Treasure Islands - Nicholas Shaxson [139]
Next, we should rethink corporate responsibility.
Societies grant corporations immense privileges, such as limited liability, which lets investors cap their losses and shift outstanding debts onto the rest of society when all goes wrong. They have also been granted the right to be treated as artificial legal entities that can relocate to different jurisdictions almost at will, irrespective of where they really do business. In exchange for these remarkable privileges, corporations were originally held to a set of obligations to the societies in which they are embedded: notably to be transparent about their affairs and to pay tax.
The offshore system has undermined all this. The privileges have been preserved and enhanced, but the obligations have withered. Tax must now be brought squarely into corporate responsibility debates. Corporate managers are taught to think that they are accountable only to shareholders. From this perspective, escaping tax seems to be their duty. But we have forgotten the fundamental truth that corporations get their license to operate, and the tools and confidence to do so effectively, from society. Seen this way, tax is not a cost to shareholders, to be minimized, but a distribution to the stakeholders in the enterprise: a return on the investment societies and their governments make in infrastructure, education, law and order, and the other basic prerequisites for all corporate activity. The shareholders must get their due, but the societies they depend on must too. When we start to make corporations feel they are accountable not only to shareholders but to societies too, a whole new arena will have been created in which the offshore system can be questioned and challenged.
We can also reevaluate corruption. I have already indicated how predominant corruption rankings of countries rate many of the world’s top tax havens—the repositories of trillions of dollars of corrupt, stolen loot—as the world’s “cleanest” jurisdictions, and how a new Financial Secrecy Index, which I mentioned in chapter 6, has started the process of setting the record straight.
But we can move beyond rearranging the geography of corruption and reassess what corruption is. At heart, corruption involves insiders abusing the common good, in secrecy and with impunity, undermining the rules and systems that promote the public interest, and undermining our faith in those rules and systems. In the process it worsens poverty and inequality and entrenches vested interests and unaccountable power.
Bribery does all these things. But many of the services tax havens provide also do these things. This close analogy between bribe-paying and the business of secret offshore escape is no coincidence: We are talking about similar underlying processes. Some people have praised bribery as a way of getting around bureaucratic obstacles: Without that bribe, that company won’t get its container through the port. They are wrong, of course: Bribery may benefit the bribe-payer, but it damages the system as a whole. Similarly, the defenders of secrecy jurisdictions argue that their services help private actors get around “inefficiencies” in mainstream economies, smoothing the way for business to proceed. And they do. But what are those “inefficiencies”? They are, most importantly, tax, financial regulations, criminal laws, and transparency—all of which are there for good reason. To help someone get around the obstacle is to corrode the system and trust in the system. Bribery rots and corrupts governments, and tax havens rot and corrupt the global financial system.
Once we start seeing this we will no longer limit ourselves to pointing fingers at developing country kleptocrats and rogue officials but will begin to examine a much broader array of actors and their facilitating activities. And