It’s not easy to be the world’s most financially secretive nation. There are many aspirants to the profitable title of most secretive country, but according to the Tax Justice Network, mountainous, isolated Switzerland is the hands-down winner. Up and comers like Hong Kong and the Cayman Islands simply can’t compete with the scores of generations of financial secrecy in-bred into Swiss bankers.
Switzerland is the most financially secretive country according to TJN
The top five countries on the Tax Justice Network’s newly published 2015 financial secrecy index are Switzerland, Hong Kong, Singapore, the United States and the Cayman Islands. The top five, of course, means the “worst offenders” with the most laws that permit easily exploited, anonymous financial services.
The problem with tax havens and secrecy
The TJN report highlights that somewhere between $21 to $32 trillion of private financial wealth is located in various “secrecy jurisdictions” such as Switzerland across the globe. Secrecy jurisdictions is just another term for tax haven countries that use secrecy to attract illicit financial flows.
The report also notes that cross-border financial flows are estimated at close to $1-1.6 trillion per year, more than 10 times the $135 billion the U.S. doles out every year in global foreign aid.
Keep in mind that since the 1970s, African countries alone have seen over $1 trillion in capital flight, with total external debts under $200 billion. Obviously Africa is a major net creditor to the world, but virtually all of the assets of the continent are in the hands of wealthy elites, who are hidden by offshore secrecy, while the debts are borne by the regular people of Africa.
That said, rich countries also suffer from the many evils created by secrecy jurisdictions. European countries such as Greece, Italy and Portugal are in dire financial straits largely because of endemic tax evasion and state looting aided and abetted by offshore secrecy.
The report notes: “A global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients. ‘Competition’ between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalization really took off in the 1980s, become a central feature of global financial markets.”
Keep in mind that the problems created by secrecy jurisdictions go far beyond just taxes. By providing secrecy, these offshore tax havens lead to the corruption and distortion of markets and investments, adding to overall volatility and decreasing the public trust in the financial markets.
According to the TJN report: “The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more.”
More on the Financial Secrecy Index
The new TJN Financial Secrecy Index compares national jurisdictions based on their secrecy laws and the scale of offshore financial activities in the country. Keep in mind taht this is a politically neutral ranking, and is designed for use as a tool to help improve understanding of global financial secrecy, tax havens and secrecy jurisdictions, as well as illicit financial flows and capital flight.
Of note, the inaugural financial secrecy index was launched on November 2, 2015.