Tax Haven Secrecy Worsening, Index Reveals

October 4th, 2011

Christian Aid

LONDON – Policy makers are failing to live up to the pledges of the world’s most powerful nations to tackle tax haven secrecy, according to the latest findings of an index that analyses the contribution different jurisdictions make to this global threat.

Despite a G20 commitment two years ago to curtail the activities of tax havens, the Financial Secrecy Index shows that the level of secrecy in international financial services is intensifying.

The Index, drawn up by Christian Aid and the Tax Justice Network, ranks 72 leading countries and jurisdictions offering finacial services according to the amount of international business they handle, and the secrecy their clients enjoy.

Switzerland, with the ink barely dry on a controversial tax deal with the UK which was condemned by Christian Aid as ‘collusion with criminality’, now heads the list as the world’s most harmful purveyor of financial secrecy.

The Cayman Islands, where not only is the disclosure of information an offence, but the mere act of requesting it can incur penalties, is second, and Luxemburg, which has consistently opposed EU attempts to tackle tax haven secrecy, is third.

Alex Cobham, Chief Policy Adviser at Christian Aid, said today: ‘Disappointingly, given that the G20 group of governments committed in London to eradicate tax havens, the findings show that more secretive jurisdictions have actually increased their share of business, and more jurisdictions now offer greater secrecy.

‘Switzerland’s place at the top of the Index tells us something about the nature of the tax regime with which the British government has shown it is prepared to do business.

‘The authorities here are apparently happy with a deal in which Britons with secret Swiss bank accounts become liable to some tax without having to disclose their identities.

‘Switzerland, along with Luxemburg, has aggressively fought attempts by the European Union to promote financial information exchange between governments.

‘But tax haven secrecy is hugely damaging and facilitates crimes such as money laundering, corruption and tax evasion.  It also has a grave impact on the economies of developing countries as it enables some unscrupulous companies trading internationally to cheat the exchequers of such countries by hiding their tax liabilities.’

Other jurisdictions in the top ten (in descending order) are Hong Kong, USA Singapore, Jersey, Japan, Germany and Bahrain.

The UK, which in the first edition of the Index published in 2009, was in fifth place (Switzerland was in third), has now fallen to 13, partly because its share of global offshore financial services has fallen, and partly because it is ranked as only ‘moderately secretive’.

John Christensen, Director of Tax Justice Network, an international, non-aligned coalition of researchers and activists with a shared concern about the harmful impacts of tax haven secrecy, said: ‘The Financial Secrecy Index reveals how the G20 is only chipping away at the outer shell of financial markets’ secrecy.

‘Powerful countries like Switzerland, Britain and the USA still block progress towards tackling the economic fault lines lying at the root of the current crisis. There will be no resolution of the crisis until the issues have been confronted full on.’

Rhetoric from the Organisation for Economic Co-Operation and Development (OECD) regarding a clampdown on tax havens has led to greater activity in Asian centres such as Singapore and Hong Kong, pushing both those jurisdictions up the index, Hong Kong climbing to fourth and Singapore to sixth.

The growth of business both havens enjoyed reflects their strong links to China which are attractive to those in the West that want financial secrecy because China is outside the OECD and has resisted pressure for reform. Singapore in particular is said in the Index to have ‘aggressively courted’ illicit funds being shipped out of Atlantic basin countries by people worried about a clamp down.

Two new entrants to the Index are Ghana (44th) and Botswana (49th).

Alvin Mosioma, Co-Ordinator of Tax Justice Network, Africa, said: ‘Until recently, Mauritius was the only African tax haven. It is deeply worrying to see these two newcomers being encouraged in some quarters to move towards tax haven status emerge given the damaging effect tax haven secrecy has on developing countries.

‘Such efforts undermine the ongoing process at the African Union to address illicit financial flows from the continent. ‘

Other welcome changes since 2009 include increases in financial transparency in Belgium, Guernsey and the Isle of Man, all of which have introduced automatic tax information exchange with countries in the European Union.

And despite coming top of the Financial Secrecy Index in its previous release in 2009, the USA has this year been given credit for attacking Swiss banking secrecy and promoting financial transparency with the passage of the Dodd-Frank Act, which requires US-listed extractives companies to report their payments to governments.

Nick Shaxson, author of Treasure Islands: Tax Havens and the Men who Stole the World, said the Financial Secrecy Index revealed the inadequacy of the efforts being made to counter tax haven secrecy.

‘Countries like Switzerland, Luxembourg and the Cayman islands are busy patting themselves on the backs about how many new information-sharing agreements they have signed recently,’ he said.

‘The Index, the biggest investigation into global financial secrecy in history, demonstrates how shallow these efforts are, and how the secrecy system is supported by some of the world’s most powerful countries. The rapid rise of gigantic secrecy industries in Singapore and Hong Kong is particularly worrying.’

In order to reflect better the global importance of transparency, this year’s Index has been calculated differently from the previous one. The greater weighting given to secrecy has contributed to the move down the Index of the biggest financial players such as the USA and the UK and the rise of smaller, more secretive jurisdictions such as Switzerland, the Cayman Islands and Panama.

Later this week (October 07)  Christian Aid and other members of the End Tax Haven Secrecy campaign will launch a Global Day of Action in advance of a G20 finance ministers meeting in Washington on the 14th and 15th October.

The aim is to persuade French president Nicolas Sarkozy as chair of the G20 this year to make tax haven secrecy a priority at a full meeting of the G20 in Cannes in November.

Christian Aid plans a protest outside HM Treasury, and a hand-in of letters to G20 embassies in London. French civil society groups are planning a number of activities that day including flash mobs and demonstrations outside different government buildings, using the slogan ‘Yes we can in Cannes’.

At the same time the Index will be presented at a special session of the annual conference of the intergovernmental, inter-NGO Task Force on Financial Integrity and Economic Development in Paris.



Further information from Andrew Hogg on 0207 523 2058 or 24 hour press duty phone: +44 07850 242950

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