Tax Havens: the Good, the Bad and the Ugly

The layers of secrecy linked to offshore tax havens is helping corruption “on a massive scale”. We’re taking a hard look.

The Cayman Islands and other so-called tax havens have been making headlines lately.

That last link reflects the fact that tax havens have become fodder for attack ads in this year’s U.S. presidential campaign. Democrats have tried to wound Mitt Romney by drawing attention to assets the Republican put away over the years in the Caymans, Switzerland and other offshore locales.

Another indication of the importance of tax havens these days was the groundswell of attendance at last week’s OffshoreAlert Conference in Miami.

More than 300 people from 23 countries signed up for the conference, according to David Marchant, publisher of OffshoreAlert, an online publication that tracks the offshore world. That’s a 30 percent jump over last year — and many times larger than the 45 people who attended the first OffshoreAlert Conference 10 years ago.

ICIJ deputy director Marina Walker Guevara and I were among this year’s attendees, joining lawyers, accountants, IRS agents and fraud sleuths for panel discussions and less-formal conversations at the Ritz-Carlton, South Beach. [Full disclosure: In keeping with ICIJ’s non-profit status, we didn’t stay in the Ritz with other attendees. We bunked in rooms at a nearby hotel that was less lavish and, well, more aromatic.]

A note on terminology: Defenders of the Caymans and similar realms don’t like the term “tax haven.”

They prefer to call them “offshore financial centers” – which they say better reflects their roles as legitimate players in global commerce.

Despite their reputations for lawlessness, offshore jurisdictions generally do a good job of following rules against money laundering and other financial misconduct, Dan Wise, a lawyer in the British Virgin Islands, said during one panel at the conference.

“These regulations are largely observed and enforced,” Wise said. “. . . The days of people turning up with suitcases of cash are long over.”

Critics, meanwhile, now often use the term “secrecy jurisdictions” – a reflection of their claim that these places are often used not only for avoiding taxes but also to sidestep banking regulations, hide wealth from spouses and business partners and launder illicit money.  

Offshore jurisdictions and “onshore” banks in the U.S. and the U.K. use banking secrecy to profit off these flows of cash, Stefanie Ostfeld, policy advisor with Global Witness, an independent anti-corruption group, said during another panel.

“This secrecy both offshore and on is facilitating corruption on a massive scale,” she said. “The corrupt as well as tax evaders, drug traffickers, gun runners and financiers of terrorism are able to exploit the secrecy, to set up shell companies that disguise their identities in order to move dirty money through the financial system.”

A team of ICIJ journalists around the world is now working on an investigation of tax havens and offshore finance. If you have story tips, documents or other information about these issues, contact us at investigations@icij.org.

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