One of the single biggest problems in global governance is the mania to move money across the globe to tax havens. We are finally seeing some movement in coordinating internationally on this, which could finally bring some accountability to the global 1%. Here’s a piece on how London has an oversized responsibility for this situation.
Those were the pungent beginnings of a modern system brought to light by the Pandora Papers, an enormous data leak coordinated by the International Consortium of Investigative Journalists. The papers exposed a smorgasbord of secretive and questionable financial dealings by more than 330 politicians and public officials from over 90 countries and territories — and over 130 billionaires from Russia, the United States and elsewhere. On display was a dizzying array of chicanery and wealth hoarding, often by the very people who should crack down on it.
The revelations, published on Oct. 3, are global in scope. But if there is one country at the system’s heart, it is Britain. Taken together with its partly controlled territories overseas, Britain is instrumental in the worldwide concealment of cash and assets. It is, as a member of the ruling Conservative Party said last week, “the money laundering capital of the world.” And the City of London, its gilded financial center, is at the system’s core.
For Britain, whose bloated financial sector exacerbates widespread economic problems, that’s bad enough. For the world, at the mercy of an economic system rigged for the rich, it’s even worse.
The offshore ecosystem is, by design, fiendishly complicated. Many intricate and opaque instruments — including offshore trusts, tax loopholes and shell companies — plus banking secrecy and negligent financial regulation shroud the wealthy’s assets in murky legal mists. Central to it all are tax havens, such as the Cook Islands, British Virgin Islands and Jersey (one of the Channel Islands), which can operate like smugglers’ coves. The wealthy and nefarious take their money there to protect it, but also to escape from rules, laws and taxes they don’t like.
The wealth held in tax havens is staggering: Estimates range from $6 trillion to $36 trillion. And some tax havens are closer to home than many would imagine. The United States, with its shady Delaware shell companies and South Dakota trusts, has long been a big part of the secrecy system. A cluster of European countries, including Luxembourg, Ireland and Switzerland, offer another menu of escape routes. Asia, of course, has Hong Kong and Singapore.
But the British network is surely the biggest. The Tax Justice Network’s Financial Secrecy Index, a ranking of tax havens, shows that Britain and its “spider’s web” of offshore satellites would rank first. Over two-thirds of the 956 companies that the Pandora Papers link to public officials were set up in the British Virgin Islands.
Central to the process is the City of London. Through international stock market listings, currency trading, bond issuance and more, the City handles perfectly respectable financial activity from around the world. But it is also the main nerve center of the darker global offshore system that hides and guards the world’s stolen wealth.
Once the finance-pumping heart of the British Empire, the City has refashioned itself as a crucial conduit for international capital of all sorts. The key moment came when, amid decolonization, the Bank of England let the country play host to the new Eurodollar market. This was an almost unregulated and highly profitable offshore space, separate from the British economy, where foreign banks, mostly American, could do things they could not at home.
We didn’t fight a revolution so those lobsterback bastards can steal our tax money again. Time for some good old fashioned American nationalism and force the British to cough up the ill-gotten gains! Or at least crack down on this.