“the index is a valuable exercise in complicating binary thinking about financial secrecy—the notion that a state is either an otherworldly no- or low-tax haven, or it’s not.”
“Instead, “a global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients,” the Tax Justice Network writes. “‘Competition’ between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalisation really took off in the 1980s, become a central feature of global financial markets.””
“But there are limits to what geography can teach about financial secrecy. In a 2012 paper for the Tax Justice Network, James Henry, the former chief economist at the consulting firm McKinsey, noted that the reality of offshore tax havens is more convoluted than it appears on a map:
[P]rivate banking has long since become virtual. So the term “offshore” refers not so much to the actual physical location of private assets or liabilities, but to nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements that manage and control private wealth—always in the interests of those who manage it, supposedly in the interests of its beneficial owners, and often in indifference or outright defiance of the interests and laws of multiple nation states. A painting or a bank account may be located inside Switzerland’s borders, but the all-important legal structure that owns it—typically that asset would be owned by an anonymous offshore company in one jurisdiction, which is in turn owned by a trust in another jurisdiction, whose trustees are in yet another jurisdiction (and that is one of the simplest offshore structures)—is likely to be fragmented in many pieces around the globe.”
“The geography of financial secrecy—which manages to be fragmented, far-flung, and interwoven all at once—helps explain why reforming the practices on display in the Panama Papers is so difficult.”