Expert debunks offshore world’ myths
There is no peer reviewed evidence to support most of the accusations of tax evasion, money laundering and terrorist financing levelled at International Financial Centres (IFCs).
That is according to Dan Mitchell, of the Cato Institute, a US-based think tank, who addressed a captive audience at the Society of Trust and Estates Practitioners (STEP) Caribbean Conference at the Fairmont Southampton yesterday.
In his speech entitled ‘What is the Reality Behind Some of the Often Dubious but Frequently Quoted Statistics Concerning IFCs?’, Mr Mitchell sought to debunk some of the myths about IFCs and give the reality.
Mr Mitchell said that most of the statistics relied upon by the critics in their arguments against IFCs were “make believe” numbers and unveiled where some of the more dubious figures came from.
Starting with the issue of harmful tax competition, he said that no facts have ever been presented to prove that tax competition was harmful, despite the “exogenous” theory espoused by the Capital Export Neutrality (CEN).
Similarly, Mr Mitchell added that the so-called evidence against tax evasion $100 billion of which has been attributed to IFCs was at best uncertain. He said that the number of $70 billion in individual tax evasion quoted by Jack Blum, chairman of the Tax Justice Network USA, turn out to be a “gut-feeling” according to Mr Blum when pressed for an answer on how he had arrived at it by the Congressional Research Service. The other $30 billion, he said, was an Internal Revenue Service estimate for legal tax avoidance by companies in IFCs.
“All of the research shows that by far the biggest driving force in tax evasion is tax rates, so the answer is surely to lower them,” he said.
As far as money laundering was concerned, Mr Mitchell said that there was no proof of such activities going on in IFCs, rather it was happening in places like Nigeria and the Ukraine or in places where criminal profits were obtained the majority of which was in the US and the UK where the drug trade was concentrated.
He said that the charge of IFCs causing global financial meltdown lacked any serious study or analysis to back it up, while Fannie Mae and Freddie Mac, the country’s biggest mortgage lenders, were bailed out by the US Government in the wake of the sub-prime housing crisis one of the key contributors to the collapse.
“If you look at all the facts that drove the financial crisis and ask yourself is there any shred of evidence that any of the IFCs had a hand in this the answer is no,” he said.
Turning to the subject of terrorist financing, Mr Mitchell said that the terrorist who committed the atrocities of 9/11 used onshore banking systems in the Middle East, Germany, the UK and the US and if they had operated through an offshore branch that jurisdiction’s financial industry would have been destroyed.
“Everyone would have leaped to the conclusion that you were hiding terrorists’ money if that was the case,” he said.
“What is created is this general notion that there is just something wrong with the offshore world and that is the challenge.”
Mr Mitchell said that there was a perception of IFCs being “rogue” regimes where fly-by-night operations looking to make a quick buck took place, but he added that, on average, so-called “tax havens” had much higher governance ratings than higher tax nations.
He went on to take Nicholas Shaxson, the author of ‘Treasure Islands’, to task over his assertions, describing it as being “full of myths”, none of which were substantiated.
In conclusion, Mr Mitchell said there were no hard and fast solutions to the problem faced by IFCs and the pressure on them would continue to mount, particularly on the part of the Organisation for Economic Co-operation and Development.
“They (the countries and organisations that are targeting IFCs) are in a deep financial crisis, some of which are close to defaulting, and it’s going to get worse and as it continues there is going to be relentless pressure going forward,” he said.
But he added that there was a silver lining with increasing evidence of the benefit of IFCs including their role as low tax jurisdictions and they needed to stand up and fight back against their dissenters.
Half of Bermuda’s eateries receive top grade
Quad bike tours on island given go-ahead
Bikes, gas tanks burnt in Hamilton car park
Wells scores in Burnley friendly
Richardson urges Brangman to reconsider
Doctor proud of colon surgery results
Worker faces $500,000 bill after drunk crash
Man charged with murder of Gibbings
Developers eye deal for Ariel Sands
Film shot in Bermuda wins top award
Brangman quits after BCB’s universal ban
Cougars pay tribute to Salaam
Premier talks of toll on family life
Questions raised over completion of pledges
Take Our Poll