Wednesday, May 30, 2007

Green Death: money laundering and tax havens

David Seaton's News Links
Offshore tax havens probably do more damage to the poor people of the world than AIDS, avian flu or climate change put together.

In Spain, the presence of Gibraltar's opaque banking system has made the Costa del Sol a refuge for every type of criminal extant and led to an imaginative cross fertilization of drug money laundering and real estate speculation which may end up causing as much damage to the Spanish political system as the "tangetopoli" scandal did to Italy's in the 90's.

There is really little I can add to this excellent article from The Guardian other than to draw your attention to it. I would appreciate any comment from readers with special knowledge of this problem. DS

Dirty money flows distort our economy and corrupt democracy - Guardian
Abstract: Tax havens warp the foundations of market capitalism. David Ricardo's theory of comparative advantage says that production should gravitate towards geographically relevant areas: cheap manufactures come from China and France or Chile produce fine wines. But now we have thousands of companies operating from one building in the Cayman Islands, and a former Thai prime minister avoids paying tax on a $1.9bn sale through a British Virgin Islands company called Ample Rich Investments. Small wonder that people lack confidence in the global economy. Swiss bankers, worried that the Nazi gold scandal had affected their reputation, cooed that secrecy "is as vital as the air we breathe". But, in practice, this parallel economy is a hothouse for crime and corruption, facilitating capital flight from developing countries on a mind-boggling scale, a corollary of the City's boasts about attracting capital into the UK. The offshore economy distorts markets by providing tax loopholes to some businesses but not others. It corrupts democracy, helping elites to evade their responsibilities to the societies that nurtured them, and breaking fundamental relationships of accountability that are forged when rulers tax citizens. It does not create wealth but redistributes it from poor to rich. Worse, it destroys wealth and slows growth.(...) to win the battle against the cancer of tax havens will require much greater commitment to international cooperation, founded on a push for greater transparency. Global debate on these issues is long overdue. New branches of economics are required, asking questions such as how certain aspects of global financial and trade liberalisation foster criminogenic, corrupting environments. Astonishingly, neither the IMF nor the World Bank have seriously studied the scale or nature of global dirty money flows, which others estimate at up to $1.6 trillion per year - half from poorer countries. For each dollar of aid into Africa, at least five flows out under the table. The time has come to confront the tax-haven monster. READ IT ALL

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