing financial secrecy in global finance.
...in fifth place in the Financial Secrecy
Index was the United Kingdom. Although it has by far the most
important historical role in the emergence of offshore and is
the centre of the British offshore spider's web, its domestic
secrecy structures are relatively transparent. Third and fourth
most important were, respectively, Switzerland and the Cayman
Islands. Luxembourg, a gigantic but hardly noticed haven of financial
secrecy, came second. And which country was ranked - by a mile
the world's most important secrecy jurisdiction? -- the United
States of America.
p147
By the early 1980s the main elements of the modern offshore system
were in place, and growing explosively. An older cluster of European
havens, nurtured by European aristocracies and led by Switzerland,
was now being outpaced by a network of more flexible, aggressive
havens in the former outposts of the British empire, which were
themselves linked intimately to the City of London. A state within
the British state, the City had been transformed from an gentlemen's
club operating the financial machinery of empire ... into a deregulated
global financial centre dominated by American banks... A less
complex yet still enormously important offshore zone of influence
had also grown up, centred on the United States and also constructed
by American banks.
p147
A state within the British state, the City [of London] had been
transformed from an gentlemen's club operating the financial machinery
of empire ... into a deregulated global financial centre dominated
by American banks... A less complex yet still enormously important
offshore zone of influence had also grown up, centred on the United
States and also constructed by American banks.
p147
By the early 1980s the main elements of the modern offshore system
were in place, and growing explosively. An older cluster of European
havens, nurtured by European aristocracies and led by Switzerland,
was now being outpaced by a network of more flexible, aggressive
havens in the former outposts of the British empire, which were
themselves linked intimately to the City of London.
p148
The London-based Euromarket, then the wider offshore world, provided
the platform for US banks to escape tight domestic constraints
and grow explosively setting the stage for the political capture
of Washington by the financial services industry, and the emergence
of too-big-to-fail banking giants, fed by the implicit subsidies
of taxpayer guarantees and the explicit subsidies of offshore
tax avoidance.
The emergence of the US as an offshore jurisdiction in its own
right attracted vast financial flows into the country boosting
bankers' power even further. The old alliance between Wall Street
and the City of London, which had collapsed after the Great Depression
and the Second World War, had been resurrected.
p148
The London-based Euromarket, then the wider offshore world, provided
the platform for US banks to escape tight domestic constraints
and grow explosively setting the stage for the political capture
of Washington by the financial services industry, and the emergence
of too-big-to-fail banking giants, fed by the implicit subsidies
of taxpayer guarantees and the explicit subsidies of offshore
tax avoidance.
p148
US crime-fighting lawyer John Moscow
Money is power, and we are transferring
this power to corporate bank accounts run by people who are in
the purest sense of the word unaccountable and therefore irresponsible.
p149
The narcotics industry alone generates some $500 billion in annual
sales worldwide, twice the value of Saudi Arabia's oil exports.
p151
The bank [BCCI - Bank of Credit and Commerce International] was
set up in 1972 by an Indian-born banker, Agha Hassan Abedi, who
got backing for his venture from members of the Saudi royal family
and from Sheikh Zayed Bin Sultan Al-Nahayan, the ruler of Abu
Dhabi. BCCI grew super-fast under a simple business model: create
the appearance of a reputable business, make powerful friends,
then agree to do anything, anywhere, on behalf of anyone, for
any reason. BCCI loaded politicians with bribes and served some
of the twentieth century's greatest villains: Saddam Hussein,
terrorist leader Abu Nidal, the Colombian MedellIn drug cartel
and Asian heroin warlord Khun Sa. It got involved in trafficking
nuclear materials via sales of Chinese Silkworm missiles to Saudi
Arabia and in peddling North Korean Scud-B missiles to Syria.
Its branches in the Caribbean and Panama serviced the Latin American
drug trade; its divisions in the United Arab Emirates, then enjoying
an oil boom and an offshore banking bonanza, serviced the heroin
trades in Pakistan, Iran and Afghanistan; and it used Hong Kong
to cater to drug traffickers in Laos, Thailand and Burma.
BCCI also penetrated the US banking system,
getting around the concerns of American regulators by using offshore
secrecy structures to make its ownership invisible. It paid off
Washington insiders and built up a solid partnership with the
CIA.
p152
In 1972, BCCI [Bank of Credit and Commerce International] set
up its headquarters in luxury offices in the heart of the London...
Many of its 80,000 depositors were relatively poor people from
the developing world who had no idea that this apparently London-based
bank, backed by wealthy Arab sheikhs, was a fiction built on a
fiction.
p156
[a Russian-born Jew named Arkady Gaydamak became Angola's trusted
man in Moskow. He told me:]
In the so-called market economies, with
all the regulations, the taxation, the legislation about working
conditions, there is no way to make money. It is only in countries
like Russia, during the period of redistribution of wealth - and
it is not yet finished - when you can get a result. So that is
Russian money. Russian money is clean money, explainable money.
How can you make $50 million in France today? How? Explain to
me!
p156
Some have compared the vast upward redistribution
of wealth in Russia after the fall of the Soviet Union to the
era of the robber barons in the United States in the nineteenth
century. But there is a crucial difference. The Americans didn't
have a huge offshore network in which to hide their money. In
spite of their many abuses, the barons concentrated on domestic
investment. While they fleeced unwary investors and subverted
the political process, they also built the country's industrial
prosperity. They left America stronger and in time the state was
able to rein in their worst excesses. But in late twentieth-century
Angola and Russia the money simply disappeared offshore forever.
p156
It was Africa's curse that its countries gained independence at
precisely the same time as purpose-built offshore warehouses for
loot properly started to emerge. For many of these countries,
independence really meant independence for their elites from bothersome
rules. The colonial powers left, but quietly left the mechanisms
for exploitation in place.
p157
Global Financial Integrity (GFI) in Washington authored a study
on illicit financial flows out of Africa (March 2010). Between
1970 and 2008, it concluded:
Total illicit financial outflows from
Africa, conservatively estimated, were approximately $854 billion.
total illicit outflows may be as high as $1.8 trillion... The
GFI estimate - equivalent to just over 9 per cent of its $51 billion
in oil and diamond exports during that time - simply has to be
a gross underestimate of the looting. Many billions have disappeared
offshore through opaque oil-backed loans channeled outside normal
state budgets, many of them routed through two special trusts
operating out of London.
... GFI's shocking estimates complement
the figures I mentioned - ten dollars out for every dollar of
foreign aid flowing in.
... Another study emerged in April 2008
from the University of Massachusetts, Amherst ... to examine capital
flight from forty African countries from 1970 to 2004. Its conclusions
are striking.
Real capital flight over the 35-year period
amounted to about $420 billion (in 2004 dollars) for the 40 countries
as a whole. Including imputed interest earnings, the accumulated
stock of capital flight was about $607 billion as of end-2004.
Yet at the same time, the total external
debt of these countries was 'only' $227 billion. So, the authors
note, Africa is a net creditor to the rest of the world, with
its net external assets vastly exceeding its debts. Yet there
is a crucial difference between the assets and the liabilities:
The subcontinent's private external assets belong to a narrow,
relatively wealthy stratum of its population, while public external
debts are borne by he people through their governments.
p158
Africa's people 'bear' their public debts, in the forms of poverty,
war, a hopeless lack of real opportunities, and the regular physical
and economic violence perpetrated against them by corrupt and
predatory elites.
p160
Playing all three corners of the triangle - source countries being
drained of wealth, increasingly offshore-like economies receiving
the wealth, the offshore conduits handling its passage turned
global private banking into one of the most profitable businesses
in history.
p160
economist Jim Henry, in his 2003 book "Blood Bankers"
The rise of Third World lending in the
1970s and 1980s laid the foundations for a global [tax] haven
network that now shelters the world's most venal citizens.
p160
[In the 1970s and 1980s] at least half of the money borrowed by
the largest [Third World] debtor countries flowed right out again
under the table, usually in less than a year, and typically in
just weeks. Third World public debts were matched almost exactly
by the stock of private wealth their elites had accumulated in
the US and other havens.
p160
The top 1 per cent of households in developing countries own an
estimated 70-90 per cent of all private financial and real estate
wealth.
p161
The Boston Consulting Group reckoned in 2003 that over half of
all the wealth owned by Latin America's wealthiest citizens lay
offshore.
p163
The OECD [Organization for Economic Cooperation and Development],
a club of rich nations -- works hard to ensure that its treaty
models, which tilt the playing field in favour of rich countries
at the expense of poor ones, is dominant.
p164
$18 trillion [in tax revenues from developing nations] flowed
in 2008 through the Netherlands, just one of many conduit havens.
p164
South Africa's finance minister Trevor Manuel
It is a contradiction to support increased
development assistance, yet turn a blind eye to actions by multinationals
and others that undermine the tax base of a developing country.'
p164
The two biggest sources of foreign investment into China in 2007
were not Japan or the US or South Korea, but Hong Kong and the
British Virgin Islands.
p164
The biggest source of foreign investment into India, at over 43
per cent of the total, was not the US or Britain or China, but
the treaty haven of Mauritius, a rising star of the offshore system.
p172
Delaware's legislature is for hire.
p173
Paul Tucker of the Bank of England in a 2010 paper on financial
stability
Money [market] funds began their life
in the US, as a response to now long abolished caps on interest
rates that the banks could pay on deposits. They have become a
gigantic part of the US financial system; at about $3 trillion,
being roughly the same size as the transactions deposits of commercial
banks.
p175
A tax haven is a state [country] captured by financial interests
from elsewhere.
p182
[The island of Jersey] is a state whose leadership has essentially
been captured by global finance, and whose members will threaten
and intimidate anyone who dissents.
p183
What we have in [the British island of] Jersey and [the US state
of] Delaware is rampant uncontrolled deregulation, harnessed to
the interests of a few insiders and large corporate players. Just
as European nobles used to consolidate their unaccountable powers
in castles, to better subjugate and extract tribute from the surrounding
peasantry; so financial capital has coalesced in these fortified
nodes of unaccountable political and economic power, capturing
local politics and turning these jurisdictions into fast and flexible
private law-making machines, defended against outside interference
and protected by establishment consensus and the suppression of
dissent.
Offshore [the offshore financial system]
is not just a place, an idea, a way of doing things, or even a
weapon for the finance industries. It is also a process: a race
to the bottom where the regulations, laws and trappings of democracy
are steadily degraded, as one arrangement ricochets from one fortified
redoubt of finance to the next jurisdiction, and the offshore
system pushes steadily, further, deeper, onshore. The tax havens
have become the battering rams of deregulation.
p184
Secrecy jurisdictions [offshore financial centers] are places
that seek to attract business by offering politically stable facilities
to help people or entities get around the rules, laws and regulations
of jurisdictions elsewhere.
p183
The future that the offshore system promises has a distinctly
medieval quality: in a world still nominally run by democratic
nation states, the offshore system is more like a network of guilds
in the service of unaccountable and often criminal elites.
p186
a 2008 Swiss-based Bank for International Settlements (BIS) study
on derivatives stated:
The most common jurisdictions for US securitisations
are the Cayman Islands and the state of Delaware.
p186
The most common jurisdictions for European securitisations are
Ireland, Luxembourg, Jersey, and the UK. Every last one is a major
secrecy jurisdiction that uses a simple business model: ask the
financial institutions exactly what they need, then shape the
laws accordingly and without democratic debate.
p186
Among the only academic experts to have seriously examined offshore's
role in the [2007 Wall Street] financial crisis is Jim Stewart,
senior lecturer in finance at Trinity College, Dublin. In reports
in July 2008, Stewart investigated the Dublin International Financial
Services Centre (IFSC), a secrecy jurisdiction setup in 1987 under
corrupt Irish politician Charles Haughey with help primarily from
City of London interests. A showcase for high-risk wild-west financial
capitalism, the Dublin IFSC emerged the year after London's giant
deregulatory Big Bang and currently hosts over half the world's
top fifty financial institutions. It became a big player in the
shadow banking system, and now hosts 8,000 funds with $1.5 trillion
in assets.
p189
The business model of private equity companies [is to] buy a company
that someone has sweated for years to create, then load it up
with debt, cutting the tax bill and magnifying the returns.
... Sometimes private equity companies
do create real value, but the core feature of their business model
is not value creation, but value skimming. A big tax bill is slashed,
the company's shares or value rise, managers' remunerations become
fatter, wealth is shifted away from taxpayers to wealthy managers
and stockholders. Nowhere in any of this does anyone produce a
better or cheaper product.
p190
Banks have been particularly adept at going offshore to grow fast:
by using tax havens to escape tax, to avoid reserves requirements
and other financial regulation and to gear up their borrowings.
Banks achieved a staggering 16 per cent annual return on equity
between 1986 and 2006, according to Bank of England data, and
this offshore-enhanced growth means the banks are now big enough
to hold us all to ransom. Unless taxpayers give them what they
want, financial calamity ensues. This is the too-big-to-fail problem
- courtesy of offshore.
p190
Banks achieved a staggering 16 per cent annual return on equity
between 1986 and 2006, according to Bank of England data, and
this offshore-enhanced growth means the banks are now big enough
to hold us all to ransom.
p230
Offshore attitudes are characterised by amazing similarities of
argument, of approach and of method, and some striking psychological
affinities in a geographically diverse but like-minded global
cultural community. A peculiar mixture of characters populates
this world: castle-owning members of ancient continental European
aristocracies, fanatical supporters of American libertarian writer
Ayn Rand, members of the world's intelligence services, global
criminals, British public schoolboys, assorted lords and ladies
and bankers galore. Its bugbears are government, laws and taxes,
and its slogan is freedom.
... While it is in secrecy jurisdictions
where these attitudes flourish so vigorously, they mainly originate
among the onshore ruling classes.
p233
Unaccountable elites are always irresponsible.
p234
Island of Jersey Senator Stuart Syvret in his blog
Come to Sunny Jersey. The North Korea
of the English Channel.
p234
Island of Jersey Senator Stuart Syvret after his arrest at the
island's airport
This is a society with no checks and balances,
run by an oligarchy. It is a one-party state, and it has been
for centuries.
p234
an Island of Jersey politician
The [Jersey] finance industry is like
an amoeba. You attack it , and it absorbs that, and attacks back.
It is the parasite in the island, It has taken it over. It controls
us and decides on everything that happens here.
p237
Economists talk of the 'Dutch disease' that afflicts mineral-rich
countries: when revenues flood in, price levels rise and locally
made goods, notably manufactures and agricultural products, cannot
compete with cheaper imports. These sectors wither. Meanwhile,
talent leaches into the dominant sectors, and politicians lose
interest in the thorny challenge of keeping other areas afloat,
because it is far simpler and more lucrative to latch on to the
sources of easy cash.
p242
Right-wing ideologies that for years have been beyond the pale
in the larger democracies have been allowed to grow without restraint
offshore. As offshore finance has become increasingly influential
in the global economy, re-engineering onshore economies in ever
more significant ways, so such attitudes have flourished, gaining
strength and confidence within the larger economies. This is evident
in the intransigent arrogance of bankers, who, having nearly brought
the world economy to its knees, still ask for more and threaten
to relocate elsewhere if they are regulated or taxed too much.
It is visible in the demands of the super-rich, who have come
to expect and demand tax rates below those of their office cleaners.
p244
The City of London! the collective term for Britain's global financial
services industry.
p245
Maurice GIasman a north London jewish academic and a young Anglican
priest named Father William Taylor directly confronted the City
of London Corporation, the municipal authority for the City of
London. The social silence they found hides what may be the most
astonishing story in the history of global finance.
p246
The City of London Corporation [is] the world's oldest continuous
municipal government.
p247
The term 'City of London' refers to the financial services industry
located in and around the British capital [London].
p247
The City [of London], or the Square Mile, is a 1.22-square-mile
slab of prime central London real estate.
p247
When the City [of London's] 350,000-odd workforce - four-fifths
employed in financial services -- has left, fewer than 9,000 resident
souls. plus security guards, remain.
p247
London has more foreign banks than any other financial centre:
by 2008 it accounted for half of all international trade in equities,
nearly 45 per cent of over-the-counter derivatives turnover, 70
per cent of Eurobond turnover, 35 per cent of global currency
trading and 55 per cent of all international public offerings.
New York is bigger in areas like securitisation, insurance, mergers
and acquisitions, and asset management, but much of its business
is domestic, making London the world's biggest international -
and offshore - financial hub.
p248
It was the creation of the unregulated offshore Euromarkets in
London from the late 1950s onwards, which emerged exactly as Britain's
formal empire collapsed, that created an escape route for US banks,
and others, seeking to get around the burdens of New Deal regulation.
p249
Three-quarters of US Fortune 500 companies, and all of its big
banks, have London offices.
p249
Having gone out of its way to welcome wealthy Arabs in the 1980s
and rich Japanese and oil-rich Africans in the 1990s, the City
[of London] has more recently aggressively courted Russian oligarchs,
providing them with bolt-holes beyond the reach of Russian law
enforcement... Some 300,000 Russians live in London.
p249
The British bank Lloyds TSB ... secretly channeled Iranian and
Sudanese money into the American banking system.
p250
political writer Robin Ramsay
In this country [UK] bankers don't go
to jail.
p250
In 1914 the tax rules were twisted to let those resident but not
domiciled in England escape tax on their worldwide income - they
would only be taxed on what was actually earned in Britain...
And that is essentially the situation today.
p251
60 percent of world trade happens inside multinational corporations.
p252
The International Accounting Standards Board (IASB), sets the
rules for how companies around the world publish their financial
data. Over one hundred countries use its standards... 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...
Through the IASB, hosted by the City of London Corporation, these
giant businesses write their own disclosure rules.
p252
The City [of London's] biggest role in the global offshore system
is in its relationship with running Britain's spider's web. In
the second quarter of 2009 the UK received net financing of US
$332.5 billion just from its three Crown Dependencies Jersey,
Guernsey and the Isle of Man. In 2009 the web as a whole held
an estimated US $3.2 trillion in offshore bank deposits, about
55 per cent of the global total according to data from the Bank
for International Settlements, and that is just bank deposits.
p252
The British offshore web provides the City [of London] with three
things. First, the tax havens scattered across the world capture
passing foreign business and channel it to London just as a spider's
web catches insects; second, it is a storage mechanism for assets;
and third, it is a money-laundering filter that lets the City
get involved in dirty business while providing it with enough
distance to maintain plausible deniability
p252
The head of the [City of London] Corporation is the Lord Mayor
of London, not to be confused with the mayor of London, who is
head of the much larger Greater London municipality which contains
the tiny City [of London] but has no jurisdiction at all over
it. The Lord Mayor's principal role today is ambassador for all
UK-based financial and professional services.
p254
The [City of London] Corporation is one of the most powerful players,
if not the most powerful, in global financial regulation. Through
myriad subtle levers and influences, it exerts an invisible influence
on Britain's financial regulators and politicians.
p255
As Britain's mainstream political system has evolved over the
centuries, the City [of London] has been a fortress withstanding
the tides of history that have transformed the rest of the British
nation state. Its special privileges stem ultimately from the
power of financial capital. Britain's rulers have needed the City's
money and given the City what it wants in exchange.
... Britain's entire political system
derives, in a sense, from the City of London Corporation.
p256
Modern Britain has no written constitution but some historians
talk of an ancient constitution involving old rights, privileges
and liberties... [There are] four pillars of the ancient constitution:
the King as its head, the Church as its soul, the parliament as
the country and the City as the money - not so much subordinate
to the Crown or parliament but intertwined with them in complex
political relationship.
p259
London is two cities: a large, vibrant and troubled population
centre plus a supremely wealthy offshore island in its midst.
p261
British Prime Minister Clement Attlee (1945-1951)
Over and over again we have seen that
there is in this country another power than that which has its
seat at Westminster. The City of London, a convenient term for
a collection of financial interests, is able to assert itself
against the Government of the country. Those who control money
can pursue a policy at home and abroad contrary to that which
has been decided by the people.
p261
The Bank of England was set up in 1694 as a private institution
capitalised by wealthy Protestant City interests, in large part
to provide credit for building the navy.
p261
The Bank of England was finally nationalised in 1946... In the
end, nationalisation was a mirage. The bank continued to be run
by essentially the same court of Old Etonian merchant bankers...
The government got powers to issue 'directions' to the bank, but
admitted in 2010 that 'thus far, the power has not been used.
p262
The Economist magazine said soon after the Bank of England was
nationalized
The nationalized bank 1946 will not differ
in any fundamental way from the privately owned bank of 1945.
p262
Margaret Thatcher was prime minister [1981], and almost the entire
political class was losing faith in manufacturing and genuflecting
towards the City [of London]. Everything was for sale: school
playing fields, telephone companies, railways and marketplaces.
The City was at the forefront of a global trend of financialisation:
the re-engineering of manufacturing firms as highly leveraged
investment vehicles and, soon, the packaging of mortgages into
asset-backed securities for trading on global markets.
p262
The Bank of England is accountable to parliament, not to the [City
of London] Corporation, but its physical location at the geographical
centre of the City reflects were its heart lies. It shares the
City's view, established over centuries, that the path to progress
lies in deregulation and with the City at the forefront.
p262
In 1991 the [Bank of England] directors decided to work out more
explicitly what the bank is for, and they came up with three main
aims. Two were the usual central bankers' goals: to protect the
currency and to keep the financial system stable. The third -
as [City of London] governor Eddie George put it - is to ensure
the effectiveness of the United Kingdom's financial services and
advance a financial system which enhances the international competitive
position of the City of London and other UK financial centres.
In other words, to protect and promote the City as an offshore
centre.
p263
Corporations get their licence to operate from the state - they
are creatures of state power. The City of London Corporation is
something else.
p283
Maurice Glasman
[The City of London] is an ancient and
very small intimate relational institution -- a medieval commune
representing capital.
p264
Tony Blair transformed the Labour Party into an institution that
the City [of London] could learn to love... In 1996 Blair quietly
dropped Labour's eighty-year-old pledge to abolish the Corporation
of London, replacing it with a vague promise to 'reform' the City.
Few people in Britain even noticed the capture of Britain's last
major bastion of real opposition to the financial sector. When
Blair was elected the following year by a landslide, the Corporation
could rest assured that its position was safe.
p265
Labour MP John McDonnell
[Tony] Blair and [[Gordon] Brown made
a Faustian pact to give the City [of London] its head. The idea
was to let them do their profiteering and just take the tax benefit.
It was not a relationship on our terms; it was simply 'Give them
what they want'.
p266
British MP Tony Benn
The City of London is an offshore island
moored in the Thames, with a freedom that many other offshore
islands would be glad to have.
p273
a 2009 OECD [Organization for Economic Co-operation and Development]
study examining regulatory capture, where government regulators
are taken over by sectional interests like banks - David Miller
led the research
We found there was a huge number of connections
of people who had gone through the revolving door to the banks
and back again, with alarming speed. The biggest banks had the
most concentrated connections, and the countries that had the
biggest connections were the UK, the US and Switzerland.
p274
Richard Brooks, a high-profile tax writer
All the tax breaks end up with the banks,
or they lever the tax breaks to get a huge competitive advantage.
Tax avoidance played a key part in generating the financial crisis.
To put it simply, the securitisation vehicles, which were so profitable
that banks couldn't generate enough of them, were often such good
deals because of the tax avoidance central to them. It was a key
part of cranking up the engine.
p276
There is no constitutional protection [in Britain] 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.
p276
An Oxford University study in 2008 revealed that libel litigation
in England and Wales costs 140 times the European average. Of
154 libel proceedings identified in an official review in 2008,
defendants won precisely zero.
p277
Robin Ramsey
Manufacturing, mining, fishing [in Britain]
are ... irrelevant. The interests of a minority [financial industry]
have come to dominate society.
p277
Manufacturing's share of UK GDP, having fallen to 20 per cent
by the time Tony Blair came to power in 1997, slipped to under
12 per cent by 2009.
p277
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 a UNICEF league of twenty-one industrialised nations
measuring child well-being, the UK came last, marginally behind
the USA.
p277
Britain's pensioners have Europe's fourth highest level of poverty
and are worse off than their counterparts in Romania and Poland.
p277
The 1,000 richest Britons had wealth of £335 billion by
the end of Labour's term in 2010, up from £99 billion when
Labour came to power in 1997. And that's just what we know about.
p278
Jim Cousins, a member of the UK Treasury Select Committee
For thirty years this city [of London]
has been engaged in a second empire project. We have run huge
trade deficits for over thirty years ... they dealt with that
trade deficit by sucking in money from wholesale markets on the
basis of better returns than could be got elsewhere. This was
invented by Margaret Thatcher: the idea was that we would become
financial dealers for oligarchs and oil people from around the
world.
p279
About 60 per cent of world trade happens inside multinational
corporations, which cut taxes by shuffling money between jurisdictions
to create artificial paper trails that shift their profits into
zero-tax havens and their costs into high-tax countries.
p282
The City of London Corporation - this offshore island floating
partly free from Britain's people and its democratic system -
must be abolished and submerged into a unified and fully democratic
London. The City's international offshore web, a mechanism for
harvesting and profiting from financial capital from around the
globe, however dirty it may be, must be dismantled.
p284
When a kieptocrat loots his country and shifts the plunder offshore,
the banks, accountants and law firms that assist him are just
as guilty as the kieptocrat. When a client gets caught and goes
to jail, so should his relationship manager, accountant, trustee,
lawyer and corporate nominee.
p285
Tax havens have become the fortified refuges of financial capital,
protecting it from tax and regulation and in the process contributing
to the latest crisis in many and varied ways.
p286
The Jersey-Delaware [the British Island of Jersey and the US State
of Delaware] notion of the captured state [is]: a place that seeks
to attract business by offering politically stable facilities
to help people or entities get around the rules, laws and regulations
of jurisdictions elsewhere.
p287
Corruption involves insiders abusing the common good in secrecy
and with impunity, undermining the rules and systems that promote
the public interest, and undermining our faith in those rules
and systems. In the process it worsens poverty and inequality
and entrenches vested interests and unaccountable power.
Bribery does all these things, but many
of the services tax havens provide do the same. The parallels
between bribery and the business of secrecy jurisdictions are
no coincidence: we are talking about the same underlying thing...
Bribery may benefit the payer, but it damages the system as a
whole. Similarly, defenders of secrecy jurisdictions may argue
that their services help private actors get around 'inefficiencies'
in mainstream economies, smoothing the way for business to proceed.
And they do. But what are those inefficiencies? They are, most
importantly, tax, financial regulations, criminal laws and transparency,
which exist for good reason. To help someone get around an obstacle
is to corrode both the system and trust in the system. Bribery
rots and corrupts governments, and tax havens rot and corrupt
the global financial system.
p287
Bribery rots and corrupts governments, and tax havens rot and
corrupt the global financial system.
p287
When pundits, journalists and politicians fawn over people who
get rich by abusing the system - getting around tax and regulation
and forcing everyone else to shoulder the associated risks and
taxes - then we have lost our way.
p289
Mervyn King, governor of the Bank of England, following the 2007
economic meltdown
Never in the field of financial endeavour
has so much money been owed by so few to so many.
p289
Offshore is undermining your elected government, hollowing out
its tax base and corrupting its politicians. It is sustaining
a vast criminal economy and creating a new, unaccountable aristocracy
of corporate and financial power. If we do not act together to
contain and control financial secrecy then ... a world of suave
insiders, impunity, international criminal complicity and desperate
poverty, will become the world we leave to our children. A tiny
few will have their boots washed in champagne while the rest of
us struggle for our lives in conditions of deepening inequality.
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