Treasure Islands: The Off-Shore Economy that Finances Globalization
Published in La Stampa
(Italy) on 4 August 2015
by Maria Grazia Bruzzone (link to original)
The government has just launched two decrees that, among other things, modify the standards for the re-entry of capital, eliminating several obstacles that up until now had prevented these standards’ application (incidentally: Couldn't they make these laws better? The Court of Appeals has just intervened on the subject of account forgery, signaling a revealing "gap,” via the interview of Giovanni Maria Flick with Corriere della Serra).
Good News
The capital that was illicitly exported to Switzerland, and elsewhere where an agreement was reached, will return, and the taxes that are due will be paid. However, those million/billion private citizens are a tiny drop in the ocean of the global black economy. And we are not only talking about taxes.
The Dimensions of the Phenomenon
More than half of global trade goes through financial havens, and more than half of banking activity and a third of direct foreign investment by multinationals is diverted offshore. Eighty-five percent of international bank and bond emissions take place in a protected zone, outside of any control mechanism [from governing authorities]. And let's not mention the massive amount of derivatives that according to the International Regulations Bank have reached the fantastical number of $700 trillion — $700,000 billion (one million billions including credit default swaps), most of which get traded outside of the stock exchanges.
Ghost-finance contributes a monstrous economic volume that equals to a third of the global GDP. According to the IMF, it's the shadow-turnover of singular, small insular centers (dated 2012).
Transparency Project?
This problem has reached the point that, after much resistance, G-20 countries decided in 2013 to turn the page, introducing an "automatic exchange of financial information" that should begin to come into effect exactly at the end of 2015, according to a standard which is being adhered to more by countries in the Organization for Security and Cooperation in Europe than by some others (see here the specialized American site gfintegrity.org, and Sole24Ore). We will see but with skepticism and commitment.
In the meantime, the offshore blacklist seems to have been trimmed a little through financial collaboration agreements, for example with Switzerland, San Marino, Lichtenstein and recently with Hong Kong and Cayman, as indicated by Panorama.it, and with more accuracy, Sore24Ore. But we are dealing with bilateral agreements between countries, in this case Italy, even if they are partial. The list of total black havens is always long and unexpected. Libero Quotidiano said it well, going as far as to say that in order to avoid the IRS, Italians are now forced to take up residence abroad.
Treasure Islands
Nicholas Shaxson, the English author, called tax havens “Treasure Islands” in his critical book “Treasure Islands: Tax Havens and the Men who Stole the World.” Vintage revealed in 2012 with data on hand the black financial universe that is the premise of globalization.
"Many people, and perhaps you’re one of them, have a queasy feeling that something has gone badly wrong with the world economy, but they can’t quite put their finger on what the source of the trouble is. Once you understand the nature of offshore tax havens, you should feel closer to pinning down the answers," he writes today in a post in (The Guardian), full of new details and examples on how the business works.
Megachip referenced it, while reviewing the book.
According to Tax Justice Network, 83 percent and 99 percent of the major U.S. and European companies, respectively, are in possession of offshore companies. These are fake "shell" companies through which trade transactions happen, hiding the real profits.
Offshore advocates defend themselves by saying that this way, the flow of capital in the world becomes fluid, removing obstacles. The fact is that the obstacles are "taxes, regulations and democratic laws," observes Shaxson in his post. He also shares some photos of the tax havens — with interesting taglines — that are on view at the Arles Festival of Photography from July 6 to Sept. 20 and will become a book.
The expression “tax havens” calls to mind images of small islands with beaches and palm trees — paradisiacal indeed — where any deposit, transaction or operation is permitted. "[S]unny places for shady people," as Shaxson calls them (SEE HERE). But next to these classical paradises, there are many others in the world where, thanks to opaque legislation, money circulates without leaving a trace. Beside the Caribbean islets there are large, famous islands like Manhattan or the U.K. where in 2007, the IMF identified a secret jurisdiction.
Secrecy Jurisdictions
"Tax havens aren’t tax havens just because they have low taxes," writes gfintegrity.org, an American site specializing on the subject. "Rather, what makes a tax haven is its opacity of financial information. This is why tax havens are often more accurately referred to as ‘secrecy jurisdictions,’ and why they facilitate many more problems than just tax evasion." (SEE HERE).
"While the legal regimes that tax havens set up to enable this secrecy are complex, their basic outline is simple — banks, companies, trusts or other financial actors in the country are allowed to accept money from basically anywhere without reporting it to the authorities in the country where it originates or from which it is controlled. In some cases, it is actually illegal to disclose that information ..." (SEE HERE).
"The secrecy jurisdiction," summarizes Megachip, "serves for many purposes: evasion, avoidance, irretrievability of the partners of a company, irretrievability of the origins of financial flows, recycling, false invoicing and other practical incentives. Like exchanges of favors with drug traffickers, arms pushers, corruptors and fringe groups of all colors who buy their representatives on the inside of the political system, including monarchs, generals, bloodthirsty drivers, drivers of 'rogue states'." And terrorists, adds the U.S. site.
The Two Poles: UK and US
There are around 60 or more secret jurisdictions. The two main groups are the British and American jurisdictions according to Shaxton. And the author admits that at the beginning of his survey, he was far from suspecting it.
The largest aggregation, which accounts for around half of these secret jurisdictions, is the U.K. At the helm are places like Jersey and Guernsey or the remote Isle of Man, which we can add to Cayman, British Virgin Islands, Bermuda and Gibraltar.
"It seems unbelievable, but the political form of the first two, small islands in the Channel that do not belong to the U.K. but are dependent on the British crown, are bailiwicks, a rare feudal form that dates to the Middle Ages. When considering the ones that are indirectly controlled, like Hong Kong, Singapore, Bahamas, Dubai and Ireland and also counting the assets of the city's banking system, the British control half of the world's banking assets," writes Magachipsulla, Shaxson follower.*
The banking assets in the Cayman Islands represent only around 1/15th of the $30 trillion in the world's banking assets, writes Shaxson today.
After this, there are the U.S. hubs, with secret jurisidictions in Florida and illicit affairs and trade taking place in Delaware, Wyoming, Nevada. There are also the Virgin and Marshall Islands, which along with Liberia and Panama, offer safe harbor to any trafficking pirate (Here's a detail from the deepest depths: Once, you would see yachts with Panamanian or Liberian flags. Today, here in Greece, they show off English or American flags, but the ship owners are Turks or Greeks — will explain later on).
Enron had 862 offshore operations; Citigroup has 427; Rupert Murdoch's News Corp has 152. Multinationals invoice from the locales and receive financial advantages from their seats in normal countries, avoiding fiscal shearing, and thanks to these enormous advantages conduct "the digressions known also under the pompous title of 'market decisions.'" They falsify competition, damaging medium and small companies, which are often forced to shut down.**
Shaxson's recent post mentions the names Amazon, Apple and Google, with new data on the billions evaded. He adds that many other companies do not act differently; for example, AIG, Aviva, Barclays, Black & Decker, British American Tobacco, Burberry, Citigroup, Deutsche Bank, Facebook, FedEx, GlaxoSmithKline, Ikea, HSBC, JP Morgan, Microsoft, Pepsi, Skype, Starbucks, Vodafone and Walt Disney, to cite a few names from the list of 350 companies that used the tax haven of Luxembourg revealed by a mole in November 2014.
Luxleak soon caused a scandal and brought to light thousands of documents. The result? Three condemned: the main mole, a second whistle-blower and the French journalist who helped them to publish the leaks and was accused of violating trade secrets.
The Europeans limit themselves to Switzerland, Andorra, Monaco, Lichtenstein and Luxembourg (recently left out of the blacklist after having conceded agreements on the NDR bank secret). But account favors can be found in Ireland and in the unexpected Holland. These are countries that apply a withdrawal at budget prices for individuals but also society. "It's called fiscal dumping," explained Sole24Ore. "Another enemy for the European powers," which in fact at G20 pushed hard for a change of pace.
The US Started with Vietnam
It's incredible the story of when the U.S. created for itself the "domestic" tax havens, told 10 years ago by an American lawyer who had worked for an international bank in Latin America. He had contacted Shaxson, who gathering materials for a book on Africa, had just written a piece on Angola, which had just emerged from the war for oil and diamonds much poorer than it had been before these resources had been discovered.
“He came to see me in New York," he wrote. “Now he was dealing with financial exemptions and other legal matters.” What did Angola or Nigeria have to do with anything? 'A lot, because the U.S. is a gigantic tax haven.'***
The story goes back to the Vietnam War. The USA spent more money abroad than it was earning, and dollars were leaving the country. In order to finance the increasing deficit, it wanted to bring back home the dollars that were abroad. It did so by transforming itself into a haven: creating financial benefits for foreigners. The idea was to suck in the capital that had flown away and the dirty money in circulation around the world; the oil money of West Africa would have worked by the way.
Drainage from Africa and Surroundings
“Illicit financial flows, or the movement of illegal money or capital in as much as the funds are illegally earned, transferred and/or used is a real plague for developing countries, first and foremost Africa,” says gfintegrity.org, which estimates that the IFFs from these developing countries are $947 billion (in 2012, and with the progress illustrated on the table, we are led to believe that they grew further). This money goes into the U.S. and U.K. banks and 45 percent in tax havens.
Not an Exception but a Condition
Offshores, continues Megachip on the trail of Shaxson's book, is the concrete condition why there exists the globalization of the trade of goods, the constitution of multinationals, and more than anything else, financial globalization, or none other than the recycling of the debt economy.
"The financialization would not exist without offshoring. This web of tempting havens for the asexual reproduction of capital reduces financial entries for the States which are then forced to ask for loans on these same markets where this capital full of illegalities operates." They are not "tolerated" systems, but on the contrary deliberately constructed, protected and incentivized by the U.S. and U.K. "in other words, the hot spot of finance and the hot spot of the banks that weld themselves to this banking-finance system that today — and not since today — dominate the economy."
"With Nixon's decision to print money from nothing without any corresponding material wealth, the Anglo-Saxons have created a supposition, then developed with globalization, monetarism, deregulation and the financialization of the ordinary economy because the economy already organized the culture, society and politics of various countries."
By bringing order to the economy through finance, there was built an empire of financial circulation that attracts capital from everywhere in order to experience commissions and occupations correlated and apt to manage this mass of money "in part real, and in part printed from itself on slips of greenish paper or on certificates of no real value, for a new season of geopolitics, wealth and increasing returns." This is a system that produces increasing inequalities and does not enrich the world except its own minimal part (see Underblog from July 22: Langue nel mondo la classe media mentre it debito globale si impenna: 3 volte il Pil Planetario [The Middle Class Languishes in the World as the Global Debt Looms: Three Times the Planet's GDP]).
The citizen post concludes with, "The Anglo-Saxon barons of 1215 called for no taxation without representation, while now they purchase representation on the market of representative democracy with money saved from 'no taxation.' This is the freedom of real liberals." [The underground system creates a]n effective image, even if reductive, and it does not regard only taxes.
Libreidee.org adds a quote by the historic Fernand Braudel, according to whom the financial phase is always the autumn of a hegemony that is losing real power.
Reflections
Who knows? Certainly, the ones who today delude themselves that problems can be resolved and the auspicious "sovereignty" can be regained simply by leaving the Euro and even Europe make us wonder. The system of power in which we are immersed is huge, complex and above all, consolidated. Reacting [to the status quo] if by chance, promoting a different kind of globalization, should in theory be all of Europe, with its 500 million inhabitants and its economic power, but we see no trace of such projects, from the right or from the left.
The BRICS are trying to create an alternative system, amid many difficulties and contradictions (think of China), but they are a group of large emerging countries, with an economy in strong growth and representing 46 to 50 percent of the global population.
It's one of the main reasons of the current geopolitical struggle.
*Editor’s Note: The city that the author is referring to is believed to be London, although it could not be confirmed.
**Editor’s Note: Please note that any original quotations lacking citations, although accurately translated, could not be verified.
***Editor’s Note: These quotes were heavily paraphrased from the original author.
Good News
The capital that was illicitly exported to Switzerland, and elsewhere where an agreement was reached, will return, and the taxes that are due will be paid. However, those million/billion private citizens are a tiny drop in the ocean of the global black economy. And we are not only talking about taxes.
The Dimensions of the Phenomenon
More than half of global trade goes through financial havens, and more than half of banking activity and a third of direct foreign investment by multinationals is diverted offshore. Eighty-five percent of international bank and bond emissions take place in a protected zone, outside of any control mechanism [from governing authorities]. And let's not mention the massive amount of derivatives that according to the International Regulations Bank have reached the fantastical number of $700 trillion — $700,000 billion (one million billions including credit default swaps), most of which get traded outside of the stock exchanges.
Ghost-finance contributes a monstrous economic volume that equals to a third of the global GDP. According to the IMF, it's the shadow-turnover of singular, small insular centers (dated 2012).
Transparency Project?
This problem has reached the point that, after much resistance, G-20 countries decided in 2013 to turn the page, introducing an "automatic exchange of financial information" that should begin to come into effect exactly at the end of 2015, according to a standard which is being adhered to more by countries in the Organization for Security and Cooperation in Europe than by some others (see here the specialized American site gfintegrity.org, and Sole24Ore). We will see but with skepticism and commitment.
In the meantime, the offshore blacklist seems to have been trimmed a little through financial collaboration agreements, for example with Switzerland, San Marino, Lichtenstein and recently with Hong Kong and Cayman, as indicated by Panorama.it, and with more accuracy, Sore24Ore. But we are dealing with bilateral agreements between countries, in this case Italy, even if they are partial. The list of total black havens is always long and unexpected. Libero Quotidiano said it well, going as far as to say that in order to avoid the IRS, Italians are now forced to take up residence abroad.
Treasure Islands
Nicholas Shaxson, the English author, called tax havens “Treasure Islands” in his critical book “Treasure Islands: Tax Havens and the Men who Stole the World.” Vintage revealed in 2012 with data on hand the black financial universe that is the premise of globalization.
"Many people, and perhaps you’re one of them, have a queasy feeling that something has gone badly wrong with the world economy, but they can’t quite put their finger on what the source of the trouble is. Once you understand the nature of offshore tax havens, you should feel closer to pinning down the answers," he writes today in a post in (The Guardian), full of new details and examples on how the business works.
Megachip referenced it, while reviewing the book.
According to Tax Justice Network, 83 percent and 99 percent of the major U.S. and European companies, respectively, are in possession of offshore companies. These are fake "shell" companies through which trade transactions happen, hiding the real profits.
Offshore advocates defend themselves by saying that this way, the flow of capital in the world becomes fluid, removing obstacles. The fact is that the obstacles are "taxes, regulations and democratic laws," observes Shaxson in his post. He also shares some photos of the tax havens — with interesting taglines — that are on view at the Arles Festival of Photography from July 6 to Sept. 20 and will become a book.
The expression “tax havens” calls to mind images of small islands with beaches and palm trees — paradisiacal indeed — where any deposit, transaction or operation is permitted. "[S]unny places for shady people," as Shaxson calls them (SEE HERE). But next to these classical paradises, there are many others in the world where, thanks to opaque legislation, money circulates without leaving a trace. Beside the Caribbean islets there are large, famous islands like Manhattan or the U.K. where in 2007, the IMF identified a secret jurisdiction.
Secrecy Jurisdictions
"Tax havens aren’t tax havens just because they have low taxes," writes gfintegrity.org, an American site specializing on the subject. "Rather, what makes a tax haven is its opacity of financial information. This is why tax havens are often more accurately referred to as ‘secrecy jurisdictions,’ and why they facilitate many more problems than just tax evasion." (SEE HERE).
"While the legal regimes that tax havens set up to enable this secrecy are complex, their basic outline is simple — banks, companies, trusts or other financial actors in the country are allowed to accept money from basically anywhere without reporting it to the authorities in the country where it originates or from which it is controlled. In some cases, it is actually illegal to disclose that information ..." (SEE HERE).
"The secrecy jurisdiction," summarizes Megachip, "serves for many purposes: evasion, avoidance, irretrievability of the partners of a company, irretrievability of the origins of financial flows, recycling, false invoicing and other practical incentives. Like exchanges of favors with drug traffickers, arms pushers, corruptors and fringe groups of all colors who buy their representatives on the inside of the political system, including monarchs, generals, bloodthirsty drivers, drivers of 'rogue states'." And terrorists, adds the U.S. site.
The Two Poles: UK and US
There are around 60 or more secret jurisdictions. The two main groups are the British and American jurisdictions according to Shaxton. And the author admits that at the beginning of his survey, he was far from suspecting it.
The largest aggregation, which accounts for around half of these secret jurisdictions, is the U.K. At the helm are places like Jersey and Guernsey or the remote Isle of Man, which we can add to Cayman, British Virgin Islands, Bermuda and Gibraltar.
"It seems unbelievable, but the political form of the first two, small islands in the Channel that do not belong to the U.K. but are dependent on the British crown, are bailiwicks, a rare feudal form that dates to the Middle Ages. When considering the ones that are indirectly controlled, like Hong Kong, Singapore, Bahamas, Dubai and Ireland and also counting the assets of the city's banking system, the British control half of the world's banking assets," writes Magachipsulla, Shaxson follower.*
The banking assets in the Cayman Islands represent only around 1/15th of the $30 trillion in the world's banking assets, writes Shaxson today.
After this, there are the U.S. hubs, with secret jurisidictions in Florida and illicit affairs and trade taking place in Delaware, Wyoming, Nevada. There are also the Virgin and Marshall Islands, which along with Liberia and Panama, offer safe harbor to any trafficking pirate (Here's a detail from the deepest depths: Once, you would see yachts with Panamanian or Liberian flags. Today, here in Greece, they show off English or American flags, but the ship owners are Turks or Greeks — will explain later on).
Enron had 862 offshore operations; Citigroup has 427; Rupert Murdoch's News Corp has 152. Multinationals invoice from the locales and receive financial advantages from their seats in normal countries, avoiding fiscal shearing, and thanks to these enormous advantages conduct "the digressions known also under the pompous title of 'market decisions.'" They falsify competition, damaging medium and small companies, which are often forced to shut down.**
Shaxson's recent post mentions the names Amazon, Apple and Google, with new data on the billions evaded. He adds that many other companies do not act differently; for example, AIG, Aviva, Barclays, Black & Decker, British American Tobacco, Burberry, Citigroup, Deutsche Bank, Facebook, FedEx, GlaxoSmithKline, Ikea, HSBC, JP Morgan, Microsoft, Pepsi, Skype, Starbucks, Vodafone and Walt Disney, to cite a few names from the list of 350 companies that used the tax haven of Luxembourg revealed by a mole in November 2014.
Luxleak soon caused a scandal and brought to light thousands of documents. The result? Three condemned: the main mole, a second whistle-blower and the French journalist who helped them to publish the leaks and was accused of violating trade secrets.
The Europeans limit themselves to Switzerland, Andorra, Monaco, Lichtenstein and Luxembourg (recently left out of the blacklist after having conceded agreements on the NDR bank secret). But account favors can be found in Ireland and in the unexpected Holland. These are countries that apply a withdrawal at budget prices for individuals but also society. "It's called fiscal dumping," explained Sole24Ore. "Another enemy for the European powers," which in fact at G20 pushed hard for a change of pace.
The US Started with Vietnam
It's incredible the story of when the U.S. created for itself the "domestic" tax havens, told 10 years ago by an American lawyer who had worked for an international bank in Latin America. He had contacted Shaxson, who gathering materials for a book on Africa, had just written a piece on Angola, which had just emerged from the war for oil and diamonds much poorer than it had been before these resources had been discovered.
“He came to see me in New York," he wrote. “Now he was dealing with financial exemptions and other legal matters.” What did Angola or Nigeria have to do with anything? 'A lot, because the U.S. is a gigantic tax haven.'***
The story goes back to the Vietnam War. The USA spent more money abroad than it was earning, and dollars were leaving the country. In order to finance the increasing deficit, it wanted to bring back home the dollars that were abroad. It did so by transforming itself into a haven: creating financial benefits for foreigners. The idea was to suck in the capital that had flown away and the dirty money in circulation around the world; the oil money of West Africa would have worked by the way.
Drainage from Africa and Surroundings
“Illicit financial flows, or the movement of illegal money or capital in as much as the funds are illegally earned, transferred and/or used is a real plague for developing countries, first and foremost Africa,” says gfintegrity.org, which estimates that the IFFs from these developing countries are $947 billion (in 2012, and with the progress illustrated on the table, we are led to believe that they grew further). This money goes into the U.S. and U.K. banks and 45 percent in tax havens.
Not an Exception but a Condition
Offshores, continues Megachip on the trail of Shaxson's book, is the concrete condition why there exists the globalization of the trade of goods, the constitution of multinationals, and more than anything else, financial globalization, or none other than the recycling of the debt economy.
"The financialization would not exist without offshoring. This web of tempting havens for the asexual reproduction of capital reduces financial entries for the States which are then forced to ask for loans on these same markets where this capital full of illegalities operates." They are not "tolerated" systems, but on the contrary deliberately constructed, protected and incentivized by the U.S. and U.K. "in other words, the hot spot of finance and the hot spot of the banks that weld themselves to this banking-finance system that today — and not since today — dominate the economy."
"With Nixon's decision to print money from nothing without any corresponding material wealth, the Anglo-Saxons have created a supposition, then developed with globalization, monetarism, deregulation and the financialization of the ordinary economy because the economy already organized the culture, society and politics of various countries."
By bringing order to the economy through finance, there was built an empire of financial circulation that attracts capital from everywhere in order to experience commissions and occupations correlated and apt to manage this mass of money "in part real, and in part printed from itself on slips of greenish paper or on certificates of no real value, for a new season of geopolitics, wealth and increasing returns." This is a system that produces increasing inequalities and does not enrich the world except its own minimal part (see Underblog from July 22: Langue nel mondo la classe media mentre it debito globale si impenna: 3 volte il Pil Planetario [The Middle Class Languishes in the World as the Global Debt Looms: Three Times the Planet's GDP]).
The citizen post concludes with, "The Anglo-Saxon barons of 1215 called for no taxation without representation, while now they purchase representation on the market of representative democracy with money saved from 'no taxation.' This is the freedom of real liberals." [The underground system creates a]n effective image, even if reductive, and it does not regard only taxes.
Libreidee.org adds a quote by the historic Fernand Braudel, according to whom the financial phase is always the autumn of a hegemony that is losing real power.
Reflections
Who knows? Certainly, the ones who today delude themselves that problems can be resolved and the auspicious "sovereignty" can be regained simply by leaving the Euro and even Europe make us wonder. The system of power in which we are immersed is huge, complex and above all, consolidated. Reacting [to the status quo] if by chance, promoting a different kind of globalization, should in theory be all of Europe, with its 500 million inhabitants and its economic power, but we see no trace of such projects, from the right or from the left.
The BRICS are trying to create an alternative system, amid many difficulties and contradictions (think of China), but they are a group of large emerging countries, with an economy in strong growth and representing 46 to 50 percent of the global population.
It's one of the main reasons of the current geopolitical struggle.
*Editor’s Note: The city that the author is referring to is believed to be London, although it could not be confirmed.
**Editor’s Note: Please note that any original quotations lacking citations, although accurately translated, could not be verified.
***Editor’s Note: These quotes were heavily paraphrased from the original author.
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