I have a question about offshore tax havens that no one has ever been able to answer. Can you name one legitimate reason to keep your money in a tax haven?
The media keeps implying that there must be one. They keep pointing out (mostly to avoid the libel laws) that using a tax haven does not necessarily involve illegality or “wrongdoing”.
But what form of activity that isn’t wrong could possibly involve stashing your cash offshore? And why should we shy away from saying that starving the public purse of money is itself wrongdoing?
In the Paradise Papers leak, the super-rich and global corporations have been caught masked up, carrying a gun and revving up the getaway car with a bag of money marked “swag”. Yet still they are being allowed to make excuses and tip-toe around the obvious, despite jealously guarding sums that far outstrip anything that one individual could possibly need in several lifetimes.
The mega-wealthy like to see themselves as lone wolf entrepreneurs, building fortunes purely on their own sweat, talent and determination. But this ego-trip bears little relation to reality — the truth is, you can’t make millions without public support.
Their fortunes rely on publicly funded projects, such as roads and other infrastructure. Laws are enforced that allow them to rely on contracts they set up and ensure people with less money than them have to respect their property rights. The finance industry is underpinned by a wealth of government guarantees.
And yet they refuse to pay back into the society that made them wealthy. In reality, this elite has committed the world’s biggest robbery — from our public services, from our entire society. And this theft has been happening daily on a scale that is simply breathtaking.
No one knows exactly how much cash is hidden in tax havens, but it is big enough to seriously distort the global economy. With so much hidden wealth, it means global inequality is far worse than it appears.
The Tax Justice Network (TJN) estimates US$32 trillion of global wealth is held. Big numbers get thrown around a lot in politics, but just stop for a moment to think about this one. It’s more than the annual economic output of the US and China combined.
TJN’s Alex Cobham points out that, despite the media’s focus on high-profile individuals, this is really about “the systemic nature of the problem”. The entire Paradise Papers leak is about one law firm alone — a tiny scratch on the surface of the issue.
In Britain alone, the PCS union, which represents tax collectors in the civil service, puts the annual cost to Britain of tax avoidance and evasion at £120 billion. That is enough to fund the National Health Service — the entire NHS annual budget is £116 billion.
The governing Conservative party said during the June general election campaign that austerity cuts were needed because “there is no magic money tree”. But the tree has been found: it’s a species of palm tree, it turns out, that grows in the Cayman Islands, the Bahamas, the British Virgin Islands, and all the other places where the super-rich bury their treasure.
There are enough of these magic money trees to fund public services not just in Britain, but in every country in the world. A system of unitary taxation, with “country-by-country reporting” so we know where multinational corporations are really making their money, could help us start to harvest their fruits.
Every penny the tax dodgers squirrelled away should have been spent on improving society for everyone. They have not robbed some anonymous “tax collector”, but local schools and hospitals.
Once you accept that there’s no such thing as legitimate use of a tax haven, then here’s another question: why shouldn’t all these people be in jail?
The government is already leaning on the argument that not all of this activity was necessarily against the law. The answer is simple: if it’s not illegal, it should be.
[Abridged from Red Pepper.]