Bigger than WikiLeaks: Secret tax havens exposed in huge release

The ICIJ estimates US$30 trillion is hidden in tax havens. This equals more than the net GDP of the world’s two largest econom
Monday, April 29, 2013

The wealthiest people, banks and corporations have long avoided paying tax by hiding their assets in tax havens, outside their own countries. Many of these tax havens are so secret that even the banks themselves do not know who owns the accounts.

But now, a huge leak of secret documents has led a global network of journalists to expose the world’s richest tax evaders.

The leak to the (ICIJ) from an unknown source is said to be 160 times bigger than the amount of documents leaked to WikiLeaks. It consists of 2.5 million confidential documents of more than 120,000 companies.

The ICIJ, operating since 1997, is a network of 86 journalists from 46 countries who collaborate on investigative journalism. Their work has been published by news organisations around the world such as The Washington Post, The Guardian, the BBC, Le Monde, and Süddeutsche Zeitung.

Named in the first of their series of articles are individuals such as the wife of Russia’s vice-prime minister and the president of France Francois Hollande’s campaign treasurer. More stories are planned to be released throughout this year.

Based on the documents, the ICIJ estimates that half of all global trade passes through offshore tax havens, and contain a third of the world’s wealth. They estimate US$30 trillion is hidden in tax havens. This equals more than the net GDP of the world’s two largest economies.

Hollande responded to the stories by saying that they would increase efforts to fight offshore tax havens, and other global politicians have responded similarly. The ICIJ reports send a message to the world that openness and transparency is important.

ICIJ was created by US organisation The Centre for Public Integrity. This organisation was founded by individuals in the US such as former Wall Street billionaires and large companies like The Ford Foundation.

Unlike WikiLeaks, the ICIJ does not publish the leaked documents in their entirety, a decision WikiLeaks called an act of cowardice. WikiLeaks started this practice as part of its commitment to transparency and openness, so the public can read the information for themselves.

ICIJ responded to this on its website referring to alleged “legal, journalistic, and technical issues” before it can reveal the leaks to the public.

Although tax havens are legal, they do great damage to the world.

Offshore tax havens have a crucial impact in furthering global poverty. In 2009, the Debt and Development Coalition Ireland (DDCI) accused Irish band U2 of avoiding tax in Ireland by moving their business to the Netherlands where they would qualify for lower taxes. At the same time, Ireland’s government implemented severe austerity measures, including reducing government spending and cuts to welfare and public sector wages.

DDCI says on its website: “Every year countries in the global South lose at least US$160 billion because of tax evasion by multi-national corporations. If this immoral transfer of wealth from the Global South to the North was ended, the lives of 350,000 children under the age of 5 could be saved each year.”

Rising inequalities and unequal distribution of the world’s total wealth is one of the main drivers of global poverty. The widening gap between the world’s rich and the poor can be addressed through preventing illicit financial flows from happening in most of the world’s poorer countries.

Since the World Food Summit in Rome in 1996, it is estimated the number of the world’s chronically undernourished has risen from 788 million to over 1 billion in 2009.

In light of such a development, the flow of wealth from poor countries into tax havens should be seen as a structural injustice that needs to be addressed. The work of ICIJ can help bring attention to this problem by making financial dealings transparent.

Today, banks are under legal pressure to report any funds related to terrorism or drug trafficking, but secrecy laws permit them to accept stolen funds. This is a global and legal form of corruption.

Corporations are also under legal protection to avoid paying taxes in the countries from where they extract, produce and sell manufactured goods. This global systematic failing allows corporations to concentrate their profits in countries where they are taxed the least.

Not only do these companies, corrupt officials and wealthy private investors enrich themselves, they greatly worsen poverty worldwide.