"Black holes" of the world economy
Signs and types of offshoreThe most important element of the modern mechanism of the world economy are offshore. Offshore means countries and territories that have the following features:
- ensure the confidentiality of financial, commercial and other operations of foreign individuals and legal entities registered in these countries and territories (“jurisdiction of secrecy”);
- provide individuals and legal entities of other countries with a favorable tax regime in the form of low or even zero tax rates (“tax havens”).
There is no universal, unified list of offshore companies. Each country, each international organization, sometimes each department within one country makes its own list of offshore companies. An account of offshore companies today goes to dozens: up to 30% of the countries of the world have certain signs of offshore. Some countries are not listed as offshore companies, however, there may be territories (zones) under their jurisdiction that have clear signs of offshore companies. The first "tax havens" originated in the US and the UK. Now only in the British jurisdiction of 12 offshore companies. The United States has "internal" offshore (Delaware, Wyoming) and island. In the zone of the European Union there are at least 10 jurisdictions with signs of offshore: the Netherlands, Monaco, Malta, Andorra, Luxembourg, Liechtenstein, Cyprus, Ireland ...
There are three groups of offshore companies.
1. Anglo-Saxon "core" (Caribbean Islands, Channel Islands, Ireland).
2. Benelux countries (Netherlands, Luxembourg, at the same time and Switzerland).
3. All other offshore peripherals, including Cyprus.
Today, the world economy is experiencing the creation of complex financial networks. Some economically developed countries such as the Netherlands and the United Kingdom in the specialized literature called sparring offshore jurisdictions. There are registered companies, which, in turn, work in conjunction with the classic offshore companies. Such companies in respectable Western countries are sometimes also called laying companies. For example, the Netherlands has its offshore in the Caribbean: Aruba, Curaçao, St. Maarten. So, in the Netherlands in 2006 there were about 20 thousand of so-called postal companies that did not have any significant commercial presence in the country. The beneficiaries of 43% of them were firms from traditional “tax havens” - the Netherlands Antilles, the British Virgin Islands (BVI), the Cayman Islands, Cyprus, Switzerland. In addition, there were 12,5 thousand special financial companies (Special Financial Institutions - SFI) in the country, through which, according to the Central Bank of the Netherlands, 2002 billion euros passed in 3600, which was 8 times the country's GDP. In the middle of the 2000s, there were also 42 thousand financial holdings in the country, thousand of which were managed by trust companies. However, almost all official international and national institutions do not consider the Netherlands as offshore (5,8).
Offshore - the main nodes through which the financial and investment flows of the world economy. Annual capital exports from the Netherlands, Luxembourg and Ireland - 10-12 trillion. dollars, which exceeds the export of capital from the United States. And portfolio investments from the islands of the Caribbean and Normandy are equal to 1 / 5 portfolio investments from the United States (2).
Offshores are also centers from which enterprises and companies from many countries around the world manage. Often, offshore companies are called “black holes” of the world economy. “Holes” - because the enormous financial resources necessary for the development of the countries from which these funds are going to flow into offshore centers. “Black” - because they are completely non-transparent, there is no information about the operations and financial and property status of offshore companies and their beneficiaries ...
Tax Justice Network report: a picture of the global offshore economy
According to the latest report of the international research organization Tax Justice Network (TJN), which deals with independent investigations in the field of tax evasion, in bank accounts of offshore jurisdictions is from 21 to 32 trillions of dollars. And this is without taking into account such non-financial assets as yachts, mansions, palaces, castles, numerous luxuries and works of art. These sums correspond to at least one tenth of the total world wealth estimated by Credit Suisse, a Swiss bank, at 231 one trillion dollars (as of the middle of the year 2011). Even the minimum estimate in 21 trillion. USD is equivalent to the total gross domestic product (GDP) of the United States and Japan. Apparently, the estimates of money in offshore include only the amount of capital flowing into bank accounts, but it does not take into account the income that the owners of offshore accounts receive in the form of interest or other income. It should also be emphasized that the estimates given in the TJN report far exceed all previous estimates of total offshore funds that were made by various organizations (none of them exceeded 10 trillions of dollars).
There is no TJN report and estimates of the total value of assets that are controlled by offshore companies around the world (first of all, assets of the real sector of the economy). It is possible that the value of such assets is at least not less than the total amount of money in offshore bank accounts (3).
Tax Justice Network is an organization that, according to some analysts, professes socialist beliefs and has a reputation as an ardent opponent of offshore zones. TJN's research director is former chief economist at McKinsey consulting firm James Henry. It is noteworthy that the TJN report data is two years old, but it was published only in July of the 2012 of the year (4).
International financial analysts suggest that the objective of the report is to prepare public opinion for the next “raid” on world bankers, similar to the pressure of Swiss banks in 2011 arranged by the US and British financial departments. Some experts believe that TJN is not as independent an organization as it seems at first glance. They draw attention to the differentiated approach of TJN to various offshore jurisdictions. Not passed unnoticed by the fact that the TJN, together with the authorities of the United States, Britain and some other Western countries in recent years especially violently attacked Switzerland and the Cayman Islands.
The initial information for the calculations was, first of all, the open official data of the Bank for International Settlements (Zurich), the International Monetary Fund, the national central banks and treasuries. As additional sources, studies of leading audit firms were used.
Main offshore TJN listings
Even before the publication of the report, the Tax Justice Network reported that Switzerland remains the main tax haven in the world, which, reluctantly compared to other developed countries, reveals data and prosecutes tax evaders. Switzerland in the financial opacity rating compiled by TJN, followed by the Cayman Islands, Luxembourg, Hong Kong and the United States. Next come the island of Jersey, Japan, Germany and Bahrain. The TJN rating changes the prevailing notion of offshore as countries and territories outside the “civilized world” (“golden billion”). Almost all major economically developed countries are included in the list of offshore companies: the United States, Germany, Japan, Switzerland, and the United Kingdom (the latter actually controls Jersey, which is only formally outside British jurisdiction).
Among offshore companies located on the periphery of the world capitalist economy, stand out the Cayman Islands, Trinidad and Tobago, and other island states of the Caribbean. These states imperceptibly passed into the category of free states independent of world politics. Take, for example, Trinidad and Tobago. There is no “democracy” here at all. In this island republic, the death penalty has not yet been abolished and corporal punishment is used everywhere. Here there are consistently high rates of corruption in the judicial sphere, there is a ban on homosexual relationships so widely promoted in the “civilized world”, women are deprived of a number of civil rights. However, such "non-democratic" trivia did not become an obstacle for the United States to declare the islands "free." The government allowed foreign companies to operate on its territory, for which it made some changes to the existing tax code. Island authorities receive a small bribe for their "hospitality"; thus, the necessary balance of interests is achieved.
Offshore clients and "services" of world banks
The amounts indicated in the TJN report belong to approximately 10 to the millions of individuals who own offshore accounts directly or through legal entities. The average is from 2 to 3 million dollars per person. 47% of funds belonged directly to individuals, 53% - to legal entities.
Nearly half of 21 trillion dollars (more precisely: 9,8 trillion. dollars), according to TJN estimates, 92 belongs to thousands of the richest people (that is, about 1 percent of all individuals owning funds in offshore). On average, per person in this group of richest people account for more than 100 million dollars in offshore bank accounts
Intermediary services of banks, other financial intermediaries and consultants assist in the placement of funds in offshore jurisdictions to individuals. As James Henry notes, official structures, a “hardworking swarm of professional assistants from the private banking, legal, accounting, and investment services” help move the shadow money around the world to the financial elite. To provide this kind of “delicate” services, many large banks even at the end of the last century created units called private banking. The largest banks in the private bankin services sector are Swiss UBS, Credit Suisse and American Goldman Sachs. Probably, today it is impossible to find a single transnational bank that would not work with offshore clients or provide its clients with offshore services. Offshore, according to some estimates, accounts for 14 – 17% of cross-border financial assets and liabilities of world banks (5).
TJN identifies fifty of the world's leading banks engaged in offshore business. With the participation of the top-50 in offshore, according to TJN estimates, about 12 trillion is placed. dollars i about half of all offshore cash. In 2005, this figure was 5,4 trillion. Doll.; thus, in five years it has more than doubled. The first two lines in the top 50 list (as of 2010) were occupied by Swiss banks UBS and Credit Suisse. The next three places belonged to such world-famous European banks as HSBC, Deutsche Bank, BNP Paribas. Then followed the banks of Wall Street: JPMorgan Chase, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs. The banks in the top 10 accounted for approximately 6 trillion. dollars of funds placed on offshore accounts (i.e. 50% of the total sum of top-50).
Where do offshore funds come from?
Relocation of a large part of large cash to offshore occurs from the world's financial centers - New York, London, Zurich, Hong Kong, Tokyo. The offshore countries of the Anglo-Saxon economic model are especially actively used, i.e. USA and UK. Of the largest-cap UK 100 companies that are listed on the London Stock Exchange, 2 in total does not use offshore services. The rest have more 8 000 subsidiaries in offshore jurisdictions around the world. The territories of Guernsey, Jersey and the Isle of Man for several centuries have been offshore zones of Great Britain. American TNCs are the most active (after British enterprises) users of offshore services. Of the one hundred largest American corporations whose shares are listed on the stock exchange, 83 corporations have subsidiaries in offshore zones.
Offshore funds are also flowing away from countries exporting raw materials and finished products in large volumes. First of all from the oil-producing countries. For 1970-2010, according to a TJN study, the following were withdrawn (billion dollars): from Kuwait - 496; from Saudi Arabia - 308; from Nigeria - 306. One of the world leaders in offshore outcomes is Russia: for the 1990-2010. 798 billions of dollars were taken out of the country from the country (on average, almost 40 billions of dollars a year). TJN estimates are quite consistent with the official data of the Central Bank of the Russian Federation. So, in 2010, net private capital outflows from Russia amounted to 34,4 billion dollars, in 2011-m - 80,5 billion dollars, and for 2012 a year, according to forecasts, it can exceed 100 billion dollars. TJN James Henry believes that most of the funds from Russia were withdrawn in the wake of the privatization of state assets.
Only China surpassed Russia in the amount of assets sent to offshore - 1,2 trillion. However, data for China is given for 40 years, since 1970, and for Russia - only for 20. So, in terms of the average annual rate of private capital flight to offshore, Russia is the undisputed leader among countries outside the “golden billion” habitat zone. Russia is followed (1970-2010 period, billion dollars): Korea - 779; Brazil - 520; Kuwait - 496. In relation to the minimum estimate of the total funds in offshore bank accounts (21 trillion. Dollars), funds that come from Russia amount to 4%.
Problems caused by offshoring the world economyFrom 1970 to 2010, the TJN report estimates that developing countries (total 139 countries) went from 7,3 to 9,3 trillion. dollars (on average per year it turns out about 200 billion dollars). Taking into account interest and other types of income, the real value of these capitals has already far exceeded 15 trillions of dollars (the most conservative estimate). If this money had not been taken off-shore, the poor countries would have already been able to pay off external debts and seriously accelerate their development. If we take the unrecorded offshore capital of all developing countries, which, according to traditional calculations, at the end of 2010 of the year had a total external debt of 4,1 trillion. dollars, it turns out that their debt is about minus 11 trillion. dollars, that is, in fact, these countries are net creditors, not debtors. Simply put, the inhabitants of poor developing countries (85% of the global population) could live completely different if the money remained inside their economies. But, as noted in the report, the withdrawn assets belong to a small group of wealthy people, while the debts of the government are on the shoulders of all citizens. Had the hidden amount in 21-32 trillion. dollars brought a modest income of 3% per annum and this income was taxed 30%, the researchers write, offshore assets would give 190-280 billion dollars in profits in the first year. This is about two times more than economically developed countries (OECD members) allocate for material assistance and development to countries outside the “golden billion” habitat zone.
The tax revenues are huge, they are “sufficient to significantly improve the financial situation of many countries, especially developing ones,” emphasizes James Henry. At the same time, according to the study leader, in this news there is also a positive aspect: the world has discovered a “black hole” into which finances are flowing, and appreciated the size of this “treasure” hidden in offshore.
The strengthening of the offshore nature of the global economy creates serious economic and social problems and, at least, the three main ones can be called immediately:
1. Low taxation in offshore zones undermines the fiscal base of countries whose residents use offshore services. According to the most conservative estimates, the budgets of all countries of the world lose every year at least 3 trillions of dollars, which are hidden in offshores.
2. Anonymous operations are prerequisites for laundering illegal profits and financing global terrorism through offshore companies. Offshores contribute to the growth of organized economic crime, especially cross-border.
3. As a result of weak regulation of financial transactions in offshore areas, the risk of uncontrolled flows of so-called hot money increases, which destabilizes the global financial system.
The administration of Barack Obama: "crusade" against offshore companies
For some time now (the zero years of our century), the fight against offshores began in the world, when the United States and European countries suddenly discovered that they were losing significant amounts of taxes. In the United States, according to official estimates, the treasury annually lost at least 100 billion dollars due to the use of offshore schemes by American taxpayers. The administration of Barack Obama has developed particularly great energy in the fight against offshore companies. Even before the financial crisis broke out, the preparation of the draft law “On the Prevention of Tax Harbor Abuse” (6) began in the USA; Obama continued pushing the bill through the US Congress. The most significant provisions in the bill are: 1) imposing more stringent requirements for US taxpayers using offshore jurisdictions; 2) giving the US Treasury the authority to implement special measures against foreign jurisdictions and financial institutions that prevent the collection of taxes; 3) the introduction of taxation of offshore trusts used to purchase real estate, art and jewelry for US persons, and the recognition of persons actually receiving assets of offshore trusts as beneficiaries; 4) an increase in the fine for tax havens to 150% of the income they received from such activities.
The sharp increase in the state debt and federal budget deficits in the United States after the country entered the financial crisis forced the American authorities to make loud statements about their plans to "deal with" individual offshore companies. Barack Obama began to make especially energetic statements on this score. The Cayman Islands, a favorite spot of American capital, were under his special sight. Subsidiaries there are such giants of American and world business as Coca-Cola, Procter & Gamble, General Motors, Intel, FedEx, Sprint, etc. There is a joke in the financial world: the most famous building in the world of finance is not New York or The London Stock Exchange, and Agland House, a modest five-story office building in Grand Cayman, is the seat of many thousands of island-registered companies. “There is a building in the Cayman Islands that houses 12 American corporations,” Barack Obama said on January 5, 2008 in Manchester, New Hampshire. “It's either the largest building in the world, or the biggest fraud in the world. And we'll find out what it is. " However, despite the determination of the then US presidential candidate, which, by the way, did not hesitate with his coming to power, the most influential person on the planet was still unable to deal with Agland House (7).
The most serious practical step in the fight against offshore should be the adoption in the USA in May 2010 of the Law on tax discipline concerning the use of foreign accounts. In February, 2012 was signed an agreement with France, Italy, Germany, Great Britain and Spain to jointly implement this legislation. Under this agreement, national tax authorities have the right to mutually exchange information and provide reports. But the United States especially benefits from this law. This act provides that banks and other financial institutions of other countries should become voluntary agents of the American Tax Service. They must report suspicious (in terms of US tax interests) accounts and transactions of individuals and legal entities of American origin. If banks and other financial institutions of other countries are noted in their unwillingness to “cooperate” with the US tax administration, then the United States may impose appropriate sanctions on such institutions. It is not difficult to notice that under the cover of the fight against offshore companies and tax abuses, the US authorities want to put other countries under their direct (administrative) financial control.
Fighting offshore and new financial schemes
Now for the depersonalization of the owner of the assets, it is necessary to use not one offshore, but a chain of offshore companies, among which there is necessarily a territory where companies with nominee directors and owners register, and the actual owners do not appear in any of the documents. They became known as beneficiaries (real beneficiaries). Such a scheme, for example, is used by corrupt officials, leaders of organized criminal groups.
Today, various official documents (for example, on official websites) contain the names of nominal shareholders, which are the world's largest private banking services. However, nominal holders do not disclose who is the actual holder of the shares - such information can be obtained only at the request of the court. Convenient form to hide their property to persons who do not want to "shine".
There is no need to go far for examples. Take the Russian joint stock companies. The holders of 97% of OAO “LUKOIL” shares are nominal. Three-quarters of the shares are in nominal holding with the Dutch ING Bank (Eurasia), the rest are with purely Russian nominal holders. Individuals officially own 3% of the shares, although it is believed that the largest shareholding in LUKOIL belongs to its managers, Vagit Alekperov (21%) and Leonid Fedun (9%). However, this information cannot be verified.
According to recent reports, 27% of the state-owned Gazprom shares are also nominal holders. Over 50% of Norilsk Nickel’s shares are held by foreign nominees or offshore. In Rusal, nominal shareholders own 25% of shares, and the entire company is controlled from offshore (8).
In fact, the largest banks in the world, law firms and even individual individuals assumed the function of concealing the ultimate shareholders and beneficiaries, which were previously carried out by offshore jurisdictions. Therefore, the results of the “hitting” of western states to offshore areas as “non-transparent information zones” turned out to be negligible.
Fighting offshore companies as a means of redistribution by financial groups of areas of global influence
Under the cover of the struggle of the authorities of individual Western countries with offshores, Western banks are redistributing their spheres of influence. The most striking example of recent times is the pressure of the US and British authorities on Switzerland. Under the guise of fighting offshore companies, the process of destroying a third-largest international financial center is underway. In 2011, Bern was forced to enter into agreements with the United States, Britain and France, aimed at full assistance to the authorities of these three countries in disclosing information about the non-payment of taxes by their citizens who are clients of Swiss banks. As a result, a massive exodus of capital from Switzerland began. Where? In the demesne controlled by American and British banks. First of all, to the Bahamas and the British Virgin Islands, which are under the jurisdiction of the same UK (these territories are formally independent, but really are "overseas territories of Great Britain" led by the monarch - Queen of Great Britain Elizabeth II, who appoints governors to these lands). Part of the capital moved to reliable banks operating in the US and UK.
However, this is not all. Swiss banks had to fork out. In August, 2011 Switzerland officially paid the UK more than 600 million dollars in hidden taxes of its citizens, who kept their capital on deposits in Swiss banks. Since January 2012, the US Department of Justice has been investigating 11 Swiss banks, including Wegelin, Credit Suisse and Julius Baer, about helping them "tax evasion by American citizens." Already at the beginning of 2012, one of Switzerland’s oldest banks, Wegelin, sold its business because of an investigation. It is possible that Swiss banks will also have to pay considerable sums to the US treasury - in order to compensate for the taxes that were not paid by their American clients.
Fighting offshore companies: penalty can not be pardoned
During the last financial crisis, all major Western countries and many well-known politicians joined the fight against offshore companies. Even Pope Benedict XVI declared that "deprives financial offshore companies of their blessing." The official document of the papal “Council of Justice and Freedom”, published following the International Conference on Financing for Development in Doha (November 29 - December 2 2008), states that offshore markets are associated with illegal profits. Offshores conducted unreasonable financial policies, which ultimately led to the current financial crisis. By providing tax evasion opportunities, they provoked a huge outflow of capital, caused tremendous damage to poor countries, and therefore should be closed (9).
However, after the completion of the first phase of the financial crisis, the anti-offshore fuse of the West has greatly subsided. The real policy of individual Western countries in respect of offshore companies is very controversial. On the one hand, they encourage the preservation (and even development) of those offshore territories that provide capital from all over the world to the accounts of banks in their countries. On the other hand, they are attempting to prevent the outflow of capital from their territories into offshore areas, which is dictated by fiscal considerations.
The practical steps in the fight against offshore Caribbean Obama administrations, which we mentioned above, have so far yielded very little effect. Similarly, European countries (with Switzerland, Luxembourg) and China (with Hong Kong) promised to “deal” with their offshores. After the start of the 2008 crisis, the G20 leaders, while discussing measures to combat the crisis, repeatedly promised to close the tax havens. In 2010, the OECD Model Tax Convention was amended to tighten disclosure regulations. Since 2010, more than 600 information exchange agreements have been signed that, among other things, severely limit bank secrecy. However, the successes were very modest.
Noteworthy is the German authorities' measure to combat the secretion of capital in the offshore zones of Europe - the acquisition by federal and state governments of illegal discs with information on accounts in the respective banks. This measure proved to be very effective, although it was criticized by many statesmen and politicians in Europe as “not quite ethically pure.” However, today the German authorities, when the debt crisis broke out in Europe and the German economy is experiencing great overloads, is no longer up to "ethical purity."
Probably, anti-offshore legislation is a necessary but not sufficient condition for the fight against offshore companies. So, Italy has good legislation in this area, but remains the leader in the share of the “shadow” economy in GDP, as well as in the amount of illegal capital outflow among the countries of Western Europe. At the same time, in the territory of the Nordic countries, where the level of taxation is quite high, the use of “black” and “gray” offshore schemes is minimal. In Norway, the tax on profits from oil and gas production reaches 80%, but foreign oil companies still pay their attention to this country due to the almost complete absence of corruption, effective government support for large projects and clear, unchanging and transparent conditions.
In general, the fight against offshore companies is aimed not at destroying the offshore institute, but at using it to strengthen the positions of individual participants in the competitive struggle. In one of the latest studies on offshore companies it is noted: “The war with offshores is a very strange war. To lead her is like fighting with your right hand. After all, offshore is one of the cornerstones of global finance. Take them out - and the whole structure collapses ... Why didn't the war with offshores become total? Why does London have so many offshores? Why does the US enjoy Caribbean life at hand? Because offshore is a great way to collect other people's money. Down with your own, withdrawing capital, but as for others - come in, we will be glad to see you. Offshore companies collect money from all over the world, so no one rejects the right of offshore companies to exist ”(10).
(1) B. Heifetz. Offshore financial networks of Russian business // Economic Portal, December 2008; Van Dijk, M., Weyzig F., Murphy R. The Netherlands: A Tax Haven? Amsterdam: SOMO Report, 2006, p. 3.
(2) “Fighting offshore companies: a forecast of hostilities. Infographics "// 11 May 2012 Forbes.ru: http://www.forbes.ru/sobytiya-column/finansy/82075-borba-sofshorami-prognoz-voennyh-deistvii)
(3) There are separate estimates of financial and non-financial assets controlled by offshore structures that have been made by other organizations. For example, according to the Boston Consulting Group (BCG), offshore banks at the end of the last decade managed capital in the amount of 7 trillion. dollars, and according to estimates of the Organization for Economic Cooperation and Development (OECD), 11,5 trillion. dollars (Elena Snezhko. The fight against offshore is active in developed countries, but it is useful for developing // www.investgazeta.net // 16.04.2009).
(4) The Price Of Offshore Revisited, Tax Justice Network, July 2012.
(5) “Fighting offshore companies: a forecast of hostilities. Infographics "// 11 May 2012 Forbes.ru: http://www.forbes.ru/sobytiya-column/finansy/82075-borba-sofshorami-prognoz-voennyh-deistvii
(6) Bill S. 681 'Stop Tax Haven Abuse Act'.
(7) "Black Holes of World Finance" // expert.ru, 23.07.2012.
(8) “Strategy - Evacuation” 5.12.11 // http://www.gazeta.ru/column/mikhailov/3858474.shtml
(9) Der Spiegel. 2008. Dez Xnumx
(10) “Fighting offshore companies: a forecast of hostilities. Infographics "// 11 May 2012 Forbes.ru: http://www.forbes.ru/sobytiya-column/finansy/82075-borba-sofshorami-prognoz-voennyh-deistvii
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