Tax Justice Network Study of Financial Secrecy with U.S. Third Most Opaque (11/14/15)

The Tax Justice Network, an independent network providing "high-level research, analysis and advocacy in the area of international tax and the international aspects of financial regulation."  The Tax Justice Network's description of itself from the web site is here.  The Tax Justice Network has a "financial secrecy index," here, which "ranks jurisdictions according to their secrecy and the scale of their offshore finanical activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight."

The index seeks to analyze features moving and hiding money offshore, with distortion in tax and economic systems.  The index general conclusions from the Introduction are summarized here :

Shining light into dark places 

An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Secrecy jurisdictions - a term we often use as an alternative to the more widely used term tax havens - use secrecy to attract illicit and illegitimate or abusive financial flows.  

Illicit cross-border financial flows have been estimated at $1-1.6 trillion per year: dwarfing the US$135 billion or so in global foreign aid. Since the 1970s African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion. So Africa is a major net creditor to the world - but its assets are in the hands of a wealthy élites, protected by offshore secrecy; while the debts are shouldered by broad African populations.  

Yet all rich countries suffer too. For example, European countries like Greece, Italy and Portugal have been brought to their partly knees by decades of tax evasion and state looting via offshore secrecy.   

A global industry has developed involving the world's biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for  their tax- and law-dodging clients. 'Competition' between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalisation really took off in the 1980s, become a central feature of global financial markets. 

The problems go far beyond tax. In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency. The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more. It provides multiple ways for insiders to extract wealth at the expense of societies, creating political impunity and undermining the healthy 'no taxation without representation' bargain that has underpinned the growth of accountable modern nation states. Many poorer countries, deprived of tax and haemorrhaging capital into secrecy jurisdictions, rely on foreign aid handouts. 

This hurts citizens of rich and poor countries alike.  

What is the significance of this index?

Movie Review of Film on Corporate Offshoring (10/30/15)

This is a first for this blog -- posting a movie review.  The movie is "The Price We Pay."  This review is from the New York Times:  Andy Webster, Review: ‘The Price We Pay’ Maps a Web of Offshore Tax Havens (NYT 10/29/15), here.  Key excerpts:

“Throughout the world, inequality is soaring to new heights, and the wealth of nations, which once provided prosperity to the majority, has gone missing.” So begins the narration for “The Price We Pay,” Harold Crooks’s exacting and disturbing documentary about offshore tax havens for multinational corporations, the growing concentration of money within a narrow minority, and the erosion of social benefits. The ideas in this densely packed but enlightening film can be challenging, but must be heard. 

As the economist Thomas Piketty, author of “Capital in the Twenty-First Century,” relates on camera, income inequality is at heights unseen since before World War I. Krishen Mehta, a former partner at PricewaterhouseCoopers, estimates that 75 percent of multinationals’ profits reside in places like Singapore, Switzerland, Bermuda and Luxembourg. Giants like Amazon and Apple, whose executives are seen being grilled in hearings in London and Washington, are accused of moving profits to other countries and wiping out, for example, independent booksellers while dodging taxes in major client nations.

The film trailer is here.