Treasure Islands - Nicholas Shaxson [5]
Gabon is on no list of tax havens anywhere. But the Elf system that it hosted was part of, and a metaphor for, the offshore world. To understand this, it is necessary to explain some fundamental truths about what a tax haven or offshore jurisdiction is.
Tax havens provide escape routes from rules and laws elsewhere. These two words, “escape” and “elsewhere,” will crop up repeatedly in this book. The zero tax rates offered in the Cayman Islands, for example, are not designed for Caymanians but are set up to attract the business of North and South Americans, Europeans, Asians, Middle Easterners, and Africans alike.
In truth, the term tax haven is a bit of a misnomer because these places offer an escape not just from taxes but from many other rules and regulations too. If a person or entity wants to do something but is forbidden by law from doing it at home, it escapes to somewhere else to do it. (To be more precise, it isn’t usually the entity but its money that escapes.) The common feature of tax havens is that they offer secrecy. Once the escape has been effected, the escapee is very hard to find. The users of tax havens might be escaping any number of different laws or regulations: taxes, criminal laws, insider trading rules, inheritance rules, environmental laws, or financial regulation. If there is a law to stop or regulate it, there will probably be places that offer escape routes from that law. A simple example of an offshore escape is when a U.S. citizen, say, parks $10 million of drug money in a bank account in Panama. It will be exceedingly difficult for the U.S. authorities to find that money, let alone tax it.
The Elf system allowed bribes to be paid and other nefarious acts to be committed elsewhere—without the paper trails touching French soil. Offshore. The system did not exactly exist anywhere: It flourished in the gaps between jurisdictions. Elsewhere became nowhere.
The Elf affair illustrates another fundamental offshore truth. The escape routes from the rules and laws of society are provided almost exclusively for the benefit of wealthy and powerful insiders—leaving the rest of us to pick up the bill. The Elf system, a gargantuan octopus of corruption, affected ordinary people in both Africa and France in the most profound, if mostly invisible, ways. Ordinary African citizens saw their nations’ oil money being siphoned off to the rich world through unfair oil contracts and general corruption, while French protection made Gabon’s leaders invulnerable and hence unaccountable to their citizens—at the same time that the Elf system made France’s elites unaccountable to that nation’s citizens too.
These very same principles apply to the offshore system more generally. Because of tax havens, we have ended up with one set of rules for the rich and powerful and another set of rules and laws for the rest of us—and this applies to citizens of rich and poor countries alike. Just like the Elf system, offshore is a project of elites against their, and our, societies. It is not so much about crime or taxes, important though they are. This is a story about how political power is distributed in the world today.
It is essential to understand from the outset that the offshore system is ultimately not about celebrity tax exiles and mobsters—though they are regular