• Tax havens - a conspiracy against the poor

    Posted by Gershon

    12 June, 2012

    I’ve never been much of a conspiracy theorist. I am yet to be convinced that the US government organised 9/11, I doubt very seriously that alien autopsies were carried out at Area 51, and despite the ‘compelling’ evidence I don’t think that Barack Obama is an Islamic fundamentalist sleeper agent charged with bringing about the upcoming 2012 global apocalypse. With that said, there has been one ‘conspiracy’ that’s started to make me more than a little worried.

    What would you say if I told you that there is a massive global system that props up corrupt dictators and politicians, facilitates the activity of the world’s largest criminal industries and drains billions, possibly trillions of dollars from Governments all over the world? That this system was one of the major causes of the current global financial crisis and worse than that, it contributes to the deaths of hundreds of thousands of people every year?

    If you’re like me, your first thought might be, ‘That’s just too surreal to be true,’ or perhaps you’re less generous, and you just think ‘Gershon’s a crackpot’. Yet, the more I read, the more I’m convinced (and horrified) that this isn’t just conspiracy, its reality.

    So what is this system? Well... it's tax havens. Yes, I know we’ve all heard the phrase bandied about, but I wonder how many of us realise how mind-blowingly destructive tax havens are or just how entrenched they have become in our economic system.

    shine the light actionshine the light actionshine the light actionTax havens are jurisdictions (nations, states, or smaller sub-units such as the City of London Corporation) that are characterised by high levels of secrecy, low levels of taxation and dubious laws. These elements work together to allow criminals and dictators to hide their ill-gotten gains while also (and even more significantly) allowing corporations and wealthy individuals to avoid paying their fair share of tax.

    In the last few decades, tax havens have moved into the centre of the world’s financial and economic structures. The majority of the world’s trade flows through them and more than half the world’s wealth is held in them. Even a cursory view of the facts shows how damaging their rise has been, and sadly, but not surprisingly, it appears that the worst of this damage is inflicted on the poor. On the most conservative estimates, in 2008 corporate tax evasion, facilitated through tax havens, cost developing countries more than US$160 billion dollars, an amount significantly greater than the US$120 billion dollars of aid that flowed into them in 2009. Christian Aid estimates that if developing countries retained these lost funds and spent it in the same proportions as the rest of their expenditure, some 350,000 children’s lives could have been saved every year.

    At Micah Challenge, we talk about the importance of the Millennium Development Goals (MDGs) a lot – and the need for funds to finance the achievement of these goals. The deeper into this conspiracy I go, the more I am astonished by how much money developing countries are losing due to tax evasion. I find myself wondering how many countries may have already achieved their MDGs if they simply had access to the tax revenue that was rightfully theirs. Indeed, I wonder how many would have graduated from becoming aid recipients into becoming aid donors, in the way that South Korea has.

    Given the scale of this problem and the damage it is causing, you would think the world powers would have united to stamp it out. Here, though, the conspiracy deepens. It turns out that some of the largest economies in the world are part of the problem. The United States of America and the United Kingdom are arguably the two most significant tax havens in the world. Though their approach to secrecy and tax dodging is a bit more subtle than the more recognisable tax havens like the Cayman Islands and the Bahamas, their impact is far greater. These nations are each at the centre of their own tax haven spider’s web, and these webs knit together smaller havens from across the globe in order to facilitate massive volumes of secretive trading and tax dodging. While both nations, particularly the United States, have shown an interest in stopping the tax evading activities of their own citizens, they have done little to stop the tax avoidance of non-residents and foreign corporations that takes place on their own shores.

    It seems that at least some of the reluctance to address the problem is the desire to keep big business happy. It’s true that dictators and criminal organisations use tax havens extensively, but the biggest users are rich multinational organisations. According to John Christensen, director of the tax justice network, 65% of the money that illegally leaves developing countries is because of corporate tax evasion.

    This global ‘conspiracy’ turns the traditional corruption narrative on its head, doesn’t it? Rather than simply pointing the finger at the corrupt politicians of developing nations, we need to recognise that developed nations and the world’s wealthiest corporations have just as much, if not more, to answer for.

    I sometimes wonder how something so large and so damaging could have escaped my notice for so long. I studied economics and international trade at University and I’ve been interested and involved in development issues for years, yet I was as shocked by this conspiracy as I would have been if someone gave me definitive proof of the moon landing being staged.

    Around the world, leaders have started to recognise the problem and have begun to take some preliminary steps to address it. While it does seem that awareness of tax havens is dawning in some quarters, the system, by and large, still avoids the scrutiny it deserves. Too few people know about this issue and even fewer are speaking up about it - but we can change that.

    Micah Challenge is seeking to shine a light on this issue and bring it out from under the cover of darkness that it has managed to hide behind for so long. It is time the world knew the truth about tax havens and the corporations that use them. Hopefully with knowledge will come outrage and with outrage, change.


    Gershon Nimbalker is the Advocacy Manager at Baptist World Aid, is a member of Micah Challenge's Campaign Strategy Group and has been helping with our Shine the Light campaign. Click here to watch the video and get involved in the campaign.

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