FacebookTwitter

Join the Coalition

Read Our Newsletter

5th UNCAC COSP 2013 - Photo by Luke Redmond

5th UNCAC COSP 2013 Representatives from 167 States Parties to the UNCAC will convene in Panama City from 25-29 November 2013...

About the Coalition The UNCAC Coalition is a global network of over 350 civil society organisations (CSOs) in over 100 countries...

Message from the Chair At the adoption of the UNCAC in 2003, the UN General Assembly designated 9 December as International Anti-corruption Day.

About the Coalition

5th UNCAC COSP 2013 Representatives from 167 States Parties to the UNCAC will convene in Panama City from 25-29 November 2013...

About the Coalition The UNCAC Coalition is a global network of over 350 civil society organisations (CSOs) in over 100 countries...

Message from the Chair At the adoption of the UNCAC in 2003, the UN General Assembly designated 9 December as International Anti-corruption Day.

Message from the Chair

5th UNCAC COSP 2013 Representatives from 167 States Parties to the UNCAC will convene in Panama City from 25-29 November 2013...

About the Coalition The UNCAC Coalition is a global network of over 350 civil society organisations (CSOs) in over 100 countries...

Message from the Chair At the adoption of the UNCAC in 2003, the UN General Assembly designated 9 December as International Anti-corruption Day.

Tax Havens – Silently Sabotaging the UNCAC and the Stability of Societies

Tax havens have become the most destructive financial force in history, quietly robbing vast sums from municipalities, small businesses and ordinary taxpayers. US Senator Carl Levin says that tax havens are “engaging in economic warfare against the United States and honest, hard-working Americans.” But it is not just Americans who are victimized by tax havens; it is 99% of citizens in most countries around the world.

This economic warfare strikes at the heart of the United Nations Convention against Corruption (UNCAC). The bedrock purpose of the UNCAC is “to promote and strengthen measures to prevent and combat corruption” (Art. 1(a)), and the fundamental concern that has prompted 165 countries and organizations to ratify the UNCAC is “the seriousness of problems and threats posed by corruption to the stability and security of societies.” (Preamble). Yet Tax Havens grow stronger every year, all while serving as the chief ally for corrupt officials, drug lords and tax evaders hiding their loot from law enforcement.

For decades, law enforcement officers have pleaded for legislation against tax havens, but the havens and their wealthy beneficiaries have fought them off. Last Spring, Robert Morgenthau, the legendary former Manhattan District Attorney, complained in the New York Times that, “secrecy laws in these tax havens are at the root of serious crimes: fraud, money laundering and international terrorism. Follow the trail of nearly any major financial scandal and you will enter one or more of these notorious jurisdictions.” Similar findings were made by the UNODC in its 1998 report, "Financial Havens, Banking Secrecy and Money-Laundering."

Source: iStockphoto

Tax Havens abetted the theft of $5 billion from Nigeria by Abacha; the swindling of billions from retirees by Ponzi scammers Bernie Madoff and Robert Stanford; massive bankruptcies of companies like Enron and Parmalat; and the Bank of Credit and Commerce International (BCCI) scandal with its connections to the Medellin Cartel and the notorious assassin Abu Nidal.

The amount stashed in offshore accounts is staggering, between $5 trillion (Internal Revenue Service webpage) to $32 trillion (Tax Justice Network). In comparison, the deposits of all the banks in the United States total $10 trillion. The Cayman Islands alone (population 55,000) has $1.9 trillion on deposit, three times as much as all the banks in Manhattan.

Why has all this money landed offshore? One answer can be found in Switzerland. After a 2009 tax fraud settlement between the U.S. and Swiss bank UBS, 33,000 U.S. citizens voluntarily disclosed their offshore accounts and paid $5 billion to the IRS.

A second answer is “transfer pricing” and “false invoicing.” Multinationals adjust their books to shift profits offshore where taxes are low, and count costs onshore where they become deductions against tax. Last Spring, the US Securities and Exchange Commission asked Pfizer, Inc., the world's largest pharmaceutical company, how it could reconcile an overseas earnings figure of $15 billion on revenues of $26.9 billion with a loss of $2.2 billion in the U.S. on revenues of $40.5 billion. Pfizer replied that further information about its earnings would not add value for investors. And that was it; the SEC had no further comments.

No wonder small businesses are being crushed and cannot produce the new jobs the world needs. When Wall Street arranges for big corporations to avoid taxes by registering in the Cayman Islands, who picks up the deficiency to maintain roads and bridges, pay for police and fire protection, and educate our children? The answer is the main street businesses and “99 percenters” who don’t have tax haven accounts. If their contributions are insufficient, the community goes without.

American revenues lost to tax havens are estimated at $100 billion, a gigantic transfer of wealth from ordinary taxpayers to rich people and a nifty competitive advantage for big corporations. Along with the growth of Tax Havens over the last 50 years, income inequality has grown dramatically, reducing social cohesion, increasing social unrest, and thereby weakening society as a whole.

Thirty years ago, Mexico's President José Lopez Portillo railed against “a group of Mexicans… led and advised and supported by the private banks that have taken more money out of the country than the empires that exploited us since the beginning of time.” Now capital flight threatens the entire global economy. Last year, former Greek Prime Minister George Papandreou declared that his country might have avoided a bailout if it had not been robbed of funds funneled into tax havens.

There are promising signs that pressure from the press may change the situation. For example, growing fury in the UK over miniscule tax payments made by corporate giants Starbucks, Google and Amazon has caused the Chancellor of the Exchequer to promise to use Britain's imminent chairmanship of the G8 to wage war on tax havens. Unfortunately, the US and the UK are two of the biggest tax havens on the planet, and the Chancellor will need lots of help to succeed.

About Jack D. Smith

Jack D. Smith teaches “International Money Laundering, Corruption and Terrorism” at the George Washington University Law School and served as the chief of litigation for the US Federal Deposit Insurance Corporation, 1991-2006.

Share and Enjoy

Submit to DeliciousSubmit to DiggSubmit to FacebookSubmit to Google BookmarksSubmit to StumbleuponSubmit to TechnoratiSubmit to TwitterSubmit to LinkedIn

Recent Blog Articles

Prev Next

Progressing access to information: global platforms available to civil society organizations

08 December 2014 Maureen Kariuki

8 December 2014. Access to Information remains a key priority for civil society working towards the realisation of open and participatory governance, and while progress may be slow and in many... Read more

Cross-border bribery in the spotlight

04 December 2014 Adam Foldes

4 December 2014. If someone is interested in how much effort the most developed countries of the world put into investigating and prosecuting companies that bribe abroad, then during the last... Read more

Money laundering and asset recovery: the case of Nigeria

27 November 2014 Auwal Ibrahim Musa

27 November 2014. In Nigeria, it is disheartening that despite efforts to tackle money laundering and other financial crimes alarming examples of such crimes are abundant. Statistics released by Nigerian anti-corruption... Read more

Corruption and transnational organised crime in Latin America and the Caribbean

24 November 2014 Luciana Torchiaro

24 November 2014. The side-event “Organized Crime in Latin America” at the seventh session of the Conference of the Parties to the United Nations Convention against Transnational Organised Crime (CTOC/COP7) provided... Read more

Foreign bribery proceedings and asset recovery under UNCAC: Legal analysis, challenges and prospects

09 September 2014 Gillian Dell

UNCAC Working Group on Asset Recovery CSO Side Event 11 September 2014, 18:00 - 19:00, Room C5, 7th Floor Objective: Following up on the asset recovery resolution that was adopted during CoSP 5... Read more

UNCAC Access to Information and Technical Assistance

08 September 2014 Gillian Dell

Working Group on Prevention CSO Side Event Tuesday, 9 September 2014, 13:30 - 14:30, Room C5 Objective: To highlight the importance of access to information in fighting corruption and sources of technical assistance ... Read more

Is there an obligation under the UNCAC to share foreign bribery settlement monies with host countries?

05 September 2014 MAUD PERDRIEL-VAISSIERE

Earlier this year a StAR report revealed that in the majority of foreign bribery cases settled abroad, host countries are left out of the bargain: only 3% of the payments... Read more

Landmark French rulings dismiss Teodorin Nguema Obiang defamation cases

23 July 2014 MAUD PERDRIEL-VAISSIERE

For those of you who have been kept busy with the World Cup in Brazil, you may have missed another important match! The match in question took place in a... Read more

Coalition CSOs promote anti-corruption enforcement

08 July 2014 Gillian Dell

Enforcement agencies frequently face constraints in their efforts to bring the corrupt to justice. This means widespread impunity for corruption offences. As shown by UNCAC reviews and other studies, a key... Read more

Whistleblower Protection - Still a Long Way to Go

07 July 2014 Indira Carr

Whistleblower Protection - Still a Long Way to Go

Credit: flickr / stevendepolo Corruption, like drug trafficking and human trafficking, is an activity conducted in the shadows. Investigations to a large extent are dependent on third parties (whistleblowers) who speak... Read more