The 2015 Financial Secrecy Index in the global media

From The Economist print edition

Since its first publication in 2009, TJN’s Financial Secrecy Index has helped transform public understanding of the geography of tax havens. This has been helped by the huge international press coverage the index receives.  This week’s launch of the 2015 FSI results has been no exception, with literally hundreds of articles in the international and national presses, including the local presses of the smaller secrecy jurisdictions.

A decade ago, most people, if they thought about the issue at all, would have seen images of small islands in the sun – the infamous “sunny places for shady people”.  Now, partly thanks to phenomenal media coverage of the FSI, they understand that the truly important players are major global powers, including the United States, Germany, China (Hong Kong, Macau) Britain and its dependent territories, and, of course, Switzerland – the hardy perennial – which yet again tops the 2015 index.

The international press has tended to focus on what we have treated as the top global story: the failure of the US administration to cooperate with other countries.

The Economist sets the tone with its head-line, ‘The mega-haven: An index of financial secrecy highlights American hypocrisy’, commenting that “America, the country that has arm-twisted so many others to join the transparency revolution, is dragging its feet.”  The article also picks up on our suggestion that Europe should mimic FATCA by imposing a withholding tax (35 percent) on payments from Europe to American financial institutions, which would, says The Economist, “induce wry smiles in Zurich.”

Reuters, in an article headlined ‘Financial transparency poor in Switzerland, Hong Kong, U.S., study says’) also focusses on the US, picking up on our report that while most countries have improved on their secrecy scores, “the records in the United States and Germany worsened.”

The Guardian (‘US overtakes Caymans and Singapore as haven for assets of super-rich’) reports that the US “appears not to be cooperating with the creation of a common standard for information sharing between countries” and also notes that “like the US, Britain too remains a central player in the vast financial secrecy industry despite championing corporate transparency on the international stage”.

The Financial Times, in a broader article titled ‘Activists to protest over multinationals’ tax bills’ refers to our comment that the US “posed a threat to emerging transparency initiatives”, and also noted that “if the UK and its dependent territories had been treated as a single unit it would easily have topped the index, above Switzerland.”

In France, Le Monde (‘Tax fraud: the awards for the most secretive countries’) identifies the four major global menaces: Switzerland, the United Kingdom and its dependent territories, the United States and Hong Kong, but notes that “the (secrecy) score for most countries has improved . . . and real measures have been taken.”

Online magazine The World Weekly (‘Global powers top a new financial secrecy ranking’) also notes the predominance of powerful OECD countries at the head of the index, but interestingly picks up on how “Hong Kong and Singapore continued their recent rise and are now ranked second and fourth respectively, in part because tighter regulations in the West have displaced illicit wealth eastward.”

Writing in The International Tax Review (‘Global powers top new financial secrecy ranking’) Salman Shaheen notes how the FSI “upends stereotypes of tax havens” and enlarges on how financial secrecy not only harms public finances, but also carries “a host social, economic and political side-effects.”

Regionally and nationally, the 2015 FSI attracted strong coverage across the world.

In Asia, the Macau Daily Times (‘Financial System “exceptionally secretive”: 11th worst globally’) noted that “According to the index, the operations of the territory’s financial system are “exceptionally secretive,” with the MSAR marked as secretive in 70 percent of the 15 indicators measured.” Macau ranks 11th on the index, with a secrecy score of 70.

In its article (‘Something to hide? Hong Kong second only to Switzerland in financial secrecy ranking‘) the Hong Kong Free Press report notes that “Hong Kong’s “classic see-no-evil approach to financial regulation” and “reluctance to sign up to global transparency standards” makes it a premier choice for ultra-rich individuals and businesses looking to shield their assets behind a cloak of secrecy.”   The article also notes that “According to the TJN, this secrecy “creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more.””

The Times of India, in a lengthy article (‘Switzerland still top tax haven, US jumps to No.3’) notes that “Among the notable FDI investors in India, countries such as Mauritius, Switzerland and UAE have a secrecy score of more than 70”, adding that “Singapore and Germany, which also figure in the top 10 list . . . are also among the top 10 investor countries for India.”

The Australian Sydney Morning Herald (‘Australia a safe haven for illicit funds, US overtakes Cayman as tax shelter for rich’) picks up on TJN’s comments that despite its “innovative and highly proactive approach” to tackling illicit financial outflows, Australia’s “record of helping other countries combat tax evasion and money laundering is somewhat mixed”.

In Africa, Front Page Africa reports on Liberia’s weak secrecy score of 83, which earns it 33rd position on the global ranking (‘Liberia amongst top countries operating in financial secrecy’).  Reporting from Liberian capital, Monrovia, they note that “While the Government of Liberia continues to boast that the establishment of several anti-graft institutions including the General Auditing Commission, Liberia Anti-Corruption Commission, Public Procurement and Concession Commission amongst others is an indication that the country is exercising high level of transparency including openness in dealings, an international report has indicated that the country is amongst top countries in the world where financial secrecy is at it peak.”

As with previous years, the FSI attracts strong interest in the European press.

In Switzerland, the Neue Zürcher Zeitung laments in an article titled ‘Switzerland is in first place’ that “Under international pressure Switzerland is moving step by step towards tax transparency. Despite this, the financial centre comes in still at #1 in the FSI of TJN.”

Les Temps of Switzerland (‘Switzerland remains the laggard of financial secrecy, accoring to Tax Justice Network’) picks up on TJN’s concerns that while Switzerland has moved in the direction of sharing tax information automatically with richer countries, it “has omitted the majority of countries of Latin America, Africa and Asia.”  Le Temps also cites TJN’s John Christensen concerns that the UK, which has made strong claims about leading the way towards greater transparency, has yet to take action on trusts – “ces boites noires, grande spécialité du droit britannique” – and on requiring its dependent territories to create public registers of beneficial ownership.

The German press, still reeling from the launch of Markus Meinzer’s revelatory book about Tax Haven Germany, is coming to terms with Germany ranking in the top ten.  Der Spiegel sets the tone in its article (‘Financial Secrecy Index: activists shine light on the US’) notes that “the Federal Republic ranks eighth on the index . . . having become a ‘safe haven for the stolen wealth of dictators, tax evasion and hiding the assets of organised crime networks around the world.”  Germany, der Spiegel notes, is weak in enforcing anti money laundering measures and in exchanging tax data with countries outside the European Union, and has become a safe haven for assets secretly hidden behind “complex structures that extend across secrecy jurisdictions such as the Cayman Islands and Switzerland.”

In Britain, BBC Radio Jersey gleefully reported ‘UK ‘more of a tax haven’ than Channel Islands, report says’ without mentioning that the UK’s secrecy score remains far lower that either Guernsey’s or Jersey’s, or pointing out TJN’s comment that were the British dependent territories aggregated with the UK itself, Britain would rank highest on the ranking, well ahead of Switzerland.  Spear’s Wealth Management magazine picked up precisely on that point, noting “Britain would certainly be number one” if these territories were treated as a single entity, while also commenting that “warriors for tax justice have cause for cheer as a report shows that countries are opening up about how much money they are holding and who it belongs to.” (‘Good news for tax justice as the world becomes less secret.’)

In Luxembourg, which in 2013 we labelled the Death Star of European secrecy jurisdictions, the Luxemburger Wort crowed that “for once, the report by NGO Tax Justice Network doesn’t dump opprobrium on to Luxembourg” (‘Luxembourg no longer the Death Star of finance’), which presumably means it’s safe for us to go back there sometime soon.

Crossing the Atlantic, HuffPost ruefully reported that “The United States has become a top tax haven for foreign companies, despite the Obama administration’s efforts to crack down on U.S. firms stashing money overseas” (‘The U.S. Is Now A Top Global Tax Haven: We’re right behind Switzerland and Hong Kong! ‘Merica.’). Indie media Free Speech TV also reported on the US’s top tax haven role, linking the 2015 FSI launch to the US release of Harold Crooks’ award-winning documentary ‘The Price We Pay’.  Watch the interview with Crooks and TJN’s Jim Henry here. (‘As US Becomes a Top Tax Haven, How Secret Offshore Economy Robs the Nations Where Wealth is Made’)

The Jersey Evening Post (sorry no live link available on their site) reported (‘Jersey 16^th on financial secrecy list’) that Jersey has improved from ninth position in the 2013 ranking, but then, predictably, quotes the Chief Minister’s Office that the FSI is not considered credible by the “international community”.  Well the “international community” has had plenty of time since we first published the index in 2009 to raise its concerns, and we’re still waiting for anything more than vague dislike. Another instance, perhaps, of small island finance centres living in tiny self-referencing bubbles.

In Cayman, the Cayman Compass reports that “Global financial transparency is improving but the U.S. is threatening the progress . . “, noting further down its article that “Cayman’s secrecy score has improved markedly since the 2013 index . . due to its endorsement of the OECD’s common reporting standard . .” (‘US ahead of Cayman in ‘secrecy’ index’)

The Bermuda Royal Gazette opens its article saying that “Bermuda is outranked on a tax secrecy list by Britain, the US and the Cayman Islands”, but notes TJN’s criticism of “Britain’s failure to force its Overseas Territories, including Bermuda” to create a public register of company ownership available for free online searches (‘UK, US rank as more secretive than Bermuda’)

Many news outlets in many other countries have reported on the FSI launch, but the above give a flavour of the main stories: first, there has been an improvement in the direction of greater transparency in many secrecy jurisdictions, though some like Germany and the US stick out as laggards.  Second, secrecy jurisdictions in the Middle East and Far East Asia are on the rise, partly because dirty business is being dislodged by the emerging standards in Europe, but also because of the rise of the mega-wealthy class in those regions.  And, third, Switzerland, despite some improvements since 2013, well deserves its number one ranking for the third time in succession.