Everything you know about tax evasion is wrong. Ok, not everything. That Putin’s clearly a wrong-un, and Dave definitely looks like a man with something to hide. But the media’s obsession with details misses a far more startling picture. Misconception number one: ‘You’ve got to have loads of sand to be a tax haven’. Fitting […]

Everything you know about tax evasion is wrong. Ok, not everything. That Putin’s clearly a wrong-un, and Dave definitely looks like a man with something to hide. But the media’s obsession with details misses a far more startling picture.

Misconception number one: ‘You’ve got to have loads of sand to be a tax haven’. Fitting the cliché of white sandy beaches is useful but not strictly necessary. No, the biggest tax haven in the world is – drum roll, please – us!

The Financial Secrecy Index regards the UK as “one of the biggest, if not the biggest, single player in the global offshore system.” Why? Because “Britain” here is not just her Majesty’s Government but, far more significantly, the City of London and its network of Overseas Territories and Crown Dependencies. But how can this be? We’re not offshore, are we? And what is this City of London anyway?

Misconception two: ‘Tax evasion has nothing to do with us.’ The story of the City of London – the ancient political entity housed in the square mile, as opposed to the Big Smoke in general – is a hugely important but unfamiliar tale for another day. Here, we just need to note that the City created the first offshore market when it facilitated the trade in Eurodollars in the 60s and ever since has been leading the way, on our unwitting behalf, in global tax evasion.

So what is the relationship between the City and the havens? Let’s ask them. “Jersey represents an extension of the City of London,” says that notorious slanderer, Jersey Finance. Successive Lord Mayors of London (Not Boris, the other mayoralty) have called Britain’s offshore network “a core asset of the City” and a “fantastic adjunct” to the UK. Meanwhile, as Eva Joly, the French investigative magistrate at the centre of the Elf Aquitaine scandal (look it up), found, the City “has never transmitted even the smallest piece of usable evidence to a foreign magistrate.” An ancient and secretive polity facilitating global tax evasion, right in the heart of our capital. What could they have to hide?

Misconception the third: ‘Britain loses out’. Absolutely. Taxpayers are getting shafted. But all the money made helping people and companies avoid tax? All that lovely lolly goes straight to the City. As Nicholas Shaxson notes in his highly recommended book, Treasure Islands, your typical tax haven is just a “booking centre that allows a company to pretend it is really located in an Overseas Territory while the real business gets sent up to London.” Or, put another way: “Great dollops of money go into London from here.” That’s Martyn Scriven. “Here” being Jersey, and Scriven being secretary of the Jersey Bankers’ Association.

So, finally, misconception four: ‘There’s nothing we can do about it.’ A 2012 White Paper states, “The UK Parliament has unlimited power to legislate for the Territories.” This is what happened in 2009, when Foreign Office minister Chris Bryant imposed direct rule over the Turks and Caicos Islands, suspending their government due to systemic corruption and “serious dishonesty”. The Crown Dependencies are different, but as Lord Bach explained in 2003: “The Crown is ultimately responsible for the good government of the Crown Dependencies […] In circumstances of a failure in the administration of justice […] the Crown could be used to intervene in the internal affairs of the Channel Islands and the Isle of Man.”

So why don’t we? Presumably because the governance in question is good, just not for the majority of British taxpayers.

If you take even a cursory look at the history, development and current state of global tax evasion, it becomes very difficult to escape the troubling conclusion that for a long time an influential section of our country’s political and financial elite has viewed tax evasion not as a shameful drain on the nation’s finances, but as a net contributor to Britain’s purse and, probably more importantly, her prestige. Fittingly, offshore has become our greatest modern export, a second global empire over which Britannia waives the rules once more.

Laurence Peacock