If you have a weak stomach or are prone to heartburn, you would be wise to avoid “Treasure Islands,” written by Nicholas Shaxson. He is a competent investigative reporter whose mission is made clear in his subtitle, “Uncovering The Damage of Offshore Banking and Tax Havens.” This is another “must read,” even though its findings are disturbing and alarming.
Most of us are aware that people and corporations evade paying their taxes by hiding their money in banks on island retreats such as the Cayman Islands. It is estimated that these offshore tax evaders cost the United States $100 billion in lost revenue annually.
We might be tempted to throw up our arms in disgust and act as though this undercover cheating is going on in another world from ours. This is foolhardy, because it forces millions of ordinary, honest and hardworking people to pay the tax bill left unpaid by these cheaters. Shaxson repeatedly shows how multinational corporations, bankers, lawyers and accountants are but sophisticated pirates who are clever at dodging their responsibility to pay their fair share of taxes.
Shaxson defines a tax haven as “a place that seeks to attract money by offering politically stable facilities to help people or entities get around the rules, laws and regulations of jurisdictions elsewhere.” An important ingredient of these “facilities” is secrecy. Because these funds are so huge, secrecy must be at a level of perfection. Therefore, it is usual that punishment for breaches of security meet with severe penalties — even the death sentence.
The wide expanse of these “secrecy jurisdictions” is alarming. According to Shaxson, there are 60 such locations that are divided into four groups: continental European, British, United States and several unclassified loners such as Somalia and Uruguay. It becomes obvious that tax havens are easily accessible even though the general public might only be aware of Switzerland or the Cayman Islands.
Shaxson is at ease with his subject, whether dealing with the idiosyncrasies of individual users of tax evasion facilities or a whole zone of activities such as British, French or the Caribbean Islands. He gives lively account of the Vesty brothers — William and Edmund — who labored mightily to organize the largest monopoly of meat products in the world. Even though they were members of two of the richest families in Great Britain, they were also two of the biggest tax evaders in history. They went to heroic extremes to avoid paying any income taxes. Once they got their hands on money, they regarded it as theirs for keeps. It was said that “Getting taxes from the Vestys was like trying to squeeze a rice pudding.”
On the larger scene, Shaxson shares his research on tax evasion by revealing his findings about the oil industry in Gabon, a former French colony along the western coast of Africa. France is still the dominating force in Gabon's affairs because of the ownership of the large oil company Elf Aquitane. A virtual puppet for French interests, Omar Bongo, managed the economy behind the protection of several hundred French paratroopers. Quietly and invisibly, a gigantic scheme of corruption was at work in the distribution of a huge slush fund raised from oil profits. These earnings were placed in tax havens in Gabon, Switzerland, Liechtenstein, Jersey and elsewhere. This scenario is typical of how elites manage to escape paying taxes.
Shaxson’s disclosures about tax havens created in the United States shows a gradual development of “facilities” for domestic and offshore tax evasion. In 1981, only months after President Reagan took office, the means to expedite international offshore banking was liberalized. Then, in 1984, foreign investors were treated to a gift of having to pay no taxes on bond incomes. But it was the evolution of Delaware as a friend to corporate interests that has attracted the most interest. At one point, Barack Obama criticized Ugland House in the Cayman Islands for housing 12,000 corporations offering tax evasion scams. The Financial Services Authority for that jurisdiction replied that Obama would do well to pay attention to what was going on in Wilmington, Del., where at one address, 217,000 companies were listed.
One wonders if any reforms are possible in a world where so many safe havens for tax evasion exist. Shaxson suggests several reforms to clean up the global stench, but it is unlikely that any reforms will be forthcoming. For example, transparency in financial records would help. But, with 60 percent of world trade conducted by multinational corporations and their quest for secrecy to shuffle money from one jurisdiction to another, there is little chance of corrective legal action. The bottom line for this sordid story of almost universal greed is that the secret wealth of elites is comingled with the secret wealth of drug lords and criminals to cheat society out of its rightful share needed to govern.
Allan Powell is a professor emeritus of philosophy at Hagerstown Community College.
Allan Powell: The murky world of offshore banking
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