Analysis shows £1.3tn of assets from Russia sitting offshore, as David Cameron prepares to host anti-corruption summit.
Russian banknotes. A detailed 18-month research project has uncovered a sharp increase in the capital flowing offshore from developing countries, in particular Russia and China. Photograph: Maxim Zmeyev/Reuters
More than $12tn (£8tn) has been siphoned out of Russia, China and other emerging economies into the secretive world of offshore finance, new research has revealed, as David Cameron prepares to host world leaders for an anti-corruption summit.
A detailed 18-month research project has uncovered a sharp increase in the capital flowing offshore from developing countries, in particular Russia and China.
David Cameron under pressure to end tax haven secrecy
The analysis, carried out by Columbia University professor James S Henry for the Tax Justice Network, shows that by the end of 2014, $1.3tn of assets from Russia were sitting offshore. The figures, which came from compiling and cross-checking data from global institutions including the International Monetary Fund and the United Nations, follow the Panama Papers revelations of global, systemic tax avoidance.
Chinese citizens have $1.2tn stashed away in tax havens, once estimates for Hong Kong and Macau are included. Malaysia, Thailand, and Indonesia – all of which have seen high-profile corruption scandals in recent years – also come high on the list of the worst-affected countries.
Henry, a former chief economist at consultancy McKinsey, told the Guardian his research underlines the fact that tax-dodging is not the only motivation for using tax havens – criminals and kleptocrats also make prolific use of their services, to keep their wealth secret, and their money safe. He said the list of users of offshore jurisdictions is like the cantina scene in Star Wars, where a motley group of unsavoury intergalactic characters is assembled. Henry said: “It’s like the Star Wars scene: you have the tax dodgers in one corner, the arms dealers in another, the kleptocrats over here. There’s also those using tax havens for money laundering, or fraud.”
Oil-rich countries including Nigeria and Angola feature as key sources of offshore funds, the research finds, as do Brazil and Argentina. Henry said the owners of this hidden capital are often so keen to secure secrecy and avoid their wealth being appropriated back home, that they are willing to accept paltry financial returns rather than investing it in ways that might promote economic development. Charging just 1% tax on this mountain of offshore wealth would yield more than $120bn a year — almost equivalent to the entire $131bn global aid budget.
The TJN is urging Cameron to push for agreement on a series of issues at this week’s summit, including a tougher crackdown on the banks, lawyers and other professionals who facilitate financial secrecy; and an obligation on all politicians to make their personal financial situation transparent.
Henry argued that when senior figures in authoritarian states such as China use tax havens to guard their money safely, they are effectively free-riding on the legal and financial systems of other countries. “All of these felons and kleptocrats are in a way essentially dependent on the rule of law when it comes to protecting their money,” he said.
He said it was not just exotic locations such as the Cayman Islands where money can effectively be hidden, but also some US states, such as Delaware, where it is possible for foreign investors to start up and run a company without making clear its ultimate ownership – something all UK firms will have to do from later this year.
We can have a vision of a good life that is not simply a yacht off the Virgin Islands, but one in which we have decent schools and hospitals. Photograph: Alamy
That global elite – I always suspected they were up to no good … I must be psychic! And look, here is the proof: the Panama leaks show all these vultures hiding away their money in perfectly legal schemes to avoid paying taxes in countries out of which they operate their businesses. The yachts flying Panamanian flags off the coast of some of these islands may have been a hint but somehow the wrong-doing of the super rich has simply become part of the environment. A stroll around London reveals rough sleepers among ghost mansions and empty penthouses, bought by those who will never make them homes.
This is just what a globalised capital city looks like. This is where global capital comes to hide itself. Never mind these idyllic tax havens, the UK itself is a centre for a form of money laundering. This is “our” success.
After the crash of 2008, the City rallied, paying for more than half of the Tory election campaign.
Anger at the bankers dissipated into a sort of shrug of the shoulders. Those who caused the damage hung on to their bonuses. Austerity works by saying that it is in our own self-interest to punish ourselves.
Hopefully some of this compliance is now falling apart, but the Panama leaks reveal something so massive that it’s hard to get to grips with it: big, bad, rich people do secret, mean things.
Jeremy Corbyn, as ever, seems mildly irritated by the workings of global capitalism. After all, he was elected in protest at a leadership that had simply sucked it up. New Labour was so intensely relaxed about wealth that it made up phrases such as “wealth creators”. All of this was personified by Cherie Blair, forever on some grabby supermarket sweep while her hollowed-out husband sells his services to dictators. Corbyn’s asceticism may be a relief, but its not yet an alternative.
Some things need to be said now, and said clearly. Not paying tax may not be illegal, but it is immoral. It is a form of theft. The acceptance of a caste system whereby the likes of David Cameron and George Osborne rule us, and we are not allowed to question the finances of this elite has to stop. We all pay tax to train doctors and maintain the roads they are driven on. The idea that this elite does not use the services that are provided is simply not true.
Try, for instance, calling a private ambulance and having it driven only on private roads? I note, after another strike by junior doctors, that just before the 2010 election, Jeremy Hunt, then culture secretary, reduced his tax bill by £100,000 through a deal that meant he transferred his companies’ office buildings. This is only human isn’t it? Why shouldn’t he do this? Here is why: tax is a marker of civilisation, a form of a social contract that right now is being torn up in front of our eyes. Even Adam Smith called tax a badge of liberty. And yet for many, freedom is entirely bound up with paying as little tax as possible. The richer you are the more free you are to not contribute – though you are still free to lecture others on the benefits of hard work.
But then this wealth bubble is a private-members club because it is, by nature, profoundly antisocial. Tax-dodging, aversion or whatever polite term we use, is premised on the free movement of money. The social consequences of this, be it the movement of migrants or the closure of industries, is someone else’s problem.
Part of this hyper-capitalism is the idea that only money makes money and people make nothing. “The left” went badly wrong buying into this worldview for a while. Financialisation meant only services would produce profit. But making things, whether you’re assembling a car, or a painting, or a house, still matters. We also became muddled about aspiration. It was good, then it was bad – rather than it being just a fact of life, like breathing. The need is to simply find a language of aspiration that is about all of us. The economy is increasingly spoken of as if it were the weather and completely uncontrollable. No.
We can have a vision of a good life that is not simply a yacht off the Virgin Islands, but one in which we have decent schools and hospitals, and our entrepreneurial skills are both useful and what we use to contribute. Where we understand that we pay tax precisely because there is such a thing as society; making money is neither a vice nor a virtue. Refusing to contribute, though, is a vice. That tight bastard who never buys a round in the pub though he earns more than you? Do you really want him running the country? Because that’s the country in which we currently live.
Queen Elizabeth II
would be evicted from BuckinghamPalace and moved into a
council house in plans to abolish the monarchy and build more social housing,
as suggested by the Greens leader.
The party would
move the royal family out of the 775-room mega-mansion, complete with tennis
court, lake and heli-pad amid 40 acres of land nestled in the leafy St James’
Park area of Westminster.
However there are
no plans that Her Majesty and Prince Philip would be turfed out in the cold,
like the estimated 2,500 people sleeping rough in England alone, as
Green leader Natalie Bennett said she would not be short of potential places to
live.
She said in
an interview with The Times: “I can’t see that the Queen
is ever going to be really poor, but I’m sure we can find a council house for
her — we’re going to build lots more.”
This would mean,
under the Greens’ suggestions, that the Duke and Duchess of Cambridge, Prince George and the unborn baby would also be served an
eviction notice from KensingtonPalace and would have to
shell out for private rent, buy their own house or join the chronically
over-subscribed social housing register.
Ms Bennett said that
the party is planning to expand on the country’s dwindling social housing stock
as “GDP is a lousy tool for progress” compared to people having a “better
quality life”.
The housing crisis
and lack of universally-affordable properties has been attributed to the Tory policy of allowing council and housing association tenants
to buy their homes at heavily discounted prices. It has also been
blamed on foreign investors buying up land for luxury developments while mortgages
and private rents go through the roof.
Ms Bennett also
criticised “parasitical” global companies who do not pay their fair share of
tax by basing their businesses in tax-havens such as the Cayman
Islands, even though they rely on public assets such as roads and
the NHS to make a tidy profit.
The Greens, with
branches in different regions of the UK, plan to “restructure society
with the rich paying their way and multinationals paying taxes” with the top
band of tax increasing to more than the current 50p rate.
Their rising
popularity, as shown by rapidly increasing numbers of memberships, has
catapulted Ms Bennett to being invited to take part in two televised political
debates ahead of the general election on 7 May.
Prime Minister
David Cameron had insisted that he would not take part unless Ms Bennett was
included if Ukip’s Nigel Farage was invited, despite the Greens having announced a total of 43,829 memberships across the UK compared
to the latter’s 41,966 members as of last week.
Ms Bennett said:
“People are really hungry for something different. There is an element of us
being fresh and new, but we are also talking about ideas, optimism and changing
things.”
The Greens also
plan to raise the minimum hourly wage to £10, with a guaranteed £71 a week
universal basic income for all adults, with half of the £280 billion cost of the
policy to come from tax, she indicated, with the rest made up of money already
paid out in benefits like jobseekers’ allowance.
A tax of 1 or 2 per
cent on people worth more than £3 million would also be implemented and the
party suggested that the state could have powers to seize assets from the
wealthy.
She said: “People
say to me that the rich will dodge [the tax], but in some of the countries that
already have it there is a simple rule that says if you haven’t declared
something on your wealth tax, you don't own it.”
The British Virgin Islands, the world's leading offshore haven used by an array of government officials and rich families to hide their wealth. Photograph: Duncan Mcnicol/Getty Images
Millions of internal records have leaked from Britain's offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.
The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.
In France, Jean-Jacques Augier, President François Hollande's campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.
In Mongolia, the country's former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.
But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners' identities normally remain secret.
The naming project may be extremely damaging for confidence among the world's wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.
BVI's clients include Scot Young, a millionaire associate of deceased oligarch Boris Berezovsky. Dundee-born Young is in jail for contempt of court for concealing assets from his ex-wife.
Young's lawyer, to whom he signed over power of attorney, appears to control interests in a BVI company that owns a potentially lucrative Moscow development with a value estimated at $100m.
Another is jailed fraudster Achilleas Kallakis. He used fake BVI companies to obtain a record-breaking £750m in property loans from reckless British and Irish banks.
As well as Britons hiding wealth offshore, an extraordinary array of government officials and rich families across the world are identified, from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states.
The data seen by the Guardian shows that their secret companies are based mainly in the British Virgin Islands.
Sample offshore owners named in the leaked files include:
• Jean-Jacques Augier, François Hollande's 2012 election campaign co-treasurer, launched a Caymans-based distributor in China with a 25% partner in a BVI company. Augier says his partner was Xi Shu, a Chinese businessman.
• Mongolia's former finance minister. Bayartsogt Sangajav set up "Legend Plus Capital Ltd" with a Swiss bank account, while he served as finance minister of the impoverished state from 2008 to 2012. He says it was "a mistake" not to declare it, and says "I probably should consider resigning from my position".
• The president of Azerbaijan and his family. A local construction magnate, Hassan Gozal, controls entities set up in the names of President Ilham Aliyev's two daughters.
• The wife of Russia's deputy prime minister. Olga Shuvalova's husband, businessman and politician Igor Shuvalov, has denied allegations of wrongdoing about her offshore interests.
•A senator's husband in Canada. Lawyer Tony Merchant deposited more than US$800,000 into an offshore trust.
He paid fees in cash and ordered written communication to be "kept to a minimum".
• A dictator's child in the Philippines: Maria Imelda Marcos Manotoc, a provincial governor, is the eldest daughter of former President Ferdinand Marcos, notorious for corruption.
• Spain's wealthiest art collector, Baroness Carmen Thyssen-Bornemisza, a former beauty queen and widow of a Thyssen steel billionaire, who uses offshore entities to buy pictures.
• US: Offshore clients include Denise Rich, ex-wife of notorious oil trader Marc Rich, who was controversially pardoned by President Clinton on tax evasion charges. She put $144m into the Dry Trust, set up in the Cook Islands.
It is estimated that more than $20tn acquired by wealthy individuals could lie in offshore accounts. The UK-controlled BVI has been the most successful among the mushrooming secrecy havens that cater for them.
The Caribbean micro-state has incorporated more than a million such offshore entitiessince it began marketing itself worldwide in the 1980s. Owners' true identities are never revealed.
Even the island's official financial regulators normally have no idea who is behind them.
The British Foreign Office depends on the BVI's company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries.
They claim the tax-free offshore companies provide legitimate privacy. Neil Smith, the financial secretary of the autonomous local administration in the BVI's capital Tortola, told the Guardian it was very inaccurate to claim the island "harbours the ethically challenged".
He said: "Our legislation provides a more hostile environment for illegality than most jurisdictions".
Smith added that in "rare instances …where the BVI was implicated in illegal activity by association or otherwise, we responded swiftly and decisively".
The Guardian and ICIJ's Offshore Secrets series last year exposed how UK property empires have been built up by, among others, Russian oligarchs, fraudsters and tax avoiders, using BVI companies behind a screen of sham directors.
Such so-called "nominees", Britons giving far-flung addresses on Nevis in the Caribbean, Dubai or the Seychelles, are simply renting out their names for the real owners to hide behind.
The whistleblowing group WikiLeaks caused a storm of controversy in 2010 when it was able to download almost two gigabytes of leaked US military and diplomatic files.
The new BVI data, by contrast, contains more than 200 gigabytes, covering more than a decade of financial information about the global transactions of BVI private incorporation agencies. It also includes data on their offshoots in Singapore, Hong Kong and the Cook Islands in the Pacific.
-----
Profiles of leading secret account holders
Leading figures across the globe with secret overseas entities
Name: Bayartsogt Sangajav Offshore company: Legend Plus Capital Limited
One of Mongolia's most senior politicians says he is considering resigning from office after being confronted with evidence of his offshore entity and secret Swiss bank account.
"I shouldn't have opened that account. I should have included the company in my declarations," Bayartsogt Sangajav told the International Consortium of Investigative Journalists (ICIJ). "I don't worry about my reputation. I worry about my family. I probably should consider resigning from my position."
Bayartsogt, who says his account at one point contained more than $1 million, became his country's finance minister in September 2008, a position he held until a cabinet reshuffle in August 2012. He is now the deputy speaker of Parliament.
During those years he attended international meetings and served as governor of the Asian Development Bank and the European Bank of Reconstruction, pushing the case for his poor nation to receive foreign development assistance and investment.
Canada
Name: Tony Merchant Offshore Company: Merchant (2000) US Inc Trust
Colourful lawyer and former politician, married to Liberal party senator Pana Merchant. Known for challenges to the Canadian revenue agency over his tax payments . He has also been disciplined by the Law Society for "conduct unbecoming ." In 1998, launched Cook Islands trust with deposit of more than US$800,000 as settlor and initially as beneficiary. Sent fee payments in cash envelopes: the agents noted "All communications regarding this trust is to be kept to a minimum…Do not ever send faxes cos he will have a stroke about it"
Comment: Declines to comment
France
Name: Jean-Jacques Augier Offshore company: International Bookstores Ltd [IBL]
Publisher and Sinologist. Campaign treasurer of François Hollande for the 2012 presidential elections. They studied together at the prestigious National School of Management (ENA). Chief Executive of Eurane SA. Made large publishing investment in China 2005. Caymans-registered entity IBL, set up with 25% shareholding granted to BVI company Sinolinks Transworld Investment Consultancy, and 2.5% shareholding to a Hong Kong entity Capital Concord Developments Ltd.
Comment: He says partner in the offshore firm was Xi Shu, a businessman and a member of the Chinese People's Political Consultative Conference, a political advisory body.
Russia
Name: Olga Shuvalova Offshore companies: Plato Management & other BVI companies owned by Severin Enterprises Inc
Wife of Igor Shuvalov, a businessman and politician close to Putin , first deputy prime minister since 2008. In 2007, she is recorded as owning Severin Enterprises , set up via Moscow agency Amond & Smith. The dealings of another of its subsidiaries, Bahamas-registered Sevenkey Ltd, were detailed in a 2011 investigative article in Barron's, which tied the company to her husband, who has denied wrongdoing.
Comment: declines to comment
US
Name: Denise Rich Offshore company: The Dry Trust
Among nearly 4,000 American names is Denise Rich, a songwriter whose ex-husband, the oil trader Marc Rich, was pardoned by President Clinton as he left office in 2001, over tax evasion and racketeering charges. A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, helped promote the pardon. She had $144 million in April 2006 in the trust in the Cook Islands plus a yacht called the Lady Joy, where Rich often entertained celebrities and raised money for charity.
Comment: Rich, who gave up her U.S. citizenship in 2011 and now maintains citizenship in Austria, did not reply to questions about her offshore trust
Azerbaijan
Name: President Ilham Aliyev and family Offshore Companies: Arbor Investments; LaBelleza Holdings; Harvard Management; Rosamund International
Three BVI entities set up in 2008 in the names of the president's daughters, Arzu and Leyla,. They list as a director wealthy local businessman, Hassan Gozal. His construction company has won major contracts in Azerbaijan. Another BVI entity set up in 2003, lists the president and his wife Mehriban as owners.
Comment: Those involved decline to comment
Spain
Name: Baroness Carmen Thyssen-Bornemisza Offshore Companies: Sargasso Trustees Ltd (1996-2004) and Nautilus Ltd (1994), both registered in the Cook Is. Her son, Borja, also has some of the shares
Former beauty queen, Spanish-based art collector and widow of a billionaire Thyssen steel heir, she used the offshore vehicles to buy art, including Van Gogh's "Watermill at Gennep" from Sotheby and Christies in London.
Her lawyer acknowledged that she gains tax benefits by holding ownership of her art offshore, but stressed that she primarily seeks "maximum flexibility" to move art from country to country
Comment: Her lawyer acknowledged tax benefits from owning art offshore, but stressed that she primarily seeks "maximum flexibility" to move art from country to country
Philippines
Name: Maria Imelda Marcos Manotoc Offshore company: Sintra Trust [BVI]
Late president Marcos' eldest daughter, now a provincial governor, is listed in 2005 in the BVI as the "investment advisor" and beneficiary of the Sintra Trust, set up by her associate, businessman Mark Chua of Singapore. She does not mention the trust in her Philippines declarations of financial interests
Comment: She declined to answer a series of questions from local journalists about the trust
• It is not suggested that any of those listed here have behaved unlawfully. Offshore entities can be held legitimately: the only aspect those listed below have in common is that they have used a jurisdiction which provides them with secrecy. This list is compiled from ICIJ data in the interests of accountability and transparency: any inaccuracies will be corrected promptly if brought to our attention.
There are many UK companies that offer trusts 'guaranteed to protect almost all your wealth from inheritance tax'. Photograph: Image Source/Alamy
The hottest ticket this week was a ringside seat for the public accounts committee's roasting of tax-avoiding Starbucks, Google and Amazon. Committee chair Margaret Hodge in full flight gave them a magnificent tongue-lashing, with Tories hot on her heels too, pouring derision on "don't be evil" companies' pretence to make next to no profit as they siphon cash into tax havens. Even the comptroller and auditor general lost his temperand called their evidence "insulting".
These are only opening salvos, as the Germans and French take aim too against companies pretending their profits arise in Bermuda or Luxemburg. John Lewis's managing director is calling on the Treasury to demand tax is paid in the country where profits are made:Amazon made £3.3bn in sales but paid zero UK corporation tax on any of the profits of that income. "They will out-invest and ultimately out-trade us," tax-paying John Lewis protests, unable to compete fairly with tax-shirkers. This should be easy to fix. Vince Cable says he's angry – but HMRC could refuse to accept these companies' accounts.
Everyone can point a shocked finger at foreign giants who bamboozle or intimidate our tax collectors. But the culture of avoidance runs deep. Labour tiptoed round the edge of the tax avoidance industry, chased off by City blusterers who called tougher tax collection a Labour stealth tax. But since the crash, the collapse in tax revenues has created soaring national debt, so the need for the Treasury to collect every penny owed has become more pressing. The culture of getting away with what you can has to give way to a popular understanding that one man's tax dodge is his own community's lost children's centres, libraries and swimming pools. So where does it all begin?
In a sedate Sussex hotel, St James's Place Wealth Management invited a flock of retired people of comfortable means to one of their genteel sales pitches on how to avoid tax. Observing unannounced, I listened to them selling their Rolls Royce anti-tax vehicles and investment funds: one fund was so stellar that it grew in 30 years from £30,000 to £2.7m – and how the room gasped in admiration. Yes, yes, we were all well warned that investments can go down as well as up, but the upside of that £2.7m looked more compelling than any risk. But the real seller for these elderly people concerned ways to avoid "uninvited guests at the sharing out of your estate". Those "uninvited guests" are the rest of the nation's taxpayers.
The atmosphere was impish and jocular, with the taxman as pantomime villain. Shocking stories were told of what befalls the estates of those without cunning advisers. Charles Clore lived abroad to avoid tax, but because he foolishly wanted to be buried "back home", the taxman deemed he was not really resident abroad at all and his whole estate was subject to inheritance tax. Gasps of shock. On screen, up came Prince Philip's whimsical remark that "All money nowadays seems to be produced with a natural homing instinct for the Treasury" – though in his case money makes the reverse journey from the Treasury to his trouser pocket. "Taking the worry out of wealth," was the theme, as one presenter promised: "We can protect your money from the dangers of tax," explaining how to offshore money.
But the big sell is trusts, special ones devised for this company's clients, guaranteed to protect almost all your wealth from inheritance tax. They are right, it can be done easily. Put all moveables and all cash and investments into a discretionary trust, and it passes to your heirs without tax as soon as you die, not even waiting for probate. It counts as a gift so the beneficiaries need pay no tax either. Called a "discretionary trust", as technically St James's are the legal trustees, the discretion in fact remains in all but name with you: the company will do whatever you ask, so you still control the fund and you can still take money from it. But for reasons that defy basic tax fairness, it avoids all inheritance tax. Why?
Even worse, hard-pressed local authorities are denuded by these trusts too. As St James's advisers eagerly pointed out, if you hide away your assets in a trust, it can't be counted when calculating how much you should contribute to your care if you need to go into a residential home. He warned that could be £1,300 a week in fees – more gasps – so why let your council take your money when you can salt it away safely in a trust? Let poorer taxpayers pick up the bill instead.
Richard Murphy, tax campaigner and adviser to the public accounts committee and others, says no one knows how much money passes through these trusts. They are opaque, unregistered and the taxman neither knows if they exist nor what's in them. Far more tax is probably avoided this way than the mere £3bn collected in inheritance tax: only 3.5% of estates pay it – and they may not be the richest. Why any Labour chancellor – or Tory for that matter – lets this dodge persist is a mystery. Inheritance is a neuralgic political topic, ever since the issue panicked Gordon Brown into ducking an election in 2007. But since so few estates pay it, it's hard to see why the 96.5% of ordinary taxpayers who never leave enough to get above the £650,000 couples' inheritance tax allowance would not support ending this loophole for the rich.
Meanwhile, the public accounts committee is summoning back Amazon after this week's "deliberately evasive" display of "outrageous" ignorance by one of their executives: he didn't know who owns their Luxembourg-based holding company that pays a fraction of the UK's tax rate. The return match is not to be missed. Margaret Hodge is calling for complete transparency to stop companies claiming "commercial confidentiality" to hide their accounts. She wants aggressive avoiders to be named and shamed and denied public contracts, and she suggests the public boycott tax avoiders.
On 8 December UK Uncut is protesting against Starbucks, setting up creches, libraries and women's refuges in the coffee shops, as payback for services that might stay open if Starbucks paid fair tax. Is it time the committee looked at how the likes of PricewaterhouseCoopers, KPMG, Accenture and McKinsey devise ever more elaborate tax dodges for their clients, yet with the other hand seize ever fatter contracts from the state they help strip bare of revenues?
'Germany is setting back years of work towards the global prize of ending banking secrecy in the world's most pervasive tax haven.' Photograph: Arnd Wiegmann/Reuters/Corbis
German tax dodgers with money hidden in Swiss banks can sleep easy tonight. For the German government this week initialled a beggar-thy-neighbour deal that undermines years of diplomatic work to penetrate Switzerland's globally corrosive banking secrecy. The agreement, which is due to be signed by both governments over the next few weeks, sees Germany accepting a paltry $2.8bn upfront from the Swiss banks said to hold some $276bn of Germans' undeclared wealth .
In addition, the deal says that Germans will in future be taxed at 26% on the income from their Alpine accounts – money the Swiss authorities will then hand over to Germany. But the Germans with secret accounts will not be forced to tell the taxman that they are hiding their wealth abroad. Their identities will remain secret, allowing Swiss bankers to keep their boasts about "privacy" and "confidentiality".
Both governments are spinning their agreement as a huge success for international co-operation and the fight against tax evasion.
In fact, Germany is setting back years of work towards the global prize of ending banking secrecy in the world's most pervasive tax haven. It has dealt a serious blow to prospects for automatic, multilateral exchange of tax-related information between governments, which is the gold standard for deterring tax dodging.
German Tax Justice Campaigners are hoping the deal with Switzerland can be repealed. But what about the scores of countries without the economic and political clout to negotiate such agreements with Switzerland? How are they to capture some of the billions they are haemorrhaging as a result of tax dodging and corruption?
They are reliant on the kind on international co-operation that NGOs including Christian Aid are fighting for, in order to End Tax Haven Secrecy. There may be worse to come. Here in the UK, HM Treasury is negotiating a similar agreement with Switzerland. It has simply been biding its time to see what kind of deal Germany gets.
With the UK government pursuing such a self-interested and myopic policy, it is no surprise that senior UK diplomats appear distinctly disinterested in playing ball at the G20, where a truly global deal to end tax haven secrecy could be brokered.
A former senior US Treasury official, who used to negotiate tax treaties for the US, recently told me of his fury about how these dirty deals are undoing a whole career's worth of work against financial secrecy.
Such is the scourge of tax havens that the Tax Justice Network estimate assets held offshore total $11.5tn – which if taxed could yield revenues in excess of $225bn. This is money that could be paying for schools, hospitals, university fees and so on – not only in the developed world but also in developing countries. It is $11.5tn that could be used productively in the global economy rather than stashed away in an Alpine tax haven for private gain.
Meanwhile, the real Swiss economy doesn't seem to be benefiting too much from the influx of dodgy capital. Its government this week met for a third unscheduled session to grapple with curbing the surging value of the Swiss franc, which is damaging Swiss exports and sending the economy down a precarious path.
Yet again, it is vested interests who are winning out over the real economy and the everyday citizens who are being deprived of essential services, whether in Basel, Berlin or Bamako.
