resilience | In his influential book Treasure Islands: Tax Havens and the
Men who Stole The World Nicholas Shaxson tells us that if you thought
the open face of global capitalism was bad enough, the murky and secret
world of tax havens is even worse. If this comes as an introduction to
the offshore industry the book lets us know that we should have started
worrying, no less been doing something about tax avoidance for a long
time now.
Jonny Gordon-Farleigh: Your book Treasure Islands: Tax Havens and the Men who Stole the World
was first published in 2010 and has since been an extremely important
contribution to our understanding of a secret, hidden and misrepresented
part of our global economy: tax havens. What has happened since then in
terms of the scale and complexity of tax avoidance schemes and how have
governments responded?
Nicholas Shaxson: That’s a big question. I would say
that different things have happened in different countries but what has
been a common factor in most has been that public deficits and
austerity measures have focused minds on tax revenues. There has been a
real change in the public mood and receptiveness to the issue of tax
avoidance and that it’s a problem more serious than we thought. In the
Go-Go years before the boom, in places such as the UK, the attitude was
“I’m alright, Jack,” and people didn’t seem to worry about it. Now, the
general public are also realising that tax havens are much more central
to the global economy than anyone had previously imagined. They had
previously been seen as an exotic sideshow to the main event but,
increasingly, the public is realising that tax havens are at the heart
of the mainstream global economy. On some measures half of all
cross-border trade is conducted on paper through tax havens. Tax havens
are not so much about Mafiosi and drug dealers, even though there is
plenty of that still about, but most fundamentally about banks and
financial intermediaries. That’s the context.
Now politicians, if we take the example of
the UK, are being led by the public mood. It’s remarkable to see a
Conservative prime minister making such statements about tax avoidance,
which had previously been considered legal and therefore little wrong
with the practice. The shift in public mood means politicians are being
forced to condemn tax avoidance and are certainly making the right
noises. Also, the OECD — a club of rich countries that had previously
jealously protected this awful system of secret information exchange
that is very favourable to tax havens and corporate taxation that is
very favourable to tax avoiders — now suddenly seem much more open to
looking for real alternatives. A closed door is now open, at least a
bit. This has not yet translated into any serious policies but there are
some incremental changes that have been made such as openings into
Swiss bank secrecy, even though there’s still a long way to go there.
On the other side of the equation, though,
the offshore system has been growing under its own momentum for decades.
It is a self-reinforcing process where countries compete with each
other to offer the best tax loopholes or secrecy facilities. This
race-to-the-bottom dynamic is still firmly in place. So there are two
opposing forces: one is the offshore system pushing ahead through its
own momentum, and then the public mood pushing in the other direction. I
wouldn’t say anything more than that things are beginning to change. A
true rollback of offshore abuses needs much more sustained public
pressure.
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