New Left Project sits down with author Nicholas Shaxson to talk tax havens — a mammoth system of quasi-legal money-laundering which has a far wider impact than we realize, with a large role in the global drug trade and financial crisis. As it turns out, the biggest “treasure islands” are not the Caymans or Monaco, but places such as the City of London and the U.S. state of Delaware:
There is no common definition of what a tax haven is. Everybody has a slightly different definition. Ultimately what a tax haven provides is escape from the rules and the laws of jurisdictions. Tax havens are also about ‘elsewhere’ – the laws of the Cayman Islands are not designed for the benefit of the 50,000-odd population of the Cayman Islands.
The traditional view is…palm-fringed tropical islands in the Caribbean, Monaco, Switzerland, Liechtenstein. Small states. But if you do the analysis of what a tax haven is and what they are selling, you will find that these small islands are generally sideshows to the big event. The biggest tax havens in the modern global economy are big OECD rich country economies – the United States, the United Kingdom, Switzerland.
The pervasiveness of this stereotype has been one of the great reasons why the offshore system has been invisible. People have always thought of tax havens as sideshows to the main event, whereas in fact they are central to the global economy.
The drug trade makes heavy use of the offshore system. The money now involved is so large that you can’t transport it in suitcases anymore. A suitcase can only hold around $1-2 million, and we are now talking about tens and hundreds of millions of dollars. In terms of the overall scale of what is happening offshore there are various different estimates.