Around 1000 rather affluent Germans are not sleeping too well since former Deutsche Post AG Chief Executive Officer Klaus Zumwinkel was arrested by the German tax authorities on February 14. The information leading to his arrest came from a DVD containing a list of alleged German tax evaders, purchased for around € 5 million by the German BND intelligence service to pay a former employee of LGT, Liechtenstein’s biggest bank. It was money well spent.
Tax havens are to those engaged in tax evasion what fences are to thieves. Tax evasion is a crime. It’s not harmless cleverness and fun; it’s theft from the community you live in. Those who engage in it, and those who facilitate it, are criminals. It is time that the more determined, if not yet sufficiently aggressive, attitude and actions of the civilised world towards money laundering is extended to tax evasion through off-shore tax havens and the corrupt states/entities that live off this trade.
The list of countries that make a living out of tax evasion and related activities (essentially the same countries that consciously created, and in some cases continue to offer, facilities, laws, regulations and institutions to facilitate money laundering) is long. The OECD lists 35 microstates with the tax haven designation, but this excludes larger countries with strong bank secrecy laws whom the shoe fits just as well (e.g. Austria, Switzerland, Luxembourg).
Many are located right in Europe. The include micro-states/entities like Monaco, Liechtenstein, Andorra (the only three tagged as “uncooperative” tax havens by the OECD), Guernsey, Jersey and the Isle of Man. Any country with an unhealthy respect for bank secrecy is part of the tax evasion/money laundry fraternity. Among the EU members, Luxembourg and Austria are prominent examples. Cyprus has long been a surprisingly copious source of funds invested in the former Soviet Union. Outside the EU but in the heart of Europe, Switzerland has long profited from the facilitation of foreign tax evasion and money laundering.
Of course there are many other tax havens, money laundromats and regulatory havens outside Europe. The Caribbean has quite a few (the British Virgin Islands, the Cayman Islands, Panama etc.), and others are scattered all over the world. The European tax havens are, however, unique in offering stable governments, predictable laws, rules and regulations – indeed most of the letter but none of the spirit of the rule of law – and low risk of having part or all of the ill-gotten gains parked there expropriated or extorted. The European tax havens are a tax evaders paradise. It is time to change that.
The vast majority of European countries – all those that lose out because of the existence of these tax havens – should unite in a determined effort to end these countries’ ability to offer safety to tax evaders by granting anonymity, confidentiality and secrecy. The exact modalities may differ from case to case. Jersey, Guernsey and the Isle of Man should simply be absorbed lock, stock and barrel into the UK, with English laws, rules and regulations applying across the board. The special status of these strange entities is not cute; it’s an enabler and facilitator of unethical and illegal behaviour. The EU should adopt a directive on bank secrecy that would end the nefarious practices of Luxembourg and Austria. Belgian dentists will just have to get used to paying taxes. Andorra, Monaco and Liechtenstein should be given the choice of ending bank secrecy or facing annexation (by France and (once it abandons its bank secrecy laws) Austria respectively).
Switzerland is the big prize, as unlike the other tax havens, it is a country rather than a dwarf-state and postage-stamp curiosity, and it is outside the EU. It should be subject to sufficiently stringent economic sanctions from its neighbours (after all, it is landlocked!) to induce it to abandon the laws, rules and regulations, including its extreme version of bank secrecy, that make it the one of the countries of choice for parking illegal or extra-legal money.
The activities engaged in routinely and as a matter of course by these tax havens are hostile acts towards all countries whose tax bases are undermined by them. It is time to stop being polite about it. If the EU, the US, Canada and Japan were to take a united line on this, things could change very quickly.