How tax havens poisoned the economy

Updated: 
JerseyIt's been called "the most important book written so far this year". It reads like a meticulously-researched thriller and it tells the story of how tax havens and the offshore financing system have distorted economies, captured governments and caused financial crises. It is essential reading.

Treasure Islands by Nicholas Shaxson, a financial journalist who works for the Financial times and The Economist, sheds light on a shadowy system that goes to the heart of the world we now live in. It is a stunning, disturbing read that deserves as wide an audience as possible.

Tax Justice Network

Shaxson quotes figures from the Tax Justice Network which show that in 2005 some $11.5 trillion of wealth was held offshore. The estimated $250 billion of taxes lost on that income is nearly three times the total of the entire global aid budget. And that's just money held by individuals.

The book goes on to explain that the offshore industry is not simply about individuals avoiding tax. Instead, it shows how corporations and financial institutions have systematically constructed a global network which distorts the world's economy and creates many of the problems it claims to solve.

Shaxson calls this "the great untold story of globalisation". He describes the offshore industry as "a project of wealthy and powerful elites to help them take the benefits from society without paying for them." He shows how half the world's trade flows through tax havens, how every multinational uses them routinely, and how banks are their biggest users.

City of London Corporation

The tale that unfolds is one of a systematic attempt by finance to not only free itself from the constraints of governments or law, but to construct a vast state within a state that demands everything it touches bends to its will. At the heart of the story is the role of the City of London Corporation.

The Corporation is a municipal authority for fewer than 9,000 people located at the heart of London but which exists largely outside the democratic and legal confines of the rest of the country and whose official role is, extraordinarily, to promote economic liberalisation globally.

It is impossible to do justice to the range or research deployed in this book in one short review. Shaxson's investigations range from the Swiss cantons to the Caymen Islands and back via Jersey to the City. Along the way he comes to the conclusion that "the British Empire faked its own death".

Offshoring

He provides some particularly clear explanations of complex issues, for example showing of why the arguments deployed against double taxation that are used to justify offshoring are in fact arguments for double non-taxation. Essentially, companies move profits to a low tax territory and losses to one with high taxes, prompting a race to the bottom.

No doubt some of the regular contributors to our comments thread will see this as another 'Marxist' attack on good honest wealth creation. Here, as usual, they would be wrong. Shaxson's analysis and his proposed solutions are rooted in a very social democratic world view.

What is truly worrying is that it is just that world view, and the new deal consensus that went before it, which has been targeted by the high priests of finance. So successful have they been that criticism, or even examination, of their affairs and their ideology is presented as extreme. And that should be cause for worry in itself.

Thatcher, Blair and Brown

The truth is that the global economy is in the grip of an extremist ideology that has captured governments. In this country it has been enthusiastically embraced by the Thatcher, Blair and Brown governments, and the current Coalition's policies continue to put the interests of finance before genuine wealth creation.

If you are worried about issues such as this, read this book. If you think it's yet more left-wing scaremongering, read the book and confront the arguments. You may find you change your mind.


Links (open in new window)

SPONSORED FINANCIAL CONTENT