Banks, not tax havens, leading financial secrecy drive

Most tax havens work with the world’s largest international banks and accounting firms, so banks have a vested interest in maintaining them. And a lot can be done to deal with the banks, John Christensen, director at Tax Justice Network told RT.

RT:Your report has come down hard in Britain but how much control does the British government really have over what is happening in its overseas territories?

John Christensen: Britain is by far the largest of the major tax haven economies - largest in the world - and it controls some of the most secretive tax havens in the world as well. Places like Bermuda, which are particularly secretive, the Channel Islands, the Turks and Caicos - all of them come under British control. Constitutionally all of these territories - Cayman, Bermuda, Channel Islands, the Turks and Caicos, have the Queen as the head of state. And the Queen’s government, in other words, Prime Minister Cameron, is responsible in international law for the good governance and has every possibility and every power to intervene in their affairs to make sure they are well-managed.  

RT:What’s wrong with tax havens? Isn’t a certain amount of financial secrecy vital for citizens to keep their money safe?

JC: First of all, the idea that financial secrecy and tax havens keep people’s money safe and those people are located in Africa, in Europe or in Russia, it’s quite wrong. But the important thing about secrecy is that it doesn’t just encourage tax evasion, which is illegal, let’s be clear about that, it also encourages fraud, embezzlement and a very wide range of other corrupt practices. And this is the reason why the world now needs to tackle secrecy because the tax haven economy has become so large.

People pass electronic information boards at the London Stock Exchange in the City of London (Reuters / Stefan Wermuth)

RT:World money always finds a path of least resistance. You know, you close one tax haven, but there is somewhere else another one. For example, look at Switzerland, which was regarded the best one in the banking secrecy, has now signed the international convention that might lift the banking secrecy. What is your view on this?

JC: Let’s be clear, most of these tax havens operate with some of the world’s largest international banks, some of the world’s largest international accounting firms and some of the world’s largest law firms. So we know it isn’t the tax havens, it is the banks that are leading this, and there’s lots that can be done to tackle the banks.

The US government has shown its own efforts to tackle Swiss banks and they have been very successful there. But as far as Switzerland is concerned, lots of very, very fine words coming out from the Swiss government, but when you look at the detail what actually they are doing and have done in the last three years, very little has changed. Switzerland remains one the most secretive and the least cooperative jurisdictions in the world.

RT:Well, there is currently around 330 billion pounds (US$530 billion) in British banks that has been repaid from the UK overseas tax havens. So a lot of money does end up back in the economy. What is your view on these flows of finances? Wouldn’t it be an economic suicide to let this money go elsewhere? 

JC: Not at all. If you take the example of London, which attracts huge sums and hundreds of billions of pounds or dollars every year from across the world, does this money actually contribute in a positive way to the British economy? Very very difficult to say yes, but there is plenty of evidence that this money is simply inflating property prices in London and directly harming the British economy. And would that money be better used elsewhere, if for example, the money was retained in, let’s say, Russia or Africa and invested in productive activity there? The answer is almost certainly yes. It would be better if that money stayed in the country of origin and was invested in the country of origin.