The Finance Curse. Nicholas Shaxson

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СКАЧАТЬ Bahamas as an alternative. In 1955 the Bay Street Boys gave Groves a two-hundred-square-mile concession to develop a port and free-trade zone, exempt from taxes until 1980 (subsequently extended to 2054) and largely free of the rule of law too. This anything-goes, libertarian free-for-all tax haven prospered greatly, though it contributed relatively little to the rest of the Bahamas, apart from corruption and some jobs, which mostly went to shady expatriates. A British official in 1968 worried that it had become “a separate city state.” As the empire crumbled, British officials were reluctant to alienate the elites in another potentially restive colony by outlawing this lucrative and fast-growing offshore activity.

      All this would have been troubling enough for the US and British governments. But other British territories in the region had noticed the money pouring into the Bahamas tax haven and wanted to copy it. A race to the bottom got under way, led by an unholy triumvirate of money-scenting local colonial elites, a few (mostly American) promoters of tax haven schemes, and a coterie of (mostly British) accountants and offshore lawyers to help set it all up.

      The British National Archives for this period tell a remarkable story, with officials from government departments becoming aware of tax haven activity popping up like Caribbean mushrooms on island after island, then engaging in a whirlwind of official correspondence, chasing after it all. Different departments pushed and pulled in different directions. The treasury, for its part, fretted about losing tax revenue to these tax havens, while seeming quite unconcerned that tax and crime-fighting authorities in the United States and elsewhere were being undermined and cheated. The Bank of England seemed most worried about shoring up exchange controls and the Bretton Woods architecture—these places were obvious points of leakage. But again, it showed little or no concern for North or South American governments and citizens, whose countries’ tax and crime-fighting systems were being undermined by these British havens, mostly known as British overseas territories. The Foreign Office seemed delighted with the dirty-money game, since it would help these tiny territories become self-sustaining, so they weren’t a drain on British foreign aid budgets.

      Aside from the Bahamas, the main territories in question were (and still are) the last fragments of the British Empire: fourteen semi-independent nations including seven global tax havens—Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands. Alongside the tax havens of Jersey, Guernsey, and the Isle of Man around the British mainland, known as the Crown dependencies, these colonies did not cut all their ties with Britain when the empire collapsed.²⁰

      In many of these places banking was conducted in both pounds sterling and US dollars, which were supposed to be kept separate under the safety hedge of the Bretton Woods system. Banks were supposed to keep two sets of books for the different currencies and implement exchange controls carefully between them. But arbitrage between currencies was highly profitable, and these libertarian paradises didn’t want to play by the rules, especially if there was big money to be made. By the 1960s all sorts of curious creatures were scurrying through the holes in the Bretton Woods boundary hedge that ran right through the middle of all these tax havens. Among the best known and the earliest of these creatures were the Beatles, whose film Help! was shot in 1965 in the Bahamas because the band had to live there for a while in order to make it work as a tax shelter. There’s a memo in the archives from a Bank of England official in 1969 that quivers with alarm:

      Events, however, seem to be moving rather faster. The potential gaps in the Exchange Control hedge can no longer be contained by occasional visits. The smaller, less sophisticated and remote Islands are receiving almost constant attention and blandishments from expatriate operators who aspire to turn them into their own private empires. The administrations in these places find it difficult to understand what is involved and to resist tempting offers.… Tax haven proposals by a US resident are leading them to have second thoughts about the need for Exchange Control at all. We might need to station a man somewhere in the area.²¹

      Fabulous and enticing promises began to mount. The memos going back and forth are ferocious by crusty British civil service standards, describing a game of whack-a-mole in these outgrowths of the Euromarkets, an offshore whirligig running faster and faster, driven by foreign criminals, shady characters, and anti-regulation bankers. Someone from the Overseas Development Ministry was gung ho for secret banking and seedy shell-company business because it “attracts entrepreneurs and financiers,” he said, arguing that this was a fine way for these Caribbean microstates to develop their economies—without apparently sparing a thought for the hundreds of millions of North Americans, Latin Americans, Africans, and many others paying a murderous price for Britain helping their elites, drug gangs, and kleptocrats to ransack their national coffers. These activities, he said, were “mainly aimed at North American companies” and “may have little adverse effect on the UK.” Screw you, America.

      The Bank of England quietly welcomed foreigners stashing money in the territories, generating foreign currency fees just as the Euromarkets were doing in London. The same Bank memo urged the authorities “to be quite sure that the possible proliferation of trust companies, banks, etc. which in most cases would be no more than brass plates manipulating assets outside the Islands, does not get out of hand.” But as long as exchange controls were not breached, “there is of course no objection to their providing bolt holes for non-residents.” That last sentence is, of course, code language for welcoming shady money. Especially North and South American shady money.²²

      The correspondence shows a mounting range of scams and schemes building up in Britain’s havens. One memo described a “financial pirates’ nest” being set up in the British Virgin Islands, used for drugs and gunrunning, while another opposed a plan by an American consortium of “investors,” with the innocuous name of Global Risk Underwriters Inc., to take over Antigua’s satellite island of Barbuda, to set up a free port and an investment bank with numbered accounts and exemption from any investigation, along with unregulated gold refining, gambling, and, officials suspected, drug smuggling.²³ Officials in London discovered that an American financier called Clovis McAlpin was proposing a scheme in the Turks and Caicos Islands that would amount to “exclusive rights which would virtually turn him into the uncrowned king of the islands.” (The scheme came to nothing.) They fretted that the Caymans had been “literally raided by an expatriate tax council, who overnight persuaded them to enact trust legislation which goes beyond anything yet attempted elsewhere.” (This council has evolved and still exists today, and it largely writes the Caymans’ tax haven laws.) One memo slammed Cayman’s Trust Law of 1967 as “quite uncivilised,” while another lamented the role of the accounting firm Price Waterhouse, which had been urging nearby Montserrat to set up an “objectionable” brass-plate business, again catering mostly to Americans. There were new laws on shell companies in the British Virgin Islands, whose users would be “immune for at least twenty years from all enquiries from any source,” and this risked infuriating the US government.²⁴

      As one scheme followed another, the wrangling continued in London. The archives show how those supporting the offshore tax haven model slowly began to gain the upper hand. The merry-go-round continued, getting ever faster and more interconnected with the Euromarkets. More and more private operators flocked to the territories, urging each to compete fiercely with its rivals by putting in place ever more devious and criminal-friendly secrecy facilities, trust laws, and financial regulatory loopholes.

      This era, from the mid-1950s to the early 1980s, was the great watershed between the two ages of the global system of tax havens, as the slow, discreet system of secret offshore banking dominated by the Swiss ceded ground to a more hyperactive, aggressive Anglo-Saxon strain, operating first out of the London-centered Euromarkets, then rippling out into the unpoliced and heavily criminalized British offshore network that still exists today. If you consider Britain and its tax haven satellites together as a network, it would soon constitute the world’s biggest offshore tax haven. This network is like a spider’s web, linking the City of London at the center to satellites like the Caymans or Gibraltar.²⁵ Fees or assets captured in the web, typically from jurisdictions near СКАЧАТЬ