The United States
Long concerned with stemming the flow of American money overseas, the US has established itself as one of the most important tax havens. Its huge financial industry, combined with a zero-per-cent tax on foreign capital, is a magnet for dirty money. Lax laws in states like Delaware, Wyoming and Nevada make it easy to set up anonymous shell companies.
In 2013, Guatemala lost more than $2.5 billion to illicit financial outflows, about a $1 billion more than total public expenditure on education.
The home of notorious law firm Mossack Fonseca, Panama continues to resist international pressure to reform on secrecy. It has about 350,000 anonymous companies currently registered, and foreign firms can bring unlimited money across its borders without paying tax. An attempted clean-up in the wake of the Panama Papers scandal is in trouble after Nobel economist Joseph Stiglitz quit a Panamanian government panel in frustration at the lack of transparency.
Famous for the ‘double Irish’, an aggressive form of transfer pricing used to cut effective corporate tax rates to single digits, Ireland is a favourite among US tech giants like Apple, Facebook and Google. The recent dust-up with the EU over Apple’s low tax bill could mean choppy waters ahead for corporate tax avoiders.
British Virgin Islands
With 16 registered companies for every citizen, this tiny overseas territory is one of the easiest spots in the world to incorporate an anonymous shell company. Famous for its lax, no-questions-asked incorporation laws, the BVI make it easy for true beneficiaries to hide behind dummy nominees.
The Cayman Islands
The Cayman Islands are the sixth-biggest banking centre in the world, with assets worth over $1.4 trillion. Home to over 11,000 investment funds, including nearly half of the world’s hedge funds, the Caymans are thought to hold more US investments than the entire Chinese economy. Secrecy laws are so tight that in certain cases, even asking for banking information can land you in jail.
Despite pressure to reform, Switzerland is still a stronghold of financial secrecy, and has become a favourite destination for corrupt money from the developing world. Experts estimate that $2.3 trillion, roughly a third of all offshore wealth, is held by secretive Swiss private banks.
After Switzerland, Luxembourg is the biggest tax haven in Europe. Loose financial regulation and low corporate tax make it especially popular with transnationals like PepsiCo and Walmart. Low capital gains tax and no tax on dividends means that Luxembourg is the European centre for investment funds, managing a whopping $2.5 trillion in assets.
In London, tax evasion contributes to sky-rocketing housing prices as wealthy tax avoiders use real-estate to stash their cash. A hot market and low property taxes make London an ideal spot to park illicit money; the average home price is now 14 times the average income.
The City of London
Sitting at the centre of its network of crown dependencies and overseas territories, The City is officially mandated to promote the interests of Big Finance around the globe. It uses its special legal privileges to lobby tirelessly to ensure the ‘financial freedom’ that keeps the offshore world buzzing.
Uganda’s fledgling oil industry was rocked by a tax scandal in 2010 when British-owned Heritage Oil and Gas tried to redomicile from the Bahamas to Mauritius in order to avoid paying $434 million on the sale of a Ugandan oil field. Part of the sum, which represents about a fifth of Uganda’s total annual tax revenue, was eventually handed over after a lengthy court battle.
In mineral-rich Zambia, mining companies use transfer-pricing schemes to pull the wool over the eyes of tax authorities. The country loses $2-3 billion annually to corporate tax avoidance, roughly 10-15 per cent of GDP. With 74 per cent of the population surviving on less than $1.25 per day, that money would nearly double government expenditure on beleaguered schools and healthcare. Instead, it goes to line the pockets of the shareholders of Glencore and Vedanta, among others.
About $200 billion, more than half of Russia’s total financial wealth, is hidden offshore, resulting in annual revenue loss of a $1 billion. Tax evasion is particularly popular among the country’s political elite – friends and relatives of top officials, including Vladimir Putin, are enthusiastic participants in the offshore economy.
One of the biggest markets for offshore services, China has seen at least $1 trillion in illicit capital flee the country since 2001 as the country’s elites – including relatives of current president Xi Jinping – look to park their assets beyond the reach of tax authorities.
A burgeoning hub for Asian capital looking to escape the tax authorities, Hong Kong attracts dirty money through a combination of tight secrecy laws and a laissez-faire approach to financial regulation. It has become famous for ‘roundtripping’, wherein dirty money from mainland China is dressed up as foreign capital before being reinvested in China.