January 17, 2011 1:39 am

Treasure Islands

 

Treasure Islands: Tax Havens and the Men who Stole the World, by Nicholas Shaxson, Bodley Head, RRP £14.99 316 pages

Writing a book on the dodgy nature of tax havens is, in the current climate, a safe bet. What is unusual about Nicholas Shaxson’s Treasure Islands, however, is that it lays the blame for tax havens squarely at the doors of the UK and US governments, mocking their recent attempts to crack down on offshore jurisdictions.

Treasure Islands traces the roots of the modern offshore system, from Britain’s introduction of a tax on overseas earnings in 1914 to the role of tax havens in the recent credit crunch, stating: “Anyone who wants to understand the modern financial machine must understand offshore.”

But this is not a book that argues both sides of the topic. Shaxson is very clear about his opinion of tax havens: “Offshore is a project of wealthy and powerful elites to help them take the benefits from society without paying for them.”

He is scathing of supposed attempts by wealthy OECD nations to crack down on tax havens, ridiculing French president Nicolas Sarkozy’s recent assertion that “tax havens and bank secrecy are finished”. Shaxson argues that these nations are the guardians of the offshore system, which throws an alarming light on the UK government’s current plans to clamp down on tax avoidance and evasion.

Despite dealing with technical economic issues, Treasure Islands is aimed at the layman. Many of the topics covered are familiar – Switzerland and Nazi gold, Keynesian economics, drug barons, and offshore money laundering. But Shaxson combines meticulous research with amusing anecdotes, resulting in a very readable account of the murky world of offshore and a strong moral message that the system needs to be changed.

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IN Non-Fiction

A common theme is how wealthy elites – whether in Europe or Russia – siphon off their country’s wealth and hide it offshore, often with the support of western financiers. Treasure Islands is a champion of poorer nations and poorer people in rich countries and the impact that offshore havens have on both.

Free movement of capital around the world will not mean money goes to where it is most needed – rather, it enables money to flow out of developing nations and into tax havens. Worldly readers who shrug and tell themselves that this is just the ugly flip side of living in a rich nation, are “suckers”, as he puts it, because tax havens deprive their own governments of revenue. We need, he says, to change the culture of “fawning over” those who get rich by abusing the system.

Shaxson touches on what some would dismiss as conspiracy theory, arguing that tax havens with links to the US, such as Panama, are “a pointer to the fact that offshore finance has quietly been at the heart of neo-conservative schemes to project US power around the globe for years. Few people have noticed.”

It is not surprising that Shaxson has his own agenda in writing this book – he is also a long-term consultant to the Tax Justice Network, an anti-tax haven group. But the drawback to the sledgehammer approach is that the reader is left with unanswered questions. Why do multinationals shift their profits into low-tax havens and costs into high-tax countries? The only motives Shaxson gives are sinister.

But while he devotes a convincing chapter to rebutting the views of those who support tax havens, such as US economist Daniel J Mitchell, he makes little mention of shareholders in multinationals who benefit from extra profits. Whether a company’s duty lies more with society than shareholders is an important debate – and arguing convincingly for the former could cement Shaxson’s argument – but it is not one that this book enters into.

Alice Ross is the FT’s deputy personal finance editor

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