Financial secrecy rocks democracies, Financial Secrecy Index finds

Risks to democracies magnify EU’s “Jekyll-and-Hyde”-like secrecy

Countries supplying the most financial secrecy are shifting towards autocracy, the Tax Justice Network’s latest update to its ranking of the world’s biggest enablers of dark and dirty money reveals.¹

Countries topping the financial secrecy ranking have worsened their scores with democracy-monitoring watchdogs, including the US which ranks first again and was downgraded this year by the Polity Project from a democracy to an anocracy.²

The developments among the top-ranking countries demonstrate the long-known risks of financial secrecy to democracies, and make more alarming the Tax Justice Network’s exposing of EU countries’ “Jekyll-and-Hyde”-like enabling of financial secrecy.

A deeper evaluation of the tax transparency and cooperation instruments that EU countries adopted and scored favourably for on the ranking in the past reveals that most EU countries are deliberately operating less transparently and less cooperatively towards lower income countries, at times entirely negating the international instruments they ratified.

The Tax Justice Network’s ranking reveals that over half (56%) of EU countries are using an overlooked backdoor in international law to shield non-EU countries’ tax evaders from accountability, negating their legal commitments to help collect unpaid taxes from other countries’ tax evaders hiding finances within their borders, and making it easier than previously believed for dark and dirty money to circulate and circumvent the rule of law.³

EU countries were found to be not exercising the backdoor towards each other and are regularly assisting each other deal with one another’s tax evaders.

EU countries’ “Jekyll-and-Hyde”-like enabling of secrecy makes them financial transparency leaders on paper and some of the world’s biggest suppliers of financial secrecy in practice, potentially carrying risks to democracy in and outside the EU.

EU countries, which were reported by the V-Dem⁴ this year to have regressed to 1983 democracy levels in western Europe and to have had a steep democracy decline in eastern Europe, increased their share of the global supply of financial secrecy more than any other region.

EU countries now account for over a fifth (21%) of the world’s supply of financial secrecy, making particularly harmful their withholding of tax cooperation and transparency to lower income countries, who are more reliant on and in need of tax revenue and so are more vulnerable to tax evasion.

The findings on the EU’s “Jekyll-and-Hyde”-like secrecy puts in an unforgiving light the bloc’s resistance to work currently underway at the UN to reform international tax cooperation and transparency.

Moran Harari, deputy director of policy at the Tax Justice Network, said:

“Most countries are currently working on reforming international tax rules at the UN, but EU countries keep trying to stop this work saying if it ain’t broke don’t fix it. Our findings show the rules are indeed broken, and EU countries played a big part in breaking them. There’s a clear pattern of EU countries choosing to crackdown on tax evaders at home and shield them abroad. Any EU talk about not fixing tax rules at the UN should be seen through this context.”

The long-running Financial Secrecy Index ranks countries on how complicit they are in helping individuals and legal vehicles to hide their finances from the rule of law. It evaluates how much wiggle room for financial secrecy a country’s laws and regulations provide, and monitors how much in offshore financial services the country provides to other countries’ residents. This two-factor approach allows the index to determine how big of a role a country plays globally in enabling financial secrecy in practice and not just in theory, unlike most tax haven “blacklists”⁵.

Financial secrecy and autocratisation moving in tandem

Comparing the Tax Justice Network’s Financial Secrecy Index with the V-Dem’s Liberal Democracy Index⁶ shows that countries supplying the most financial secrecy are shifting toward autocracy.

Of the top 10 biggest suppliers of financial secrecy, 8 saw worsening autocracy from 2018 to 2024 on the Liberal Democracy Index. Of the other two, Singapore – classified by V-Dem an “electoral autocracy” – saw a marginal improvement yet continued to score below countries’ average democracy score.

The other is the US, which had seen a small improvement from the first Trump administration to the Biden administration, but is now seeing a dramatic collapse in governance that is not captured by the 2024 edition of the Liberal Democracy Index. The Polity Project, which updated its evaluation of the US after Trump took office again, downgraded the US from a democracy to an anocracy.⁷

South Korea, which saw a failed political coup in 2024, entered the Financial Secrecy Index’s top 10 for the first time, rising eight positions to become the world’s 8th biggest supplier of financial secrecy. South Korea was downgraded from a “liberal democracy” to an “electoral democracy” in V-Dem’s 2024 report.

Alex Cobham, chief executive at the Tax Justice Network, said:

“Democracy as we know it today started with a fight for just taxes: no taxation without representation. We’ve let the superrich and the biggest corporations operate beyond the reach of tax for so long that they’ve now accumulated enough extreme wealth to threaten democracy itself.

“We see this clearest today in the US, which again ranks first on the Financial Secrecy Index. US democracy is now captured by the billionaires, tax evaders and money launderers that the US shielded from the rule of law for so long. This couldn’t be more clearly illustrated than by the deliberate dismantling of the IRS’ capacity to enforce tax compliance from the wealthiest and largest companies in the US, even as the administration justifies cuts to crucial public services on the spurious grounds of addressing the fiscal deficit they’ve created.

“The best way to defend our democracies is with more democracy, and that is exactly what the UN tax convention is about. It means governments can’t decide global tax rules behind closed doors anymore where only lobbyists for the superrich are heard. It means governments will be legally obligated to make global tax rules work for people and planet too. This is exactly why the billionaires and multinational corporations that sat first row at Trump’s inauguration are so afraid of the UN tax convention.

“In these dark days for multilateralism and democracy, the UN negotiations can be a shining light. International tax cooperation has the potential to empower our governments to deliver progressive taxation for better societies, and to demonstrate how we can all be better off by working together. It’s time for the EU and the UK to make their choice clear: will they subjugate their tax sovereignty to the bullying of the US, or will they work together with the G77 countries to build a common front at the UN?”

US sees less and murkier finance; Spain, UK see more and cleaner

The US ranked first on the Financial Secrecy Index again, keeping it the world’s biggest supplier of the type of financial secrecy services used by the superrich as well as by money launderers, tax cheaters, sanctions evaders and corrupt politicians to circumvent the rule of law.

Under a new Trump administration, the US launched an unprecedented attack this year on the tax sovereignty of all countries when it demanded countries surrender their right to collect tax within their borders when it comes to US corporations operating within their borders.⁸ The US has threatened to follow up this demand with economic repercussions.

The US’s supplying of financial secrecy is also an attack on countries’ tax sovereignty, costing countries $37.5 billion a year in lost taxes from wealthy individuals alone.⁹

The Financial Secrecy Index’s latest update shows that while the US remained at the top of the ranking, it is now capturing a slightly smaller and murkier share of international finance. The US now accounts for 25%, down from 26%, of the global supply of offshore financial services, and has increased its Secrecy Score from 67.4 to 68.6.

The same trend of less-and-murkier international finance also played out among the countries that filled up the rest of the top five spots on the index, all of which held on to their positions: Switzerland (2nd), Hong Kong (4th) and Luxembourg (5th). The exception was Singapore (3rd) which increased both its supply of offshore financial services and its Secrecy Score.

In contrast, Spain, Denmark and the UK captured a dramatically larger and cleaner share of international finance than before. Spain’s share of the global supply of offshore financial services grew by a third from 0.7% to 0.9% while the country improved its Secrecy Score from 57 to 56. Denmark’s share grew by almost half (46%) from 0.17% to 0.25% while improving its Secrecy Score from 49 to 39. The UK’s share grew by a tenth (11%) from 14% to about 16% – the biggest share after the US – while improving its Secrecy Score from 47 to 45.

Spain moved 5 places down the ranking to 34th, Denmark moved 26 places down to 106th, and the UK moved 7 places down to 20th. The countries’ growing, cleaner share of international finance confirms that racing to the bottom on standards is no guarantee of growth – indeed, the opposite can be true.

The EU’s “Jekyll-and-Hyde” enabling of financial secrecy

EU countries fared poorly on the index against three core areas of tax transparency and tax cooperation.

Across all three areas, EU countries were found to be either negating their public commitments in ways that had not been noticed before, or simultaneously operating two-tiers of transparency or cooperation: sharing information and assistance with EU or higher income countries, but withholding it from lower income countries. More information on this is provided in note 10 below.

The two-tiers of transparency and cooperation for higher and lower income countries demonstrate an apparently deliberate choice to selectively exercise financial transparency to the benefit of higher income countries and to exercise financial secrecy to the detriment of lower income countries.

Decision time: secrecy and autocracy with Trump, or democracy and transparency with the UN

The latest update to the Financial Secrecy Index adds more urgency to the choice facing some richer countries and particularly EU countries, the Tax Justice Network is warning: stick with the existing global tax system which fails to stop financial secrecy and which the Trump administration is weakening further at risk to your democracy – or protect your democracy by committing to the ambitious process underway at the UN to reform the global tax system, which can end financial secrecy and which most countries have already committed to.

The existing global tax system, for over 60 years, has been exclusively negotiated behind closed doors by a small circle of rich countries, including EU countries, where the US has exercised veto power and where corporate lobbyists have been given wide access, unlike civil society.

The existing global tax system costs countries nearly half a trillion dollars¹¹ a year in lost taxes to multinational corporations and wealthy individuals cheating on tax, and makes possible the financial secrecy that carries autocratisation risks.

After a decade of failed attempts by the small group of rich countries to reform the global tax system they had designed, the vast majority of countries at the UN agreed in 2023 that a new global tax system should be designed and managed through a transparent and democratic process at the UN that gives all countries a say, not just the richest. Negotiations are now underway on delivering this commitment, and are expected to culminate in a world-first UN tax convention in 2027.¹²

Only 9 countries remain opposed to the UN tax convention: the US (ranked 1st on the Financial Secrecy Index), South Korea (8th), Japan (10th), Canada (18th), the United Kingdom (20th), Israel (25th), Australia (29th), New Zealand (53rd) and Argentina (104th).

EU countries, acting as a bloc, shifted from an opposed position to abstention in 2024.

EU countries, and the handful of other countries still opposed to a UN tax convention, have argued that a UN tax convention would unnecessarily duplicate elements of the existing global tax system that rich countries built, in exclusion of the rest of the world. Supporters of the convention argue that this is precisely the point – not to duplicate, but to fix the existing, broken system.

Countries have already pre-agreed ambitious key terms, commitments and protocols ahead of the negotiations that the final UN tax convention must deliver. A number of these commitments would address the EU’s “Jekyll-and-Hyde”-like enabling of financial secrecy. These include top-level commitments on “effective mutual administrative assistance”, which EU countries are currently withholding by using a backdoor in international law, and “[a]ddressing tax-related illicit financial flows, tax avoidance, tax evasion and harmful tax practices”, which EU countries are tackling within the EU but shielding abroad.¹³

In contrast to the invitation extended to EU countries at the UN to cooperate on tax, EU countries are being targeted by the Trump administration for agreeing to global tax policies proposed by the Biden administration. On day one of his second term, Trump blew up the negotiation process used for the last 60 years by the small circle of rich countries to negotiate global tax rules.¹⁴

On the same day, Trump challenged the long-established right of countries to collect tax on profit made within their borders, threatening to turn global tax policy back to a pre-League of Nations standing – to a time when companies could only be taxed by the imperial power they came from, regardless of where they were making their money.¹⁵

Sergio Chaparro-Hernandez, international policy and advocacy lead at the Tax Justice Network, said:

“EU countries face a choice: tax sovereignty at the UN or tax subjugation under Trump. The UN tax convention in the works isn’t just about fair tax, it’s about protecting the foundation that democracies stand on: no taxation without representation.

“EU countries must ask themselves, are we a democracy if our tax laws are set by Trump? Does the will of our people rule over our territory, or do we let our economies be exploited by untaxable and ungovernable US companies?

“The UN tax convention was initially meant to fix rampant global tax abuse, but it’s now become our best shot at defending tax sovereignty and democracy in a world lurching back to autocracy. It’s no coincidence that it was African-led Global South countries, former European colonies, that kicked down the many doors to make the UN tax convention possible today.

“EU countries helped the Biden administration barricade most of these doors, but now find themselves in the US’s crosshairs. Trump has made clear that his idea of tax cooperation is holding countries at economic gunpoint. EU countries must defend their democracies and tax sovereignty, and support others to do the same, by backing the UN tax convention.”

-ENDS-

Go to: Financial Secrecy Index website

Notes to Editor

1. The latest update to the Financial Secrecy Index is available here.
2. The Polity Project updated the US’s “Polity Score” in 2025 to 0, pointing it on the border line between democracy and autocracy, and classifying it as an anocracy. The Polity Project states: “The USA is no longer considered a democracy and lies at the cusp of autocracy; it has experienced a Presidential Coup and an Adverse Regime Change event (8-point drop in its POLITY score).” The dataset covers all major, independent states in the global system over the period 1800-2018 (ie, states with a total population of 500,000 or more in the most recent year; currently 167 countries with Polity5 refinements completed for about half those countries).The Polity Project is unique in that it examines concomitant qualities of democratic and autocratic authority in governing institutions, rather than discreet and mutually exclusive forms of governance. This perspective envisions a spectrum of governing authority that spans from fully institutionalized autocracies through mixed, or incoherent, authority regimes (termed “anocracies”) to fully institutionalised democracies. With the support of the US’s Political Instability Task Force (PITF), the Polity IV Project was transformed into a living data collection effort, meaning that it constantly monitors regime changes in all major countries and provides annual assessments of regime authority characteristics, changes and data updates. The PITF terminated its support for Polity in early 2020. Since then, the Polity Project has been intermittently updated.
3. More than half of EU countries were found by the Financial Secrecy Index to be exercising reservations on the Convention on Mutual Administrative Assistance – an international tax instrument that allows countries to help each other collect taxes owed by confirmed tax evaders when one country’s tax evader hides their untaxed wealth in another country. The exercise of reservations allows EU countries to withhold help to other countries, specifically non-EU countries. A separate EU legal instrument makes such collection assistance compulsory between EU countries, revealing the EU countries’ double standard of tax cooperation. The reservations baked into the international instrument are an outcome of the fact that only a small circle of rich countries, including EU countries, were given a say on the instrument’s design and negotiation. The EU countries found to be exercising reservations on cooperating with the collection of tax debts are: Austria, Cyprus, Germany, Croatia, Ireland, Italy, Luxembourg, Latvia, Malta, Poland, Portugal, Slovenia and Slovakia.
4. The V-Dem provides a multidimensional and disaggregated dataset that reflects the complexity of the concept of democracy as a system of rule that goes beyond the simple presence of elections. The V-Dem Democracy Report 2025 is available here.
5. For more on the use of “blacklists” and comparison of the practice to the Financial Secrecy Index, see our article in the IFC Review. More information on the Financial Secrecy Index’s indicators and methodology will be available here once the latest update to the index goes live on 3 June 2025.
6. See note 4.
7. See note 2.
8. More information on Trumps challenge to countries’ tax sovereignty is available here. For an in-depth analysis of the consequences of the new Trump administration to international tax, see our briefing.
9. Tax loss figures are sourced from the Tax Justice Network’s State of Tax Justice 2024, which reports that countries altogether are losing US$492 billion in tax a year to multinational corporations and wealthy individuals using tax havens to underpay tax.
10. EU countries fared poorly on the index against three core areas of tax transparency and tax cooperation:
    • Cooperation on collecting tax owed by tax evaders
      More than half of EU countries were found by the Financial Secrecy Index to be exercising reservations on the Convention on Mutual Administrative Assistance – an international tax instrument that allows countries to help each other collect taxes owed by confirmed tax evaders when one country’s tax evader hides their untaxed wealth in another country. The exercise of reservations allows EU countries to withhold help to other countries, specifically non-EU countries. A separate EU legal instrument makes such assistance compulsory between EU countries, revealing the EU countries’ double standard of tax cooperation. The reservations baked into the international instrument are an outcome of the fact that only a small circle of rich countries, including EU countries, were given a say on the instrument’s design and negotiation.
    • Post-Panama Papers transparency on company owners
      About a fifth of EU countries have scrapped anti-secrecy safeguards since the last update to the Financial Secrecy Index that were put in place in response to the Panama Papers, leaving just about a quarter of EU countries now with the safeguards still in place. The u-turns follow on from the European Court of Justice’s controversial decision to bar public access to beneficial ownership registers. Public access to these registers introduced transparency on the true owners, made of flesh and blood, of companies and other legal vehicles, cutting through the secrecy tactics exposed by the Panama Papers that had shielded individuals from transparency and accountability. While EU countries are still confidentially collecting and sharing beneficial ownership information with each other, the rolling back on public access has created a transparency blackout for the rest of the world. Some EU countries are popular destinations for shell companies, making the ownership blackout extremely problematic for lower income countries’ efforts to prevent corruption and financial crimes.
    • Transparency on multinational corporation’s profit shifting
      All EU countries were found to be exercising two-tiers of transparency on multinational corporation’s profit shifting. The EU transposed the PCbCR directive in 2023 introducing a tax transparency measure – first proposed by the Tax Justice Network 20 years prior – that is designed to expose a multinational corporation whenever it shifts profits out of a country to underpay tax. However, while the directive requires multinational corporations to publicly come clean about the movements of their profits concerning EU countries (and a few countries listed on the EU list of “non-cooperative” jurisdictions), it permits them to stay secretive about the movements of their profits concerning other countries. Since most multinational corporations are headquartered in the EU, often deliberately in high-ranking places like Luxembourg (5th), the Netherlands (7th) and Ireland (14th) to underpay tax owed to other countries, the new directive keeps the rest of the world exposed to rampant global tax abuse. Countries lose an estimated US$74 billion in unpaid corporate tax a year to multinational corporations shifting profit into EU countries, according to the State of Tax Justice 2024 (See note 9).
11. See note 9.
12. An overview and analysis of negotiations currently underway on a UN tax convention is available here.
13. The “Terms of Reference” adopted in 2024 ahead of negotiations on a UN tax convention is available here. Additional information about the terms is available here.
14. See section 2 of Trump’s Presidential Memorandum signed on day one of his presidency here. See the Tax Justice Network’s reaction to the memorandum here. For an in-depth analysis of the consequences of the new Trump administration to international tax, see our briefing.
15. See note 14.
16. Rolling updates introduced to global ranking
    The Tax Justice Network has made changes to how the Financial Secrecy Index is published. Up until now, the index was updated once every two years. For each update, all the indicators on the index – against which countries’ laws and regulations are assessed – were updated simultaneously. As of 2025, the index will be updated on a rolling basis in batches. Each batch will include updates to a set of indicators, following the index’s new update cycle.The new approach allows the Financial Secrecy Index to capture regulatory change closer to when it occurs and to offer a more dynamic view of countries’ complicity in enabling global financial secrecy.Today’s update consists of updates to 5 of the index’s 20 indicators. Most of these indicators assess countries’ tax transparency and international cooperation. Today’s update also consists of several “supplementary updates” – ie, changes pertaining to indicators that are not part of the current update cycle, but were brought to the Tax Justice Network’s attention, verified by its researchers and updated on the index as part of the current batch ahead of cycle. Lastly, today’s update also includes new data on the scale of offshore financial services countries provide to non-residents – this metric is updated annually. A detailed log of all the changes is available on the Financial Secrecy Index website.