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A thrilling ride inside the world of tax havens and corporate masterminds While the United States experiences recession and economic stagnation and European countries face bankruptcy, experts struggle to make sense of the crisis. Nicholas Shaxson, a former correspondent for the Financial Times and The Economist, argues that tax havens are a central cause of all these A thrilling ride inside the world of tax havens and corporate masterminds While the United States experiences recession and economic stagnation and European countries face bankruptcy, experts struggle to make sense of the crisis. Nicholas Shaxson, a former correspondent for the Financial Times and The Economist, argues that tax havens are a central cause of all these disasters. In this hard hitting investigation he uncovers how offshore tax evasion, which has cost the U.S. 100 billion dollars in lost revenue each year, is just one item on a long rap sheet outlining the damage that offshoring wreaks on our societies. In a riveting journey from Moscow to London to Switzerland to Delaware, Shaxson dives deep into a vast and secret playground where bankers and multinational corporations operate side by side with nefarious tax evaders, organized criminals and the world's wealthiest citizens. Tax havens are where all these players get to maximize their own rewards and leave the middle class to pick up the bill. With eye opening revelations, Treasure Islands exposes the culprits and its victims, and shows how: *Over half of world trade is routed through tax havens *The rampant practices that precipitated the latest financial crisis can be traced back to Wall Street's offshoring practices *For every dollar of aid we send to developing countries, ten dollars leave again by the backdoor The offshore system sits much closer to home than the pristine tropical islands of the popular imagination. In fact, it all starts on a tiny island called Manhattan. In this fast paced narrative, Treasure Islands at last explains how the system works and how it's contributing to our ever deepening economic divide.


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A thrilling ride inside the world of tax havens and corporate masterminds While the United States experiences recession and economic stagnation and European countries face bankruptcy, experts struggle to make sense of the crisis. Nicholas Shaxson, a former correspondent for the Financial Times and The Economist, argues that tax havens are a central cause of all these A thrilling ride inside the world of tax havens and corporate masterminds While the United States experiences recession and economic stagnation and European countries face bankruptcy, experts struggle to make sense of the crisis. Nicholas Shaxson, a former correspondent for the Financial Times and The Economist, argues that tax havens are a central cause of all these disasters. In this hard hitting investigation he uncovers how offshore tax evasion, which has cost the U.S. 100 billion dollars in lost revenue each year, is just one item on a long rap sheet outlining the damage that offshoring wreaks on our societies. In a riveting journey from Moscow to London to Switzerland to Delaware, Shaxson dives deep into a vast and secret playground where bankers and multinational corporations operate side by side with nefarious tax evaders, organized criminals and the world's wealthiest citizens. Tax havens are where all these players get to maximize their own rewards and leave the middle class to pick up the bill. With eye opening revelations, Treasure Islands exposes the culprits and its victims, and shows how: *Over half of world trade is routed through tax havens *The rampant practices that precipitated the latest financial crisis can be traced back to Wall Street's offshoring practices *For every dollar of aid we send to developing countries, ten dollars leave again by the backdoor The offshore system sits much closer to home than the pristine tropical islands of the popular imagination. In fact, it all starts on a tiny island called Manhattan. In this fast paced narrative, Treasure Islands at last explains how the system works and how it's contributing to our ever deepening economic divide.

30 review for Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens

  1. 5 out of 5

    Zach Cohen

    Before I get into my review, I wanted to point out that for someone without a lot of financial knowledge, this could be a very difficult book to read. I have a college degree in accounting, did some graduate work in tax, and worked for one of the big four accounting firms for a year in their international tax consulting department. I quit working for them and left the field entirely after I realized in vague generalities what they were doing, which was one of the reasons I was so interested in Before I get into my review, I wanted to point out that for someone without a lot of financial knowledge, this could be a very difficult book to read. I have a college degree in accounting, did some graduate work in tax, and worked for one of the big four accounting firms for a year in their international tax consulting department. I quit working for them and left the field entirely after I realized in vague generalities what they were doing, which was one of the reasons I was so interested in this book. The international system Shaxson describes coincides perfectly with what I saw in the accounting firm I worked for, and some of the specific techniques he describes correspond exactly to the tax structures I used to see discussed in trainings and other meetings. Given that background, I found this book incredibly engrossing and informative, but if you have low financial literacy, you may have a tough time with it. However, it is incredibly well written, uses a minimum of jargon, and tries its hardest to break down complex tax and financial concepts into lay terms. Treasure Islands does a really incredible job in shedding light on an arcane, complex international financial system that has evolved mainly over the past 100 years. Like most people, when I heard the term tax haven, I would think of a few rogue Caribbean islands who helped a few rich people and crime lords launder money or hide it from taxation. Shaxson turns that conception on its head. While the term tax haven sounds like it specifically refers to taxes, Shaxon defines it more broadly: "Tax havens can be loosely described as a jurisdiction that seeks to attract money by offering politically stable facilities to help people or business entities get around the laws, rules, and regulations of jurisdictions elsewhere." Using that definition, Shaxson aggregates the international network of such jurisdictions under the label "the offshore system". In this book, he investigates the three main components of the offshore system, which may surprise you. While the small island states are integral fortifications of the offshore system, the main poles are actually the United States, London, and a grouping of states in continental Europe (mainly Luxembourg, Switzerland, Lichtenstein, and the Netherlands). Considering that about one half of world trade passes through tax havens, they are integral to the current global system. Also, while terrorists and crime lords are significant users of the offshore system, the primary beneficiary and architect is the financial services industry. The bankers on Wall Street and in London have constructed a system to help them undermine democracy, drastically boost profits, destabilize the global markets, shape international regulation to their liking, and evade taxes, and this very same infrastructure enables the financing of international terrorism, corrupt third world rulers, and greatly facilitates the illegal drug trade. One key takeaway from the book is that all of these phenomena have their roots in the same underlying financial network, and none of them can be addressed without confronting the offshore system. The main services that tax havens provides are secrecy, tax evasion, and freedom from unwanted regulation. A very important consequence of such a system is the creation of a race to the bottom in terms of regulatory environments. Shaxson examines this process both in the United States and internationally. While the US is an international tax haven (offering secrecy to foreign donors, allowing banks to accept proceeds from criminal activities as long as they were committed abroad, offering tax breaks to foreign investors), there is also a tax haven network at the state level. States such as South Dakota and Delaware, in an effort to attract corporations to incorporate in their states, abolished interest rate caps, giving birth to the credit card industry in the 80s. Delaware also has a long history of offering the most permissive rules of corporate governance, giving maximum power to corporate managers. Barack Obama criticized the Caymans, where he alleged that there was a building where 12,000 corporations supposedly had business offices. Well, there is an office building in Delaware with about 219,000. Internationally, the offshore system allows banks to exercise this deregulatory leverage at the national level. The city of London, which has long maintained an extremely lax regulatory environment for fascinating historical reasons detailed in the book, began attracting massive amounts of business from US banks chafing under the Bretton Woods system of capital controls and Glass Steagall regulations separating commercial and investment banking. London had no such controls, so US banks were able to begin doing business there and use the threat to relocate to London to eventually force the US to deregulate in the late 90s and 2000s. As we know, this was a crucial development in setting the stage for the financial crisis of 2008. In addition, the unregulated markets that were based in London allowed banks to set up investment vehicles that were free of reserve requirements, allowing them to issue massive amounts of debt. A final theme discussed in the book is the devastating effects of the offshore system on poor countries. For every one dollar of foreign aid that has flowed into developing countries over the past 30 or so years, TEN dollars have left the country and into the offshore system, building the portfolios and secret accounts of corrupt ruling elites. The offshore system creates a neocolonial dynamic where western countries back corrupt leaders and their allies, and provide the international financial infrastructure for these corrupt elites to steal their country's wealth and hide it abroad, free of tax. As pernicious as that is, the real consequence to that is that poor populations are saddled with the debt (the proceeds of which the rulers stole), which then of course requires the IMF to come in and radically undermine democracy by imposing harsh structual adjustment programs that mainly benefit rich investor countries and cause great pain to average people. In summary, this book details the most important aspect of the global economy that you probably never knew existed. If you are interested in understanding poverty, inequality, development economics, international terrorism and the drug trade, and how corporations have amassed such great political power, you are missing a huge piece of the puzzle if you don't read Shaxson's epic work.

  2. 4 out of 5

    Jan-Maat

    The truest sequel to Robert Louis Stevenson's classic that could ever be written. Why trouble yourself about a little buried treasure on one little island with only a few corpses on a dead man's treasure chest when the capital outflows of entire countries or industries can be redirected? This is an easy to read introduction to tax havens and the offshore system. It's disturbing in that you can see why Africa will remain poor and why we will remain at risk of financial shocks like the collapse of The truest sequel to Robert Louis Stevenson's classic that could ever be written. Why trouble yourself about a little buried treasure on one little island with only a few corpses on a dead man's treasure chest when the capital outflows of entire countries or industries can be redirected? This is an easy to read introduction to tax havens and the offshore system. It's disturbing in that you can see why Africa will remain poor and why we will remain at risk of financial shocks like the collapse of the sub-prime mortgage market in the USA for the foreseeable future and see one of the reasons why the rich will continue to get ever richer. Worth a read or two.

  3. 5 out of 5

    Nathan

    Sometimes fascinating insight into the history of tax shelters, ruined in my eyes by the author's style which that of an incensed early 1980s Greenpeace leaflet writer. By the nature of tax shelters, you're going to have multinational corporations as villains so, unless you *want* to come off sounding like a stereotyped leftie loon, you had better get that tone and voice just right. Shaxson has not. My favourite story was that of the wealthy British Vestey family with Argentinian meat interests. Sometimes fascinating insight into the history of tax shelters, ruined in my eyes by the author's style which that of an incensed early 1980s Greenpeace leaflet writer. By the nature of tax shelters, you're going to have multinational corporations as villains so, unless you *want* to come off sounding like a stereotyped leftie loon, you had better get that tone and voice just right. Shaxson has not. My favourite story was that of the wealthy British Vestey family with Argentinian meat interests. They were shipping meat from Argentina to Britain before World War I, when British income tax was 4%, and making a tidy profit doing so. They owned the entire supply chain: farms, packing, shipping, stores. When the British government substantially raised income taxes at the start of WWI, the Vestey brothers fought the taxes and then manipulated the prices that their companies sold animals/meat/shipping/etc. to each other so that their profit was made before the meat landed in Britain--they invented this method of sheltering from taxes. The story doesn't end there--the British government after them, so they decamped to France. Or, rather, their company was put in a French trust out of the reach of the British government. The to-and-fro continued, with the Vesteys wanting to live in Britain but not to pay its taxes. They were eventually given a title, to widespread uproar (and modern parallel: a Tory peer recently admitted he still isn't a tax resident in the UK). The Vestey family is rich to this day. Other takeaway points: (1) tax shelters have different rules for natives than for the foreigners with money; (2) they're a form of colonialism; (3) they're deeply damaging to the economies of the countries that host them; (4) they are set up and run by the UK and US and other sources of money, and in particular Jersey and other Channel Islands have a close and unassailable connection to the finance industry in the UK whose monied lobbying prevents any changes.

  4. 4 out of 5

    Adrian White

    A remarkable book that gives a real insight into how the world works - particularly into the power of the City of London. It's a rigged game and I don't want to play.

  5. 4 out of 5

    Heikki

    I picked up this book (actually its Finnish translation) at a book fair, because it seemed to handle tax evasion and planning, as well as tax havens and offshoring, which have been of interest to me for a while. It did. I had three questions I hoped it would answer: what are tax havens, what is the effect of offshoring, and how can we start to rectify the appalling financial problems in the world. I am also happy to report this book does indeed answer all three. Having read some other books on I picked up this book (actually its Finnish translation) at a book fair, because it seemed to handle tax evasion and planning, as well as tax havens and offshoring, which have been of interest to me for a while. It did. I had three questions I hoped it would answer: what are tax havens, what is the effect of offshoring, and how can we start to rectify the appalling financial problems in the world. I am also happy to report this book does indeed answer all three. Having read some other books on postwar economy, ie. Bretton Woods and after that, I had been under the illusion that the little hot islands in the Caribbean are the root of all evil. That is not at all true. They do contribute to the problem in a massive way, but much more blame is to be put on the politicians who shied away from setting robust rules on financial markets and transactions. The development in the City of London in the 1950s, as well as the Thatcherite Big Bang of the 1980s serve as illustrations on just how clueless, and powerless, politicians have been in the glare of financial empire building. The modern financial system supplies companies with almost limitless means for hiding profits by moving vast amounts of money between subsidiaries at the click of a mouse. In another source I read that while banks used to hold on to stock for four years on the average, the current time is 22 seconds. If all that stock selling and buying is supposed to create tangible value, I do not see how that would be even possible, and after this book I know it doesn't. It creates money for nothing (I wonder if Dire Straits was right and tricks are for free) and it is all just a big bubble. The way corruption and use of advanced loopholes in national and international law are used to siphon real assets such as oil and other commodities, not to mention money, out of developing countries, is nothing short of appalling. In the name of fast and efficient transfer of money, it has become possible to fade out any trail of real ownership of money once it enters one of these tax havens. Shaxson brings out some people who used to work in the financial sector but left it, usually due to nausea incurred by the flaunting of rules, regulations and especially the lack of any trace of shame, and the way these people are able to illustrate, first-hand, what goes on behind the scenes is hard to read. You have your eyebrows on the dome of your head from time to time. And the third thing, the way out, is listed at the end in about ten key actions. All these would spell the doom of the financial world as we know it today, and therefore I am not at all confident they will be picked up any time soon. I definitely hope that the people of all nations, everywhere, would pick up the standard and start yelling out for honesty, transparency, and fairness in trading and financial action in their respective countries. But faced as we all are with local big companies and a financial sector interested plainly and exclusively with the making of more money out of thin air, it will be an uphill battle. After reading this excellent book, I am more convinced than ever of this: greed will be the ruin of this world.

  6. 5 out of 5

    Maru Kun

    Fascinating body of work by Gabriel Zucman, assistant professor at UC Berkley, linking leaked information from the Panama Papers, HSBC etc with national tax records in order to investigate not tax avoidance but tax evasion: Gabriel Zucman, Tax Evasion and Inequality. This presentation sums up a lot of the work.

  7. 5 out of 5

    Markus

    Tax heavens, the missing piece of every book that has dealt with the 2008 financial crash, or least those that i have read so far. It gives a clear answers why a poor countries remain poor and it makes the current European bail out sums seems like a pocket money when compared to trillions of dollars/euros that have gone through the tax heavens and disappeared to somewhere in pockets of the plutocrats and their like. Easy to read and understand even to a simpleton like me, Shaxson writing is good Tax heavens, the missing piece of every book that has dealt with the 2008 financial crash, or least those that i have read so far. It gives a clear answers why a poor countries remain poor and it makes the current European bail out sums seems like a pocket money when compared to trillions of dollars/euros that have gone through the tax heavens and disappeared to somewhere in pockets of the plutocrats and their like. Easy to read and understand even to a simpleton like me, Shaxson writing is good and like Matt Taibbi and Michael Lewis, he can make a potentially boring subject very interesting. The most fascinating chapter was one dealing with the City of London Corporation, i have read and heard bits and pieces, but now i know so much more, it's a truly bizarre story and hard to believe that it really exist. If there really is the Illuminati, then City of London is it's headquarters. And speaking of the secret societies, those pesky Freemasons seems to pop up at the tax heavens, a funny thing that. Truly an eye-opener kind of a book. Highest recommendation.

  8. 5 out of 5

    Margaret Sankey

    Thoroughly depressing study of 70 years of financial chicanery and evolution of tax havens and money laundering, with highlight that include the City of London and its outposts in Gibraltar and Jersey, Omar Bongo of Gabon and the French neo-colonial Elf scandal, active anti-tax lobby groups and their PR, celebrities who campaign for anti-poverty measures and hide their income in the Netherlands, ineffective PATRIOT Act provisions and terrorism financing, the Caymans and the Bahamas, seedy ads in Thoroughly depressing study of 70 years of financial chicanery and evolution of tax havens and money laundering, with highlight that include the City of London and its outposts in Gibraltar and Jersey, Omar Bongo of Gabon and the French neo-colonial Elf scandal, active anti-tax lobby groups and their PR, celebrities who campaign for anti-poverty measures and hide their income in the Netherlands, ineffective PATRIOT Act provisions and terrorism financing, the Caymans and the Bahamas, seedy ads in the back of airline in-flight magazines for help setting up shell corporations and the lost political leverage of people who like to extract their wealth from hellholes and live somewhere under rule of law they don't want to pay for. Unfortunately, the fixes Shaxson and regulators suggest depend on sustained political will, concerted action and the attention of voters who hear complicated financial explanations and go slack jawed.

  9. 5 out of 5

    Karel Baloun

    The debasement of the global economy is a threat to everyone who depends on it working, on its currencies maintaining trust and value. The start of the book is a slightly repetitive summary of the main ideas, but by page 50, the historical facts of elites avoiding taxation, and Keynes working valiantly to stop them, become interesting. Tax dodgers are evil, and gop ideology of minimizing the government aligns. Dems like money too, especially senators from Delaware, but libertarian starve the beast The debasement of the global economy is a threat to everyone who depends on it working, on its currencies maintaining trust and value. The start of the book is a slightly repetitive summary of the main ideas, but by page 50, the historical facts of elites avoiding taxation, and Keynes working valiantly to stop them, become interesting. Tax dodgers are evil, and gop ideology of minimizing the government aligns. Dems like money too, especially senators from Delaware, but libertarian starve the beast doctrine is a core evil. Way to easy to lead the wrong cheers while sounding like a good American. Ironically, the US fiscal deficit requires both low interest rates and these huge capital inflows, just to sustain normalcy. Capital flight if a target existed would limit political fight. Most of this book is about history, and its modern third is 1980-2010, even if publication date is 2015. The list of solutions, saved for the very short “conclusion” don’t feel credible or sufficient to me. Certainly persistence and global coordination are required. The opportunity window closes if democracy and rule of law become unable to coordinate global actions In a $100T/yr formal global economy, how much corruption and theft can the system take, before losing credibility and public support? Maybe 2-4cx more? Perhaps 1-3% of annual theft? Around the rate of inflation... but those assets keep growing :-( “The interested of industrial capitalists and financial capitalists often conflict too. Financiers, for instance, tend to like high interest rates for which they can derive considerable income, while industrialists want low interest rates to curb their costs.” (p52) I find more justification for hating big finance and the large chunk of GDP which it steals, while liking capitalism and market economics. The size of financial industry profit seems to me an excellent proxy for how the main street economy is failing and inequality is growing. “Capital no longer flows simply to where it gets the best return but to where it can secure the best tax subsidies, the deepest secrecy, and to where it can most effectively evade the laws, rules, and regulations it does not like.” (p53)

  10. 5 out of 5

    Thomas Ray

    A taste of it in Foreign Affairs magazine March/April 2018 pp. 94-107. Shaxson is on staff of Tax Justice Network. Twitter @nickshaxson

  11. 5 out of 5

    LATOYA JOVENA

    This book has shaken my entire world view. Money isnt real. Its all just made up in banks. The whole thing is a scam. And we can't just raise taxes on rich people to solve social ills, because they have ways, both legal and illegal, to prevent that. Well researched and plainly explained! This book has shaken my entire world view. Money isn’t real. It’s all just made up in banks. The whole thing is a scam. And we can't just raise taxes on rich people to solve social ills, because they have ways, both legal and illegal, to prevent that. Well researched and plainly explained!

  12. 4 out of 5

    Liam Curran

    The content was simply dumbfounding; Treasure Islands really illuminates the infinitely gloomy world of tax havens, secrecy jurisdictions and corruption. The sheer scale of financial criminality that lies beneath the surface of modern society will leave any unexpecting world-view altered. The only reason I did not give 5* is because I felt at times the writing style was not as methodical or poetic as it could have been. But in all fairness I was reading Sapiens at the same time which is a book The content was simply dumbfounding; Treasure Islands really illuminates the infinitely gloomy world of tax havens, secrecy jurisdictions and corruption. The sheer scale of financial criminality that lies beneath the surface of modern society will leave any unexpecting world-view altered. The only reason I did not give 5* is because I felt at times the writing style was not as methodical or poetic as it could have been. But in all fairness I was reading Sapiens at the same time which is a book rarely challenged in terms of explaining concepts and facts in the most coherent and satisfying way possible.

  13. 4 out of 5

    Martina

    Devastating book. *insert bad joke about likely substance abuse following the completion of the book*

  14. 4 out of 5

    Peter

    Overall, the book achieved its core goal: it made me angry about tax havens. It also made me confused about how to govern corporations, and more convinced than ever of the need to totally eliminate the corporate tax and focus more on progressive income taxes and capital gains. This is obviously a bit under-developed, but at the same time, paragraphs like this one just don't offer a lot of other options: "Each country taxes its citizens, residents, and corporations in different ways, and different Overall, the book achieved its core goal: it made me angry about tax havens. It also made me confused about how to govern corporations, and more convinced than ever of the need to totally eliminate the corporate tax and focus more on progressive income taxes and capital gains. This is obviously a bit under-developed, but at the same time, paragraphs like this one just don't offer a lot of other options: "Each country taxes its citizens, residents, and corporations in different ways, and different countries’ tax systems often clash in unpredictable ways. Multinationals based in these different countries face very different tax bills on similar incomes, enabling one to out-compete another on a factor that has nothing to do with efficient management or real productivity." From a technical level, the prose was a bit ranty and overly polemical in a lot of places. But it maintained a fervent anger that I appreciated, and I think that the overall argument was quite strong - at the end of the day, I think more people should read this book. I will say though - there is a certain amount of joy that seems to come from openly flaunting taxes, and there were some hard-working lawyers who just seemed to have found their calling in this arcane subfield.

  15. 4 out of 5

    Liam

    Treasure Islands is an investigation into the world that many of us have heard of but who few of us have had direct interaction: so-called "tax havens". Shaxton has done a lot of travelling to these places and explains to us how they have become a fixture of the international marketplace. He puts an emphasis on how diverted profits have damaged third world countries: I had spent years watching, living in and writing about the countries along the curve of Atlantic coastline ranging from Nigeria in Treasure Islands is an investigation into the world that many of us have heard of but who few of us have had direct interaction: so-called "tax havens". Shaxton has done a lot of travelling to these places and explains to us how they have become a fixture of the international marketplace. He puts an emphasis on how diverted profits have damaged third world countries: I had spent years watching, living in and writing about the countries along the curve of Atlantic coastline ranging from Nigeria in the north, through Gabon and down to Angola in the south. This region supplies almost a sixth of US oil imports and about the same share of China's, and beneath the veneer of great wealth lies terrible poverty, inequality and conflict. Journalists are supposed to start on the trail of a great story somewhere dramatic and dangerous; unexpectedly I found my story here, in a series of polite if unsettling meetings in Libreville, [Gabon]. p.1 Shaxton claims that a process called "transfer pricing" allows profits to be hidden from the presumptive country of sale, and also for the costs of production to be refunded according to the ost favourable tax code - regardless of where it was produced: Consider the banana. Each bunch takes two routes into your fruit bowl. The first route involves a Honduran worker emploued by a multinational who picks the bananas, which are packaged and shipped to Britain. The multi-national seels the fruit to a big supermarket chain, which sells it to you. The second route - the accountant's paper trail - is more round-about. When a Honduran banana is sold in Britain, where are the final profits generated, from a tax point of view? in Honduras? In the British supermarket? In the multinational's US head office? How much do management expertise, the brand name, or insurance contribute to profits and costs? Nobody can say for sure. So the accountants can, more or less, make it up. They might, for example, advise the banana company to run its purchasing network from the Cayman Islands anmd run its financial services out of Luxembourg. The multinational might locate the company brand in Ireland; its shipping arm in the Isle of man; "management expertise" in Jersey and its insurance subsidiary in Bermuda. Say the Luxembourg financing subsidiary now lends money to the Honduras subsidiary and charges interest at $20 million per year. The Honduran subsidiary deducts this sum from its local profits, cutting or wiping them out (and its tax bill). The Luxembourg's subsidiary's $20 million in extra income, however, is only taxed at Luxembourg's ultra-low tax haven rate. With a wave of an accountant's wand, a hefty tax bill has disappeared, and capital has shifted offshore. Big Banana has done a common offshore trick known as transfer pricing, or transfer mispricing.. By artificially adjusting the price for the internal transfer, multinationals can shift profits into a low-tax haven and costs into high-tax countries where they can be deducted against tax. p.11 Shaxton also claims that a common trick is for companies to resell to its own subsidiaries at high prices on paper. Why? In order to make these subsidiaries, located in high-tax countries, unprofitable on purpose: Chase was the oil company's preferred bank, and [in the early 1960s] it had asked [young economist] Hudson to study the balance of payments of the petroleum industry, in order to show that the oil companies were "good for America" and help them lobby for special perks from the government. Hudson had been asked to find out where the oil companies made their profits. At the producing end? At the refineries? In the gas stations? David Rockefeller, Chase's president, arranged for Hudson to meet Jack Bennett, treasurer of Standard Oil of New Jersey, now part of the ExxonMobil empire. Bennett gave him his answer. "The profits are made right here in my office," the oil man said. "Wherever I decide." He was talking about transfer pricing...Bennett showed Hudson exactly how large vertically integrated multinationals could shift profits around the globe, apparently without breaking the law. The company would sell its crude oil cheap to a shipping affiliate registered in zero-tax Panama or Liberia, which in turn sold it on at nearly retail price to its refineries and marketing outlets. In the high-tax countries where the oil is produced and consumed, the subsidiaries buy at a high price and sell cheap, so they are unprofitable. But in the middle, in zero-tax Panama or Liberia, the subsidiaries buy cheap and sell dear, making vast profits. But these havens levy no tax on those profits. To this day, accounting standards effectively hide this kind of trickery, letting companies shovel results from different countries into a single category (often called simple "international") which cannot be unpicked to work out who takes what profit where. "Only the immense political power of these extractive sectors," said Hudson, "could have induced their governments to remain so passive in the face of the fiscal drain." In the 1960s this kind of offshore leakage was relatively restrained when compared to today. p.190 Shaxton proposes that the largest companies crush innovation on the market since the advantage of tax havens is not available to smaller businesses: A lot of innovation - I'm talking about useful innovations to make better and cheaper goods and services, not the City of London's innovations that simply shift wealth upwards and shift risks downwards - happen in small and medium-sized enterprises. But the offshore system works directly against this. It subsidises multinationals by helping them cut their taxes and grow faster, making it harder for the innovative minnows to compete. And when small innovative firms do emerge they become targets for predators who seek to "unlock value" from "synergies" created by bringing the small firm into the bigger, more diversified one. Some synergies may be useful - economies of scale, for instance - but too often the predator unlocks value simply by being better at obtaining abusive, unproductive offshore tax privileges. Some make their best profits by seeking out and harvesting small, genuinely innovative companies that haven't yet managed to unlock those abuses for themselves. This harvesting removes nimble, competitive and innovative firms from the marketplace and relocates them inside large corporate bureaucracies, curbing competition and potentially raising prices. Debt rises, and ordinary people pay more tax or see their schools and hospitals fall into disrepair. And if the predators leave their earnings offshore they can defer tax on them indefinitely. Deferred taxation is, as I have mentioned, effectively an interest-free loan from the government, with no repayment date. In other words, more debt. p.190 Shaxton regards the permanent residents of the tax havens as kooks. It surprised me that Shaxton did not take the libertarian philosophy seriously in this book, since it seems to me that in such a book there ought to be some principled stand against the theory of "libertarian" or "neoliberal" economic growth: British private equity tycoon Guy Hands revealed that after moving to the British crown dependency of Guernsey to legally avoid tax, he had "never visited" his school-age children or his parents in England since he left, in order to preserve his non-resident tax status. Konrad Hummler, a vocal senior Swiss banker, calls Germany, France and Italy "illegitimate states" because their taxes are too high. Tax evasion, or what he calls "Swiss-style saving outside the system", is, he says, a legitimate defence by citizens attempting to "partially escape the current grasp of the administrators of a disastrous social welfare state and its fiscal policies." Offshore attitudes are characterised by amazing similiarities of argument, of approach and of method, and some striking psycological affinities in a geographically diverse but like-minded global cultural community. A peculiar mixture of characters populates this world: castle-owning members of ancient continental European aristocracies, fanatical supporters of American libertarian writer Ayn Rand, members of the world's intelligence services, global criminals, British public schoolboys, assorted lords and ladies and bankers galore. Its bugbears are government, laws and taxes, and its slogan is freedom. p.231 Elsewhere, Shaxton looks into the history of some tax haven technologies. Many have surprisingly deep roots, such as the colonial history of the term "non-dom": the concept of domicile was originally developed to help colonials identify themselves wherever in the empire they lived. And English colonial administrator in India would be resident in India, but domiciled in England. England was their "natural" home, and they would remain domiciled in India, and never fully British. In 1914 the tax rules were twisted to let those resident but not domiciled in England escape tax on their worldwide income - they would only be taxed on what was actually earned in Britain. A rule originally created to discriminate against foreigners now discriminated against ordinary British residents. And that is essentially the situation today. A "non-dom" hedge fund owner can make sure all his income is booked outside Britain and escape tax on it. About 60,000 non-doms live in the UK now, including Greek shipping magnates, Russian oligarch foot club owners, Saudi princesses and the Indian steel magnate Lakshmi Mittal, many of whom pay very low taxes. Just to add another layer of absurdity to the system, many resident non-domiciles were born in this country, including Lord Ashcroft. Born in Sussex and member of the House of Lords, his heart belongs to Belize, at least for tax purposes. ...The celebrity entrepreneur Sir Richard Branson - who owns his business empire through a maze of offshore trusts and companies, said in 2002 that his company would be half its size if he hadn't legally avoided tax via offshore structures. The British media treats Branson with awe. p. 251 ...and the continuity of the City of London's institutions since the medieval ages. The House of Lords was originally bsed on the City's Court of Aldermen; the House of Commons was based on the City's Court of Common Council. The prime minister's office was strongly modelled on the office of the lord mayor, elected by the Court of Common Council, which refers to itself as the Grandmother of Parliaments.... [Maurice] Glasman describes four pillars of the ancient constitution: the King at its head, the Church at its soul, the parliament as the country and the City as the money - not so much subordinate to the Crown or parliament but intertwined with them in complex political relationships. When William the Conqueror invaded England in 1066 and the rest of the country gave up its rights, the City kept its freehold property, ancient liberties, and its own self-organizing militias - even the King had to disarm when entering the City. When William commissioned the Domesday Book - a survery of the kingdom's assets and revenues that determined taxation - the City of London was excluded. At the Protestant Reformation 500 years later, the English Church became subject to the Crown, and in the centuries that followed, the power of the monarch declined, parliament steadily lost its aristocratic character and broadened the suffrage to include almost all adults. But the City remained apart. It was, a nineteenth century reformer said, "like some prehistoric monster which had mysteriously survived into the modern world". Monarchs, firebrands and demagogues who tried to roll back the City's special rights and privileges had occasional success, but most came to a sticky end, and the City vigorously reasserted its rights afterwards. ...King Henry VIII's powerful advisor Cardinal Wolsey enraged the City by introducing progressive taxation and forcing the nobility to cough up large "benevolences," even taking all the armour and plate of the City's livery companies. The City helped engineer Wolsey's demise in 1529 with accusations such as "he having the French pox presumed to come and breath on the king." The City never forgot that and in 1571 instituted the post of city remembrancer to remind the King of his debt. The remembrancer, the world's oldest institutional lobbyist, remains a potent force in the British state today... the only non-parliamentary person allowed into the Commons chamber, he sits unobtrusively behind the speaker p. 256 As an interesting epilogue, in the year after this book was published, Glasman was appointed to the house of Lords. What are we to make of all this? I take seriously the notion that competitive advantages are being given especially to the biggest companies in the form of highly expensive, but economic, accounting wizardry. Whether this crushes innovation is hard to argue on the face of it - have we ever lived in such a technologically innovative time? What on earth would it look like if the supposed parasite on innovation was lifted? Then I think that it's quite right that these tax havens are grimly reminiscent of the feudal or colonial class disparities of old, even sharing hsitories with them. However the libertarian arguments for the benefits of wealth disparity, even their ultimate benefit to the poor, are unanswered in this book. If these arguments have been answered, Shaxton does himself an injustice by not including them in this otherwise very comprehensive and powerfully argued work.

  16. 4 out of 5

    Yngve Skogstad

    A great work on the origins and evolution of tax havens, and how they operate not as a side-show, but at the heart and centre of our global political-economic system, in cooperation with ruling elites all over the world. Far from being just a few curious islands in the Caribbean, the world today inhabits 60 secrecy jurisdictions, most of them emanating from UK and its former empire. This book shines the light on all the harm and corruption they give rise to, and to a great extent I think it does A great work on the origins and evolution of tax havens, and how they operate not as a side-show, but at the heart and centre of our global political-economic system, in cooperation with ruling elites all over the world. Far from being just a few curious islands in the Caribbean, the world today inhabits 60 secrecy jurisdictions, most of them emanating from UK and its former empire. This book shines the light on all the harm and corruption they give rise to, and to a great extent I think it does so well. Yet I feel the need to make a critique of the rhetoric and/or understanding concerning taxation which figures prominently in this book as well as from organizations like Tax Justice Network and others. Tax evasion/avoidance isn’t a problem because the rich aren’t providing the state with the money it needs to spend on important public provisioning. This is just a rephrasing of Thatcher’s famous quote: “there is no such thing as public money, there is only taxpayers’ money”, which beyond being a racist and anti-poor dog whistle, is demonstrably false. For currency issuers (i.e. any government with its sovereign currency) spending logically must come prior to taxation. Broad and effective taxation is important to maintain a stable, well-functioning currency, not to “pay for stuff”. The government has infinite amounts of money and can therefore win any price war with the non-government sector. Obviously, it shouldn’t attempt to do that, as it would lead to spiralling inflation. But it’s not as if the rich assholes stashing their money away in tax havens are using their wealth to employ workers or buy up productive assets anyway, so if there are idle resources in the economy, the government can step in and employ these resources without any risk of inflationary pressures. Lost taxes don’t change this fact. Tax evasion is a problem because it leads to increased inequality, which leads to increasing power concentrations, corruption of democratic processes, social conflict and a host of other ills. As for the other problems relating to tax havens that Shaxson points to, they are all very valid. Tax havens incentivize a race to the bottom in terms of levels of taxation on the rich, and with regards to regulation and transparency. They lead to asset price inflation, making cities unaffordable for ordinary working people, and causing speculative financial bubbles and crises. They help all sorts of criminals in money laundering and hiding their wealth. They encourage transfer mispricing and all sorts of accounting schemes that lead to ever-bigger and ever more unaccountable MNCs. They lead to an immiseration of countries of the global south through all the mechanisms mentioned above, as well as several others. They are a scourge of this earth, and they must be destroyed, not because we need their vaults of money or whatever, but because their wealth is based on theft and destruction in the first place, and because they are using their wealth in deeply detrimental ways, making our societies much worse off. For all the great and informative content in this book, which I must add I learned a lot from, this is not the argument that Shaxson makes. The way I read it, he just wants us to go back to the “Golden Age of Capitalism” of post-war Keynesianism, which was so immensely extractive, racist, undemocratic and imperialist in the first place. To me, that’s not only a very uninspiring vision, I also think it’s a misappraisal of what capitalists in this conjuncture will concede to (barring another world war). Neoliberalism isn’t some aberration, it’s simply the currently dominant form of capitalism, an adaptation to our historical conditions of power relations among classes and nations; technology and ideology. There’s no going back to a previous form of capitalism (serving the interest of capital in that specific conjuncture) for the obvious reason that that historical conjuncture no longer exists. It’s in the past. Tax havens is an intrinsic part of neoliberal capitalism, and as such will not easily be done away with. No tinkering around the edges will do, to have any chance of achieving a just society we will need to eliminate the capitalists as a class altogether and get rid of the incentives for capitalist accumulation.

  17. 5 out of 5

    Tom Hunter

    This is an important and profound book that exposes what is really going on around the world. Rich elites with utterly depraved lack of morality are cheating, lying and thieving against the rest of the world's population in places such as that vile cesspool of depravity the Isle of Jersey, in the Cayman Islands--a vile place that has enabled criminality of the worst sort, of foolish places like the state of Delaware that allowed themselves to enable the destruction of their fellow Americans This is an important and profound book that exposes what is really going on around the world. Rich elites with utterly depraved lack of morality are cheating, lying and thieving against the rest of the world's population in places such as that vile cesspool of depravity the Isle of Jersey, in the Cayman Islands--a vile place that has enabled criminality of the worst sort, of foolish places like the state of Delaware that allowed themselves to enable the destruction of their fellow Americans through the elimination on limits on interest payments and most of all through the actions of a little-known knothole within the London, England known as the City of London. These various places and the bankers who have used their immoral devices to rob, cheat and steal from the community of the world, are the worst sort of filth on earth. If there were a God, the people whose actions are described in this monumental book would burn in a seething miasma of oil. While pretending to be honorable professionals, the bankers and hedge fund managers and accountants and attorneys who enable the practices described in detail in this book are the worst sort of scum, stealing from the poor, forcing others to pay the taxes they shirk, all while these same people benefit from the stable societies in the countries where they live and whose taxes they don't pay. Even more infamous, these same super wealthy and corporations complain about income taxes they claim are high while they in fact evade, lie and slime their way out of paying any of them. The super wealthy in America but all over the world now evade taxes almost 100% while whining and complaining about those same taxes, in the most astounding and shocking and angering display of venality you can imagine. In truth, no matter how bad you thought it was--these people who do business in Bermuda, in the Cayman Islands, in the Bahamas, in Manhattan, in Delaware, in the Isle of Jersey, Gurnsey, the Isle of Man, in the financial center of London called the "City of London" and in a thousand other places across the world--are 1,000,000 times worse than in your worst horror imaginings. These people are not only responsible for the finacial crisis--and for the destruction of economies going back to the mid 1980s. These self-justifying slime are the reason that our world is in trouble. They don't care and if this world is to be saved from destruction from within, each one of us owes it to humanity to say, I personally am not going to put up with this. In the United States, it is the super wealthy that screw everybody and their enables are of course the Republicans but, I am horrified to realize, the Democrats are in the tank too. Read this book and see if you don't join my outrage. It's time for us to take action. Action--yes--you know what I mean. Not indignation but real action, the kind that comes out of a pitchfork. You, reading this in the Isle of Jersey, in the Cayman Islands. We are looking right at you. You have enabled these crimes. We know.

  18. 5 out of 5

    Anchit

    The author seems to have done a superhuman level of research in the process of writing this book. He clearly mentions and explains repeatedly how difficult it is to get hold of information on Tax Havens and how they are being used. But still he's managed to find a wealth of information. However, while putting together all this wealth of information there's a lot of bias about how the information is presented. The book consists of about 90% opinions, beliefs, allegations, complaints, overlooking The author seems to have done a superhuman level of research in the process of writing this book. He clearly mentions and explains repeatedly how difficult it is to get hold of information on Tax Havens and how they are being used. But still he's managed to find a wealth of information. However, while putting together all this wealth of information there's a lot of bias about how the information is presented. The book consists of about 90% opinions, beliefs, allegations, complaints, overlooking any postive aspect of the situation, signalling a doomsday prophesy. Basically we are all doomed! The book does have some redeeming aspects where something complex is presented in a very simple manner. Enough to get you thinking about the concepts and let you know the basics. Before I read this book I had no idea what was meant by a Tax Haven and how an MNC might make use of it. Now I have a basic understanding of some fundamental concepts like laddering (which is similar to what you read hackers do - a chain of proxies to make tracing difficult), Regional pricing to evade taxes, using Trusts to avoid paying taxes, deffered taxes where you hold money outside the US and don't pay tax for it. So essentially the book reads like this :- "we are doomed! Oh god we are doomed! xyz company screwed us. donald made crazy policies. then white took a divide and conquer approach. then donald screwed us more! OMG! OMG we are doomed! OMG! This is sooo hoorribble! - lots of beliefs, allegations being thrown, lots of events thrown in but not connected logically. The whole tone is very offputting. One para here - This para outlines some interesting concept in very simple, day-to-day terms. This is where the author really shines. Even if you don't have a background in Accountancy and Finanace you will still understand this. IMO this para redeems the whole book. It's an "explain like I'm 5" kind of para. OMG! We are doomed! OMG this is the end for us. We are all screwed. X screwed us. And then Y did this. And then ABC played hard. And then we got screwed." In the end I would recommend this book to someone who has absolutely NO idea about Tax Havens. If you do your skimming right, then you can read most of the intro and start skimming the chapters for a paragraph of simple explanation (1 para per chapter). I suggest that you start skimming right from chapter 1 because about 90% of the body won't help you understand anything but just form a bad opinion about the world. ALl you would know is that "something bad is happening in the Finance world". That kind of belief is useless.

  19. 5 out of 5

    Darran Mclaughlin

    Absolutely essential reading if you want to understand the way the world works today, and why capitalism and liberal democracy is falling apart. I decided to read this after the Panama banking scandal broke, having been aware of the book for a few years. It is the clearest explanation of the sickness and corruption at the heart of contemporary capitalism, and Britain, especially the City of London, is the main culprit. Western Governments and the press talk about the ineradicable corruption in Absolutely essential reading if you want to understand the way the world works today, and why capitalism and liberal democracy is falling apart. I decided to read this after the Panama banking scandal broke, having been aware of the book for a few years. It is the clearest explanation of the sickness and corruption at the heart of contemporary capitalism, and Britain, especially the City of London, is the main culprit. Western Governments and the press talk about the ineradicable corruption in the third world as the reason that the Global South struggles so much, but we never talk about the systems and networks that the West creates and fosters to encourage this corruption. London is the place that corrupt Global elites send the money they steal, with the full backing of our Government, our banks, our accountants, our lawyers and our media. We are hoovering up 10X more money through encouraging tax evasion than the West gives out in development funding. By fostering low tax, low regulation regimes in Jersey, Hong Kong, Singapore, the Cayman Islands, the British Virgin Islands and more we have created a race to the bottom as other countries are forced to compete with us. We have created the conditions in which multi-national corporations manufacture several shell companies so that, for example, Amazon can pay £11.9 million in tax on £5.3 billion in UK sales in 2015 by routing the sales through Luxembourg. When gigantic multi-nationals can use their size and power to avoid tax and influence governments this puts smaller or more ethical companies at a competitive disadvantage which means they either have to find a way of avoiding tax themselves or go out of business. Offshore is at the heart of so many of the problems in the world today that the world would very quickly change for the better if we forced our Governments to do something about it. However, Britain has just left the EU and whilst the majority of out voters were driven by opposition to immigration the people leading the campaign are driven by making offshore even more welcome, cutting taxes, loosening laws and regulations and further liberalising the financial sector so we are about to enter a world of shit.

  20. 5 out of 5

    Sara

    The neoliberal sense of place [Through my ratings, reviews and edits I'm providing intellectual property and labor to Amazon.com, Inc., listed on Nasdaq, which fully owns Goodreads.com and in 2013 posted revenues for $74 billion and $274 million profits. Intellectual property and labor require compensation. Amazon.com, Inc. is also requested to provide assurance that its employees and contractors' working conditions meet the highest health and safety standards at all the company's sites.] We The neoliberal sense of place [Through my ratings, reviews and edits I'm providing intellectual property and labor to Amazon.com, Inc., listed on Nasdaq, which fully owns Goodreads.com and in 2013 posted revenues for $74 billion and $274 million profits. Intellectual property and labor require compensation. Amazon.com, Inc. is also requested to provide assurance that its employees and contractors' working conditions meet the highest health and safety standards at all the company's sites.] We generally think that it is places like New York, Shanghai, or Rio that represent globalization. Saskia Sassen's global cities, network hubs attracting and trasforming people and resources, and spitting externalities back into the flow. This book shows how little this vision reflects the real power balances, and how tiny a place the world has become for its cosmopolitan elites. Neoliberalism knows that what matters to control the world economy is not the techno-mass but only one thing: jurisdiction. A tiny somewhere where conensus is guaranteed and decisions are taken effortlessly behind closed doors. “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” Off-shore jurisdictions are fulcrums, the rotating Mont Pelerin venue is a fulcrum, Delaware, the World Economic Forum's Davos, the London School of Economics... It's from those places that it gets so easy to pass a bill, cut a deal, have the tactical op-ed published.. Effortlessly, pleasantly. All the levers close to hand. This is for me the major revelation of the book. An activist at some point says: "There are so few of us, and so many of them". Clearly, it's not a matter of numbers. There are so few of them, but they are so well co-ordinated in small shabby places - and so many of us, lost in breathtakingly huge and marvelous cities.

  21. 4 out of 5

    Colin Heber-Percy

    If capitalism used to be a force for good in the world, drawing communities and nations closer together through trade and mutual cooperation, it certainly, demonstrably isn't any longer. This book opens a window on the current reality: greed, corporate irresponsibility, and criminality. Shaxson's primary target is offshore finance which he describes as a sort of metastasing cancer in the body of global finance. He argues that the City of London sits at the heart of an offshore empire; the If capitalism used to be a force for good in the world, drawing communities and nations closer together through trade and mutual cooperation, it certainly, demonstrably isn't any longer. This book opens a window on the current reality: greed, corporate irresponsibility, and criminality. Shaxson's primary target is offshore finance which he describes as a sort of metastasing cancer in the body of global finance. He argues that the City of London sits at the heart of an offshore empire; the British Empire never died, he claims, it just went financial. Written like a thriller, Treasure Islands is about tax, but exciting, and deeply shocking. If you think corruption in Africa is down to local politicians, if you think pumping aid into the developing world will work (for every $1 of aid in, $10 flies out into tax havens), if you think the current global debt crisis is caused by sovereign governments overspending on welfare, if you think our politicians haven't been captured by the finance industry lobby - then read this book. I guarantee it will shock you.

  22. 5 out of 5

    Annie Smidt

    Here are some things you didn't want to know about how the world works! Fascinating though. Depressing. Frustrating. It's not just some naughty old aristocratic white guys and some dodgy corporations hiding some tax dollars, it's a huge, complex, worldwide system of sanctioned corruption that keeps the rich rich, the poor poor and the bankers busy. On the one hand, this is a dry-ish book about global tax practices and economics. On the other hand, it's essential reading for anyone who really Here are some things you didn't want to know about how the world works! Fascinating though. Depressing. Frustrating. It's not just some naughty old aristocratic white guys and some dodgy corporations hiding some tax dollars, it's a huge, complex, worldwide system of sanctioned corruption that keeps the rich rich, the poor poor and the bankers busy. On the one hand, this is a dry-ish book about global tax practices and economics. On the other hand, it's essential reading for anyone who really wants to know how money works. After reading this, I have no idea how one can buy anything ethically, let alone invest ethically... or even open a bank account that isn't screwing over someone in a developing nation once the butterfly's wings start beating. Although I picked this up to learn more about the British Virgin Islands and Caymans, the parts about The City of London and Jersey were very eye-opening. And Bono stashing his money in the Netherlands. What's up with that!?

  23. 4 out of 5

    David

    I gave up on it about halfway through. He has some strong points and great historical context, but he is so hell-bent on showing what can go wrong that he presents the efforts to fight tax evasion and money laundering as little more than trivia. We will never track down every dollar that has been pushed into a tax haven, but we can go beyond bemoaning our failures and focus a bit more on (1) the investigations against major international banks that have yielded billions of dollars in fines and I gave up on it about halfway through. He has some strong points and great historical context, but he is so hell-bent on showing what can go wrong that he presents the efforts to fight tax evasion and money laundering as little more than trivia. We will never track down every dollar that has been pushed into a tax haven, but we can go beyond bemoaning our failures and focus a bit more on (1) the investigations against major international banks that have yielded billions of dollars in fines and (2) statutes like the Foreign Account Tax Compliance Act (FATCA). Are either of these perfect? Of course not, but we can look at how these efforts have forced financial institutions to change their behavior, and then look for ways to strengthen our existing laws and regulatory efforts. We need to move beyond cynical complaining on this issue...

  24. 5 out of 5

    Stevan Cirkovic

    Truly the most important book I've read in the past year. It illustrates in detail and beyond doubt the workings of the off-shore world, carving out lesser known features too. In not leaving it up to readers to dig out the details of those mechanisms, Shaxton goes beyond a political pamphlet and clearly sets out how tax havens erode democracy and perpetuate poverty. Treasure Islands teaches a lot about institutions and the human factor in the equation. I certainly learned a lot reading this Truly the most important book I've read in the past year. It illustrates in detail and beyond doubt the workings of the off-shore world, carving out lesser known features too. In not leaving it up to readers to dig out the details of those mechanisms, Shaxton goes beyond a political pamphlet and clearly sets out how tax havens erode democracy and perpetuate poverty. Treasure Islands teaches a lot about institutions and the human factor in the equation. I certainly learned a lot reading this great investigative work which adds more contours to my political views and business knowledge.

  25. 4 out of 5

    deleted d

    interesting book but I disagree with the author's personal opinion on some things in the book. Good introduction to tax heavens Tax havens are nothing more than tools for wealthy and power people to maintain their wealth and power. By allowing global elites to avoid their taxes, they further the gap between rich and poor. They also take an enormous toll on the developing world and make it even more difficult for small- and medium-sized business to compete with major corporations. Tax havens dont interesting book but I disagree with the author's personal opinion on some things in the book. Good introduction to tax heavens Tax havens are nothing more than tools for wealthy and power people to maintain their wealth and power. By allowing global elites to avoid their taxes, they further the gap between rich and poor. They also take an enormous toll on the developing world and make it even more difficult for small- and medium-sized business to compete with major corporations. Tax havens don’t help oppressed people or keep the economy more free, they do quite the opposite.

  26. 4 out of 5

    Vishaka Datta

    There have been numerous ads on TV and print by the government of Gabon, a republic in Africa, advertising its tax-friendly regimes for foreign businesses. It was while casually reading more on Gabon that I bumped into Shaxson's book. The book opens with a description of Gabon's history just after it gained independence from France. A political scandal that involved the use of Gabon's secrecy laws by French businesses to register profits and evade taxes from the mainland, and use the proceeds to There have been numerous ads on TV and print by the government of Gabon, a republic in Africa, advertising its tax-friendly regimes for foreign businesses. It was while casually reading more on Gabon that I bumped into Shaxson's book. The book opens with a description of Gabon's history just after it gained independence from France. A political scandal that involved the use of Gabon's secrecy laws by French businesses to register profits and evade taxes from the mainland, and use the proceeds to buy influence at home and abroad . emical major Elf. I was rather young at the time the scandal broke, but this story itself brings out several of Shaxson's main contentions about secrecy jurisdictions such as Gabon. Shaxson argues that their creation was an attempt by the likes of Britain and France to hold on to their former colonies, with the US rather late to get in on the act. While Switerlzand is the common secrecy jurisdiction that pops to mind in India, nearly 50% of the world's offshore wealth is held in overseas territories of Britain. He also lays out the playbook used by financial lobbyists in creating tax competition amongst countries by the use of offshore tax havens. Shaxson tells numerous stories of corporations first carrying out activities in offshore territories that would be deemed illegal onshore, only to argue to regulators that since the said activity is happening offshore on a large scale anyway, it perhaps makes sense to carry these activities out onshore. By threatening to freely move capital around the globe, notably offshore destinations, wealthy individuals and corporations are able to drive tax rates to zero in different countries. Shaxson also speaks to the local inhabitants of offshore jurisdictions such as Jersey and the Cayman Islands and finds that democracy has been hollowed out by the influx of hundreds of billions of dollars of wealth into these islands. With much of the GDP in these states being derived from a financial sector that does not tax foreign capital, not-so-wealthy locals foot the tax bills and have virtually no say or inkling in the laws passed in these countries, especially pertaining to the financial sector. Quite often, these laws themselves are directly written by financial lobbies who view it as their sworn duty to keep wealth growing away from onshore governments. Perhaps the most bizarre story that leaps out of Shaxson's book when it comes to the creation of these British tax havens is that of the City of London, whose lord-mayor and governance structure pre-date not just the British parliament but the monarchy in itself. The fact that Eurodollar market which has grown to an immense size today was technically illegal in Britain at its outset, but not so in the City of London. A part of the Fed Reserve's operations to save the US economy involved massive aid (in Euros) to banks that were dealing in the Eurodollar market. The other story that perhaps never gets press in India is the status of the US itself as a secrecy jurisdiction, with states like Delaware passing laws that practically legalized usury in order to attract the financial sector. Historical stories of British tax evaders such as the Vesteys (Tom Hiddleston is reportedly a descendant) show the story of how rich individuals have longed to evade taxes much before corporations. A trip through history reveals that the architects of the Bretton Woods agreements, John Maynard Keynes and Harry Dexter White, wanted to restrict the mobility of capital but their efforts were ultimately undermined by the financial sector. The book is really at its best in these parts when tracing the origins of tax havens themselves, and the early efforts to stop their growth. Shaxson also argues that the OECD's goals of enforcing transparency in tax havens is a sham, since the jurisdictions it blacklists as tax havens barely register as a blip on the radar of companies looking to go offshore. He also details the lobbying efforts that were carried out by various tax havens in order to water down the OECD's efforts, and shows with data that the transparency currently enforced is followed only in letter and not in spirit. Where the book loses out perhaps is in leaving the black box of offshore finance closed. While the author explains some basic tax avoidance schemes, such as creative trade invoicing or the use of trusts where the beneficiaries are lawyers of tax evaders (thereby protecting the actual beneficiaries of wealth through client-attorney privilege) , there is a lot that goes unexplained with how directorships in shell corporations work, and how trust structures actually survive scrutiny from on-shore governments and courts. I have recently finished reading a different account of offshore wealth that does go into these details, but Shaxson's book triumphs in providing a coherent narrative about the birth, growth and seeming invincibility of offshore jurisdictions. The book ends on a very bleak note, arguing that there is really not much governments can do about this at the moment unless there is some form of concerted multilateral action. But given how much developed countries such as the US or the UK have to lose in the event of a genuine crackdown on offshore havens, this seems like a long shot.

  27. 4 out of 5

    Chang-ryung Han

    This book is quite boring. It does not give a great insight on tax havens. The author links almost all financial scandals that he has known to tax havens. He repeats the same thing (i.e., secrecy) from the first page to the end. Some articles published in academic journals are better than the book in understanding the mechanism of tax havens.

  28. 5 out of 5

    Michael

    An outstanding, and very readable, analysis of how corporate finance has grown so powerful that it can basically do what it likes. And we how we all suffer the consequences! The section on the City of London Corporation is particularly eye-opening!

  29. 5 out of 5

    N

    The Paradise Papers are reminding me that I read this a few years ago and it was incredibly boring and I remember nothing about it. *hides* We should all care about tax havens, but good lord talking about tax avoidance is dull.

  30. 4 out of 5

    Andrew Davis

    A well written account of Tax havens and how the impact on the worlds economy. A lot of interesting facts and references. With discussion of the historical background on the tax evasion it helps to understand the current situation. Well recommended. Some of the notes follow: More than half of world trade passes, at least on paper, through tax havens. Over half of all banking assets and third of foreign direct investment by multinationals are routed offshore. The world contains about 60 secrecy A well written account of Tax havens and how the impact on the world’s economy. A lot of interesting facts and references. With discussion of the historical background on the tax evasion it helps to understand the current situation. Well recommended. Some of the notes follow: More than half of world trade passes, at least on paper, through tax havens. Over half of all banking assets and third of foreign direct investment by multinationals are routed offshore. The world contains about 60 secrecy jurisdictions, divided roughly into 4 groups: 1. European havens – Switzerland, Luxembourg, Netherlands, Austria and Belgium, Lichtenstein and Monaco, Andorra and Madeira. 2. British zone centred on the City of London, which spans the world and is loosely shaped around Britain’s former empire. It has 3 layers: a. City of London, b. Jersey, Guernsey and the Isle of Man, Cayman Islands, Bermuda and British Virgin Islands, the Turks and Caicos Islands and Gibraltar. c. Hong Kong, Singapore and Bahamas, Dubai, Vanuatu 3. Zone of influence focused on the USA – Florida, Wyoming, Deleware and Nevada, the American Virgin Islands, Marshal Islands, Panama 4. Others, like Somalia and Urugway. Brothers William and Edmund Vestey are quoted among the biggest individual tax avoiders in history. They started in 1897 by shipping meat trimmings from Chicago to Liverpool. They set up cold stores and retail outlets in Britain, France, USA, Russia and South Africa. In 1911 they moved into shipping. From 1913 they expanded into ranches and meat packaging in Argentina. When Britain started in 1914 to increase taxes to cover costs of the war, they moved overseas to cut their tax bill. When they returned in 1919 they continued to be treated as visitors, not taxable residents, and started lobbing to decrease their taxes. Having failed they set up a trust in Paris and claimed that technically they were abroad. Despite changes in law to tax overseas trusts, they continued to avoid taxes. When Queen finally started paying income tax in 1993, the latest Lord Vestey smiled and said, ‘Well, that makes me the last one’. In 1934 the Swiss law was adopted a law to criminalise any banking secrecy violations. This was done in response to French requests to collaborate with their investigation of some French tax evaders. After the war Swiss claimed they enacted it to protect Jewish money from the Nazis, which wasn’t true. As London banks got restricted in using pounds to loan to overseas borrowers, they set up a Euromarket to deal in Eurodollars – the US dollars to loan instead. In late fifties Soviets did not want too many dollars in New York and started depositing them in London. American bankers soon realised that if this strange new market in London was free of US banking laws and started using London banks instead. By 1997, nearly 90% of all international loans were made through this market. Without any regulations about holding some percentage of their assets in cash (usually 10%) they could lend all their money and increase profits sixfold. With a normal bank it needs to keep some cash reserves (say 10%), so if it lends 100$ dollars it has to have $110 instead. Next out of that $100, the next lender can only lend $90, which turns into $81 for the next lender, and so on. That way $100 can contribute $1000 to the economy. In case of Euromarket there is no need for reserves and $100 can be multiplied endlessly. In 1981 when Reagan became president, America approved a new offshore possibility – the International Banking Facility. The American banker could sit in Manhattan office and open a new set of books and operate as if he was a branch in Nassau and operate under Nassau regulations. The second smallest state in the USA, Delaware is the home to many of the world’s biggest corporations. They have been there incorporated to follow Delaware corporation laws which are much more lax than in the other states. All the major corporations: Ford, General Motors, Coca-Cola, Google, Intel follow Delaware law. The narcotics industry alone generates some $500 billion in annual sales worldwide. Two organisations worth watching: - Tax Justice Network - http://www.taxjustice.net. An European organisation. - Global Financial Integrity - http://www.gfintegrity.org. An American organisation. The author raises an issue of the International Accounting Standards Board, that sets the rules how the companies publish their financial data. This is a private company funded by the banks and large accounting firms, operating in London and registered in Deleware. It’s an example of privatising of the public policy making. When William the Conqueror commissioned the Doomsday book, the City of London was excluded from it.

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