Book: Bermuda’s A “Treasure Island”

January 8, 2011

1Treas-IslBermuda is singled out as one of the “off-shore tax havens that sink nations” in an upcoming book and accompanying documentary by African-born journalist Nicholas Shaxson.

Mr. Shaxson — an Associate Fellow of  the Royal Institute of International Affairs and a consultant for global watchdog organisation Tax Justice Network — is releasing “Treasure Islands, Tax Havens and the Men Who Stole the World” in the UK next week (Jan. 13), and advance notices have been positive.

“Companies and people who don’t pay their due level of tax shift the burden on to those who do,” says a review in today’s “Irish Times“.  “They make use of the educational and other infrastructures that underpin modern economies while trying to reduce the financial contribution they make towards these social goods. They want all the pluses of modern democracies while seeking to reduce their obligations to zero. They are behaving like parasites.

“Corporation tax in the US can be as high as 35 per cent. By keeping their profits in off-shore locations such as Ireland, the Caymans and Bermuda, US multinationals are in effect getting interest-free loans from the US government, to the competitive disadvantage of those businesses that do not or cannot avail of offshore tax structures.

“Furthermore, the corporations are using the same systems and structures as international crime organisations, the most corrupt despots on the globe and the world’s growing army of “non-resident” multimillionaires.”

Mr. Shaxson’s book cites examples of dictators in the Developing World who plunder foreign aid, depositing the money in off-shore accounts by way of a wilderness of corporate mirrors — making the funds all but untraceable and unrecoverable .

“… Instances are given where the populations of poor countries have to pay back enormous loans apparently given to their countries but in fact snaffled by their corrupt leaders, who stash the money in First World bank accounts,” said the “Irish Times” review. “The key point is that these banks, located in Switzerland, Bermuda, the Cayman Islands, Dublin, London, Jersey and so on, welcome such deposits and fight efforts to impose obligations of disclosure.

“Often solicitors and accountancy firms are involved through the creation of off-shore trusts and companies whose ownership cannot be established.”

Raymond Baker, director of the Global Financial Integrity organisation in Washington DC, is quoted by Mr. Shaxson as saying the off-shore system is “the ugliest chapter in global economic affairs since slavery.”

Mr. Shaxson has been highly critical of Bermuda in the past, arguing that not only do off-shore economies “impoverish other nations” they can also hurt the people and  infrastructures of host jurisdictions.

“The tensions in Bermuda highlight one of several reasons why tax haven economies
–- especially small islands with little else to fall back on –- are inherently unstable,” he said at the onset of the global recession in 2008. “Often the financial sector becomes dominant in an island economy the result is political ‘capture’ by the lobbyists and cheerleaders for financial services.

“The dominant sector also sucks skilled personnel out of the others, eroding them further; and by raising prices locally, people in other sectors are effectively poorer and further marginalised.

“The dominant sector thus becomes yet more dominant. Again, this is a bit like like mineral-rich economies afflicted by the Resource Curse, where the natural resource sectors crowd out other productive sectors like agriculture, manufacturing or tourism, leaving politicians to rail impotently about the receding dream of economic diversification.

“Like oil-dependent economies vulnerable to world oil prices, island tax haven economies are heavily exposed to boom-bust swings in international finance; if the current international ‘credit crunch’ proves to be as deep and durable as some fearm, many havens face a bitter future.”

“Treasure Islands, Tax Havens and the Men Who Stole the World” is being published by the Bodley Head in the UK. An American edition from Random House will be released in April.

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Comments (5)

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  1. Triangle Drifter says:

    "Instances are given where the populations of poor countries have to pay back enormous loans apparently given to their countries but in fact snaffled by their corrupt leaders, who stash the money in First World bank accounts,”

    Can't help but relate this to the $1B debt Bermuda has recently aquired & spending that is otherwise unaccounted for or mispent. BHC, Cruise Ship Dock, Berkley, Gov Admin Building, BLDC projects at baselands, handicap buses, unused 'small' buses, inappropriate ferrys, Gov cars for everyone, gov credit cards, travel junkets etc.etc.

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  2. Peter Barrett says:

    The notion that US corporations are "keeping their profits in off-shore locations" is very misleading. US operations in the US pay full corporate income taxes on the profits earned in the US. Offshore jurisdictions like Bermuda are not used to avoid paying taxes on US operations. Bermuda does not cheat Uncle Sam.

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    • Sumitra says:

      "US operations in the US pay full corporate income taxes on the profits earned in the US."
      Dear Mr. Barrett,
      I think you may be incorrect in your statement. Please see the links below.
      Citizens for Tax Justice ctj.org

      Direct link to page of reports---
      http://www.ctj.org/fed_pub_news/givaways_corp.php

      Here are some of the good ones----they are working on updating these but you'll get the drift and it's even worse now since 2008!

      * CTJ/ITEP Study of State Corporate Taxes - 02/02/2005
      * Congress Passes $210 Billion in New Corporate Tax Breaks - 10/12/2004
      * Corporate Income Taxes in the Bush Years - 09/22/2004

      Thank you.

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  3. Triangle Drifter says:

    One would think that a topic like this, which is so vital to the Islands future would generate lots of responses. Sadly it does not. Car crashes, a homeless individual getting a lucky break, a Minister not paying a parking ticket etc. etc. all get far more keyboard time. So sad.

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  4. LostinFlatts says:

    “The dominant sector thus becomes yet more dominant. Again, this is a bit like like mineral-rich economies afflicted by the Resource Curse, where the natural resource sectors crowd out other productive sectors like agriculture, manufacturing or tourism, leaving politicians to rail impotently about the receding dream of economic diversification."

    Good point, how dare countries with natural resources build their economy around these? How dare small islands with no means to produce anything at all use creativity to create an industry to sustain themselves?

    Perhaps the author would be so kind as to suggest what ourselves, the Caymans etc should do if not international business? Because agriculture and manufacturing are obviously out of the question, and tourism is still a focus (well at least it should be, maybe we should have had a full time Tourism minister over the past few years).

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