Tax Havens 101

There has been a lot of interest in Wikileaks and the notorious and brave individuals who have risked it all to bring some of the secrecy of international politics out into the light, but have you heard of the International Consortium of Investigative Journalists? Here is their website:  take a look and keep an open mind … ICIJ (Secrecy for Sale: Inside the Global Offshore Money Maze).

I ran into the ICIJ when an article online caught my eye and suggested that secret offshore tax havens and questionably legal tactics to avoid taxes might have been exposed by the ICIJ.

Here is the article from Slate:

The Secret World of Tax Havens Just Got a Whole Lot Less Secret
By Abby Ohlheiser | Posted Thursday, April 4, 2013, at 4:02 PM

Anyone who’s looking for an in-depth and more than a little disturbing look into how the rich and powerful use offshore tax havens need look no further than a new report from the Center for Public Integrity’s International Consortium of Investigative Journalists out today. (That’s a long-name, but the nonpartisan group earned every letter for all the work they poured into the project over the last 15 months.)

The study—which will be updated with additional findings as reporters continue to dig in—centers around a trove of 2.5 million leaked financial documents from around the world. To put that in perspective, the leak is 160 times larger than Wikileaks’ State Department database that kept reporters busy for weeks. The offshore effort took one the biggest collaborations in journalism history to sort through: more than 80 journalists from more than 40 countries worked together for more than a year to extract meaning from the documents.

While the reporters at the center and at other media outlets are still uncovering additional nuggets, the current findings seem to fall within a few broad categories: the offshore secrecy practices of the mega rich, of politicians, and of those connected to corruption and criminal activity. While that’s perhaps not surprising to the cynically inclined, there’s now data to back up those assumptions.

The findings shed light on 120,000 offshore companies and trusts, almost 130,000 individuals, and pertain to nearly 170 different countries. Given the size of the trove, there’s myriad ways for the data to be cut and nearly countless stories to tell, but few paint a rosy picture of international finance. The best place to start is probably the CPI’s overview of the whole project, which you can find here. Here’s some relevant context of why these files matter to get you started:

The vast flow of offshore money — legal and illegal, personal and corporate — can roil economies and pit nations against each other. Europe’s continuing financial crisis has been fueled by a Greek fiscal disaster exacerbated by offshore tax cheating and by a banking meltdown in the tiny tax haven of Cyprus, where local banks’ assets have been inflated by waves of cash from Russia. Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. Studies have estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year. ICIJ’s 15-month investigation found that, alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive. The anonymity of the offshore world makes it difficult to track the flow of money. A study by James S. Henry, former chief economist at McKinsey & Company, estimates that wealthy individuals have $21 trillion to $32 trillion in private financial wealth tucked away in offshore havens — roughly equivalent to the size of the U.S. and Japanese economies combined.

You’ll find the early reports over at the project’s homepage, and a smattering of stories from media outlets around the globe as well. ICIJ says they and their media partners will release more stories in the coming weeks …

The article continues at Slate and most of the background material is published at the ICIJ site.

One thought on “Tax Havens 101

  1. Offshore tax havens have been abused by the rich and crafty, but this does not negate the strategic importance of offshore destinations in general for business purposes.

    For example, South Africa can be a good country in which to establish your company for use in your own country. There are obvious benefits for this, for example you could be better accepted in business throughout Africa and other parts of the world like the EU, the USA, Australia, India, Brazil, etc.

    See here for more on this:


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