Shaxson, Nicholas. Treasure islands: Uncovering the Damage of Offshore Banking and Tax Havens. 2011. Palgrave Macmillan. UK. ISBN 978-0-230-10501-0

Review by Theresa Wolfwood

“Societies grant corporations immense privileges, such  as limited liability…they have also been granted the right to be treated as artificial legal entities that can relocate to different  jurisdictions almost at will, irrespective of where they really do business. In exchange for these remarkable privileges, corporations were originally held to a set of obligations to the societies in which they are embedded: notably to be transparent about their affairs and to pay taxes.”

“The offshore system has undermined all this. The privileges have been preserved and enhanced, but the obligations have withered.”

In this well-written and important analysis of tax havens (more like tax-LESS havens) the author, a British writer, describes a tax haven as a place that seeks to attract money by offering politically stable facilities to help people or entities get around the rules, laws and regulations of jurisdictions elsewhere.[Welcome to Nowhere]  He writes that this description will help him show, “how the offshore system is not just a colourful appendage at the fringes of the global economy but lies rather at its centre.”

Shaxson begins the book with a story about ELF, the giant French oil company, and how it managed to evade taxes and he reveals their operations through a complex net of nation governments, politicians and corporate elites. He goes on to detail how widespread these offshore havens are, from the Bahamas to Panama, from London to Luxembourg. The tiny Cayman Islands with a population of 55,000 is home to 80,000 registered companies, over three-quarters of the world’s hedge funds and $1.9 trillion on deposit in its banks – four times as much as banks in New York.

He explains how it is done, who are involved and how much money we are losing in taxes from the wealthy who use these havens- funds that we have to pay out in our taxes, like retrogressive sales taxes and income tax; Canada probably loses $10 -15 billion a year in taxes that we make up in ours.

He also shows how poor countries are kept poor by the hiding of profits; only a few elite get the benefit of exploitation and trade from most of the world.

Income taxes were a means to pay for the 1st World War; many of us have been paying ever since, as the rich soon devised ways to evade taxes. It is all here, too important to spread through a review; the book is essential reading.

In his last chapter, “Reclaiming Our Culture”, Shaxson calls on us to act to change this drain on our economies with many suggestions. First we need to know, so he says we should pursue transparency.  We need to know and create awareness about how money is transferred from poor countries to rich, we can work with our like-minded contacts in other countries to reveal these injustices and to help construct better tax systems – something Brazil for one is working on.

Support groups like Global Witness to tackle all the levels of tax evaders including intermediaries, banks, accountants, lawyers; they are all complicit. Corporations must be responsible not only to shareholders but the societies they operate in.

He writes that the most important thing to do is to change the culture –stop fawning over people who get rich by abusing the system. Tax evasion can become “a predicate crime for money laundering, and tax offenses” which could be included in international conventions.

He concludes with this call, “We can recapture our culture from the forces of unaccountable privilege that have taken it away from us.”

And finally, “It is time for the great global debate about tax havens to begin in earnest…..offshore is at work…It affects you. It is undermining the government you elect, hollowing out its tax base and corrupting your elected politicians. It is sustaining a vast criminal economy and creating a new unaccountable aristocracy of corporate and financial power. If we do not act together to contain, control and eradicate financial secrecy, then the world I found in West Africa more than a decade ago, a world of suave insiders, criminal complicity and desperate poverty, will become the world we leave to our children. A tiny few will have their boots washed in champagne, while the rest of us struggle to make our lives in conditions of steepening inequality.”

Filed under Nicholas Shaxson