What are the politics of secrecy?

Many jurisdictions listed in the Financial Secrecy Index are commonly described as tax havens, and tax havens are often perceived to be small palm-fringed islands filled with sleazy law firms, motor yachts and numerous shell companies. Sunny places for shady people.  

The Financial Secrecy Index reveals a much richer and more complex political story. The world’s biggest players in the supply of financial secrecy are mostly not the tiny, isolated islands of the popular imagination. Instead they are some of the richest nations that are mostly either members of the Organisation for Economic Co-operation and Development (OECD) or ‘satellites’ of OECD countries, particularly Britain.

We are also particularly concerned about the United States, as well as several countries on the European continent: Luxembourg, Switzerland and the Netherlands are also in our top 10. OECD member countries and their various dependencies account for well over 80 per cent of the global market in offshore financial services.

This has important implications. The G20 group of countries have given the Paris-based OECD the responsibility for tackling financial secrecy and secrecy jurisdictions (or tax havens). The OECD has played a pivotal role not just in terms of secrecy, but also in setting the global terms of corporate tax, tax treaties, and more.

Misunderstanding geography

Quite often, when one country tries to crack down on another country's predatory activities this is portrayed as a battle between two countries. For example, when the United States began arresting Swiss bankers in 2008, this framing of the problem was very helpful for Swiss bankers, who were able to rally most of the nation behind them by portraying an image of plucky Alpine defenders facing the big American bully. But this geographical view is misleading. It is important to change the frame of reference. This was most importantly not a battle about one country versus another, but about the politics of wealth. This particular fight is better understood as a struggle between wealthy US tax evaders and criminals and their financial enablers (in Switzerland and elsewhere) against ordinary US taxpayers and the rule of law. It is essentially the same story in all other countries.

The politics of secrecy is thus a fascinating and complex tale, then, about power struggles between rich nations and poor nations, and between wealthy, law-escaping elite and ordinary folk inside countries, and often a combination of the two.