Everything You Know About Tax Evasion Is Wrong
Ok, so not everything. That Putin’s clearly a wrong’un. And Dave definitely looks like a man with something to hide. But the media’s obsession with details and personalities misses a far more startling picture. Here’s some things you won’t have heard about the Panama Papers.
Misconception One. You’ve got to have loads of sand to be a tax haven.
Being a haven is a question of secrecy not sunshine. If you happen to fit the cliché of white sandy beaches, that’s all to the good, but it’s not a necessary requirement. No, the biggest tax haven in the world is….drum roll, please…us! Yes, Britain - number 1!
The Financial Secrecy Index “regards the UK as one of the biggest, if not the biggest, single player in the global offshore system.” Why the ambiguity? Because “Britain” here is not just her Majesty’s Government and HMRC but, far more significantly, the City of London and its network of British Overseas Territories and Crown Dependencies. As the FSI states, this network “constitutes by far the most important part of the global offshore world.”
But how can this be? We’re not offshore, are we? And what is this City of London anyway?
Misconception two. Tax evasion has nothing to do with us.
The story of the City of the London (the ancient political entity housed in the square mile as opposed to the Big Smoke in general) is a hugely important but unfamiliar tale for another day. Here, we just need to note that the City created the first offshore market when it facilitated the trade in Eurodollars in the sixties and since then has led the way, on our unwitting behalf, on global tax evasion.
So what is the relationship between the City and the havens? Let’s ask them. “Jersey represents an extension of the City of London.” So says that notorious slanderer, Jersey Finance. Successive Lord Mayors of London (Not Boris, the other one) have called Britain’s offshore satellite havens “a core asset of the City” and a “fantastic adjunct” to the UK. Meanwhile, as Eva Joly, the French investigative magistrate at the centre of the Elf Aquitaine scandal, found: the City “has never transmitted even the smallest piece of usable evidence to a foreign magistrate.”(1) Hm, an ancient and secretive polity facilitating global tax evasion right in the heart of the capital. What could they have to hide?
Misconception the third. Britain loses out.
That very much depends on who you mean. You and me? Absolutely. We’re getting shafted. But all the money to be made helping people and companies avoid tax? All that lovely lolly goes straight to the City. As Nicholas Shaxson notes in his highly recommended book Treasure Islands, your cliché tax haven is invariably just a “booking centre that allows a company to pretend it is really located in an Overseas Territory while the real business gets sent up to London.” Or, put another way: “Great dollops of money go into London from here.” That’s Martyn Scriven. “Here” being Jersey. And Scriven being secretary of the Jersey Bankers’ Association.
So, finally, misconception four. There’s nothing we can do about it.
A 2012 White Paper states, “The UK, the Overseas Territories and the Crown Dependencies form one undivided Realm. As a matter of constitutional law the UK Parliament has unlimited power to legislate for the Territories.” This is what happened in 2009 when Minister Chris Bryant went for the nuclear option and imposed direct rule over the Turks & Caicos Islands, suspending their government due to systemic corruption and “serious dishonesty”.
The Crown Dependencies are a bit different but as Lord Bach explained in 2003: “The Crown is ultimately responsible for the good government of the Crown Dependencies […] In circumstances of a failure in the administration of justice […] the Crown could be used to intervene in internal affairs.”
So why don’t we? Presumably because the governance in question is good, just not for the majority of British tax payers.
The media frenzy over the Panama Papers has been fascinating. We’ve heard some good gossip and ruffled some feathers. But in focusing on people, we ignore the structures. Taking even a cursory look at the history, development and current state of global tax evasion, it becomes very difficult to escape the troubling conclusion that for a long time an influential section of our country’s political and financial elite has viewed tax evasion not as a shameful drain on the nation’s finance but as a net contributor to Britain’s purse and, probably more importantly, her prestige. Fittingly, “offshore” has become our greatest modern export, a second global empire over which Britannia waives the rules once more.
Published in Now Then magazine, May 2016.
Further Reading
Treasure Islands, Nicholas Shaxson
Tax Havens: How Globalisation Really Works, Ronen Palan
Narrative Report on the UK, Financial Secrecy Index,
Oxfam’s new report on Tax Evasion
All other references are linked in the text.
- Shaxson, Treasure Islands, p250