Tax Haven Hypocrisies

What are the Group of 20 countries really up to, with their grand plans against tax havens?  France’s Nicolas Sarkozy had been particularly noisy on that score, hoping for tough sanctions against off shore centers intent on evading tax officials.  Such moves are ostensibly based on an effort to cleanse the global financial system of this “scourge” – capital that moves in less than mysterious fashion to areas of lesser accountability and higher returns.

The G-20 countries, after their London labours, were meant to produce a “blacklist” of recalcitrant jurisdictions.  But as Alexander Neubacher of the German magazine, Der Spiegel, rightly remarks, it must be one of the shortest blacklists in history.  With remarkable deftness, a list that would have seemed impressively long seemed startlingly short.  None, to be exact.  Overnight, tax havens had, it would seem, ceased to exist.  No country was willing to throw their hat in the ring – we are all saints in the financial system now.

The reasoning behind this sudden willingness to make such escape options for enterprising businesses and individuals disappear is clear enough.  No country wants sanctions on the basis that they offer such services.  The official communiqué of the G-20 London summit trumpeted with confidence that, “The era of banking secrecy is over” promising stern measures against countries not in accord with the “international standard for exchange of tax information.”

How did tax havens and associated countries miraculously purify themselves overnight?  A solemn assurance to abide by the new rules was all that was required, an odd kind of gentleman’s agreement.  Given the recent chapters in banking and financial irresponsibility, this provision is barely believable.

The G-20 gloss has also given the impression that tax havens and abuses are the stuff of small offshore states, exotic retreats with little or no regulation to speak off.  Nothing similar could, it is implied, take place within the states of the OECD itself.  Surely.  This, is far from true.  As the Economist pointed out last month (March 26), “The most egregious examples of banking secrecy, money laundering and tax fraud are found not in remote alpine valleys or on sunny tropical isles but in the backyards of the world’s biggest economies.”

The OECD has been busying itself with drawing up a blacklist of tax havens for sometime, an exercise that is weakened by what it leaves out.  In fact, the OECD nations control a staggering 80 percent of the world’s “offshore” market, with many member states qualifying as havens themselves.  Additionally, it has only focused on smaller jurisdictions, suggesting, perhaps, an anti-competitive bias in the whole exercise.

One key offender is, unsurprisingly, the United States, where reporting requirements in such states as Delaware, Wyoming and Nevada are skimpy.  Indeed, political scientist Jason Sharman of Griffith University in Australia argues that the US is worse on such things as shell corporations than classic tax havens, more so than Liechtenstein or Somalia.  The state of Nevada boasts, through its website, “limited reporting and disclosure requirements” along with rapid incorporation services.   Shareholders do not need to be named, and information is rarely shared with the federal government.  Given such services, the ratio of companies to people in that state is roughly one to six.

The new regime of strict bookkeeping and accountability must, as ever, take root within the OECD states before the tentacles are extended to jurisdictions of little consequence to the financial system.  After all, the diligent evasion of financial regulations and rules, the result of an ideological mania, began there.

BINOY KAMPMARK was a Commonwealth Scholar at Selwyn College, University of Cambridge.  Email:


Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He lectures at RMIT University, Melbourne. Email: