Treasure Islands - Nicholas Shaxson [96]
Mitchell has another presentation he likes to make: what he calls “The Moral Case for Tax Havens.”17 A video from October 2008 gives a flavor.
“The vast majority of the world’s population lives in nations where governments fail to provide the basic protections of civilized society,” says Mitchell (cue pictures of Kim Jong-Il, Robert Mugabe, and Vladimir Putin, looking sinister). “Tax havens protect these people from venal and incompetent governments by providing a secure place to hide their assets.
“One reason why Switzerland has such an admirable human rights policy of protecting financial privacy is that they strengthened their laws in the 1930s to help protect German Jews wanting to guard their assets from the Nazis.” (Cue grainy pictures of Hitler saluting from a staff car and a Gestapo officer rounding up frightened women.) “And what about the Argentine family,” he continues, “and the risks that their life savings are wiped out by devaluation?” Put it offshore, he says, and the money is safe.
Again, his arguments are persuasive—right up to the point where you stop to think about them.
First, the story about the origins of Swiss bank secrecy is no more than an appealing fiction. The argument about it being set up to protect Jewish money first appeared in the November 1966 Bulletin of today’s Credit Suisse. It wasn’t true. The reason bank secrecy was strengthened in 1934 was a scandal two years earlier when the Basler Handelsbank was caught in flagrante facilitating tax evasion by members of French high society, among them two bishops, several generals, and the owners of Le Figaro and Le Matin newspapers. Before that, there was professional secrecy (such as exists between doctors and their patients), and violation of this secrecy was a civil offense, not a criminal one as it is today.18 The law had nothing to do with protecting Jewish secrets.
Next, if a country is misruled, why should it only be the wealthy elites who get to protect their money by going offshore? If a country has unjust laws, then providing an offshore escape route for its wealthiest and most powerful citizens is the best way to take the pressure off the only constituency with real influence for reform. Keep their money bottled up at home, and pressure for change would come fast. Even then, there is no need for offshore secrecy to protect your money. If I am a Tanzanian with a million dollars in London earning 5 percent, and I ought to pay tax on that income at 40 percent, then I owe my government twenty thousand dollars in taxes for that year. I should pay that. Britain could tell my government all about my money, but that would give Tanzania no power under any international agreement to “confiscate” my million dollars. An Argentine family can protect its money from hyperinflation by shifting it to Miami—but secrecy plays no part in this protection. Put it in a normal bank account, exchange the information on the income, and pay tax on it. The principal remains quite safe.
On the question of people needing to protect their cash from tyrants, Mitchell might like to answer this. Who uses secrecy jurisdictions to protect their money and bolster their positions? The human rights activist, screaming in the torturers’ dungeons? The brave investigative journalist? The street protester? Or the brutal, corrupt, kleptocratic tyrant oppressing them all? We all instinctively know the answer.
Ah, but, Mitchell then retorts. “Your personal data may be sold to kidnappers who then grab one of your kids.” Transparency threatens homosexuals in Saudi Arabia and Jews in France “victimized by corrupt and/or despotic governments. Without the ability to protect their assets in so-called tax havens, these people would be at even greater danger.” The answer, he says, is to “place your money in a bank in Miami, since America is a tax haven.”19
This one carries a shading of truth—but no more. Kidnappers don’t need tax data to know that someone has money. And the very wealthy have bodyguards and are relatively rarely kidnapped: The lower and middle classes are usually