Treasure Islands - Nicholas Shaxson [6]
The offshore system is also about a more generalized subversion of democracy by our increasingly unaccountable elites. “Taxes are for the little people,” the New York millionaire Leona Helmsley once famously said. She was right, though in the end she wasn’t big enough to escape prison herself. The media baron Rupert Murdoch is different. His News Corporation, which owns Fox News, MySpace, and any number of other media outlets around the globe, is a master of offshore gymnastics, using all legal means available. When The Economist magazine investigated in 1999, it reckoned that News Corporation paid a tax rate of just 6 percent—compared with 31 percent for its competitor Disney.8 Neil Chenoweth, an Australian reporter, probed News Corporation’s accounts and found that its profits, declared in Australian dollars, were A$364,364,000 in 1987, A$464,464,000 in 1988, A$496,496,000 in 1989, and A$282,282,000 in 1990.9 The obvious pattern in these numbers cannot be a coincidence. As John Lanchester wrote in the London Review of Books: “That little grace note in the sums is accountant-speak for ‘Fuck you.’ Faced with this level of financial wizardry, all the ordinary taxpayer can do is cry ‘Bravo l’artiste!’”
Much of what happens offshore is technically legal. A lot of it is plainly illegal and often criminal. And there is a vast gray area in between. All of it is profoundly dangerous, corrosive to democracy, and morally indefensible. Eva Joly explains what the Elf affair taught her about the distribution of power in the world. “I realized I was no longer confronted with a marginal thing but with a system,” she said. “I do not see this as a terrible, multifaceted criminality which is besieging our [onshore] fortresses. I see a respectable, established system of power that has accepted grand corruption as a natural part of its daily business.”10
From this strange Franco-African tale emerges one more important point, which will be a recurring theme of this book. In decades and centuries past, colonial systems helped rich countries preserve and boost their elites’ wealth and privileges at home. When the European powers left their colonies after the Second World War, they replaced formal controls over their ex-colonies with different arrangements to retain a measure of control behind the scenes. The Elf system was the main way that France achieved this. Britain did it with the modern offshore system, its financial replacement for empire. Citizens of the United States are paying the price.
“It has taken me a long time to understand,” explains Joly, “that the expansion in the use of these jurisdictions [tax havens] has a link to decolonization. It is a modern form of colonialism.”11
Long before my first visit to Libreville I had noticed how money was pouring out of Africa, often into tax havens, but the secrecy surrounding this financial trade made it impossible to trace the connections. Financial institutions, and occasionally their accountants and lawyers, would surface in particular stories, then slip back into an offshore murk of commercial confidentiality and professional discretion. Every time a scandal broke, these intermediaries’ crucial roles escaped serious scrutiny. Africa’s problems, the story went, had something to do with its nations’ rulers, or its cultures and societies, or the oil companies. It was their fault.
The providers of offshore secrecy were clearly a central part of all these dramas—but the racket was very hard to penetrate, and nobody seemed very interested in trying. It was only in 2005 that the threads properly started to come together for me. I was sitting with David Spencer, a New York attorney previously with Citicorp, talking about transparency in the public finances of West African oil-producing nations. Spencer was getting agitated about matters that