What makes a tax haven?
This is a guest blog post from Juliette Garside, Deputy Business Editor at The Guardian, for Fair Tax Week 2023.
Fair Tax Week 2023 (8th-18th June) is a recognition of the businesses and organisations that are proud to promote responsible tax conduct, and a celebration of the positive contribution this makes to society.
Register now to hear Juliette and a panel of expert speakers at our ‘What makes a tax haven?’ webinar, 12:00 – 13:00 BST on 13th June.
Deputy Business Editor
When King Charles acceded to the throne, he inherited a collection of crown dependencies and overseas territories. A legacy of empire, the economies of these small islands barely register on the global stage. But collectively, they make up the world’s largest network of tax havens.
Ranging from Jersey and Guernsey in the Channel to the British Virgin Islands in the Caribbean, they are important cogs in the offshore mechanism, which is estimated to shift over $1 trillion of corporate profits each year away from the countries in which that cash was generated. The process deprives governments of tax revenues needed to fund schools, hospitals and infrastructure.
Despite widespread outrage at the damage done by tax havens, and revelations about the extent of offshore evasion in the Panama Papers and subsequent leaks, the process only seems to accelerate. The economists Ludwig Weir and Gabriel Zucman estimate multinationals shifted just 2% of their profits offshore in the 1970s. Today, they say it is 37%.
Private wealth, too, is sheltered offshore. For certain individuals, one of the major attractions of tax havens is secrecy. The most popular offshore destination, the British Virgin Islands, has 30,000 inhabitants and 400,000 offshore companies. The attractions are obvious: companies registered here are black boxes, with no public register of their owners and no duty to publish accounts. The jurisdiction is used by oligarchs evading sanctions, and by kleptocrats hiding bribes. Tax havens are a scourge on more than just the revenue raising powers of other nations, they incentivise corruption.
The problem is easy to identify, but the solutions are complicated. Revenues from incorporations still make up more than half of the money the BVI government collects each year. Without that revenue, the local economy would crumble.
So what makes a tax haven? And how do we un-make them? I’ll be looking for answers to these questions during Fair Tax Week next month, in a discussion on the rise of offshoring with the award-winning author Oliver Bullough, and speakers from Oxfam, Tax Justice Network and the Fair Tax Foundation. Come and join us.