Visiting Treasure Islands
Taxguide.co.uk recently spoke to Nicholas Shaxson, the author of a book examining the world of tax havens entitled Treasure Islands.
Malawi-born journalist Shaxson explains he became interested in tax havens after writing for several years on West African politics and subsequently discovering how ‘tax havens were implicated in the huge sums of money that were disappearing’.
His book, Treasure Islands examines havens such as Jersey, Bermuda and the Cayman Islands, exploring both their historical development and their legislative loopholes that make them a popular destination for some of the world's biggest corporations.
Regarding how much is stored offshore he remarks that while the OECD has estimated the figure at $7 trillion the full amount could be in the region of $10- $20 trillion, though he notes it is extremely difficult to estimate a precise amount as a result of the secrecy that exists regarding offshore accounts.
Responding to the question of whether or not tax havens are ever a morally legitimate means of avoiding tax, he argues that as they primarily exist as what he describes as ‘An escape route for the elite’ it is as a result ‘unfair’ if the wealthiest are able to escape paying the rates the majority of a populace will be exposed to.
He gives the example of how legitimate exercises to avoid double taxation in multiple territories are used by companies to avoid paying tax in any jurisdiction, arguing that tax havens provide what amounts to a ‘subsidy to large multinationals’.
Concerning the trial of Harry Redknapp for tax evasion Shaxson notes that Monaco – the country Redknapp used to receive payment for what the court decided were gifts from his then chairman Milan Mandaric – is a territory that does ‘Not represent a very sophisticated way of evading tax’. Taxguide.co.uk notes that Redknapp was acquitted on charges related to tax evasion.
He remarked a more effective way would be to ‘Use two or more havens so that if investigators break one they must subsequently go to another’.
Furthermore he notes with ‘Really big money’ there will often be five or six interconnected havens with trustees located in a different territory to the assets to further complicate attempts to investigate them.
With politicians in both the US and UK putting pressure on countries perceived to be tax havens, Shaxson comments that with ‘Rising austerity politicians will be increasingly keen to access tax revenues’ adding that tax could potentially become a ‘key battleground’ in this years US presidential race.
Further information on double taxation is available here.
By Ben Jaglom