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Where they hide the cash
We help rich individuals and companies to spirit away vast sums from
the developing world
By
Duncan Campbell
12/05/05 "The
Guardian" -- -- Five trillion dollars has been
corruptly removed from the world's poorest countries and lodged
permanently in the world's richest countries. That is the
"conservative estimate" not of a leftwing anti-globalisation
activist but of a leading American businessman and enthusiast for
capitalism who has just completed a major study of how multinational
corporations, wealthy individuals and unscrupulous governments are
using the world's banking systems in ways that spread poverty.
When aid or debt relief are discussed, attention often focuses on
corrupt leaders and governments in Africa and other parts of the
developing world. But they are amateurs compared with the rich
companies and individuals who use the world's tax havens and banking
systems to hide sums of money that could address almost all of the
continent's financial needs.
The United Nations has now recognised the seriousness of the
situation and today the first meeting of a new committee of experts
on international tax matters will be held in Geneva. What will
emerge from it remains to be seen, but at least one of the world's
great hidden scandals will have a brief airing.
Raymond Baker is a committed capitalist whose new book, Capitalism's
Achilles Heel, has already made waves in the US. In Britain he has
been working with the Tax Justice Network, a London-based
organisation that seeks to expose the abuse of tax havens and
loopholes.
Baker describes capitalism as "the greatest economic arrangement
ever devised", but he believes that western governments and banks
are failing catastrophically in their duty to police the system.
"Falsified pricing, haven and secrecy structures and the illicit
movement of trillions of dollars out of developing and transitional
economies break the social contract ... that Adam Smith incorporated
into the core of the free-market system," he writes.
Six out of 10 US corporations pay no tax, and the recent Enron
scandal demonstrated how cynically major household names in the US
exploit the system. Enron used around 800 different "Caribbean
financial dumps" to hide its debts. Baker argues that the west could
break the back of poverty worldwide if there was political will to
tackle the abuse of the tax and banking systems. Instead, western
countries have been all too willing to turn a blind eye to the
original sources of money.
"Laundered proceeds of drug trafficking, racketeering, corruption
and terrorism tag along with other forms of dirty money to which the
US and Europe extend a welcoming hand," concludes Baker, a
businessman who operated in Nigeria for 35 years and is now attached
to the Brookings Institution. Even since September 11, he says, the
US has shown little inclination to clamp down on the illicit use of
banking systems.
John Christensen of the Tax Justice Network, a former adviser to the
Jersey government, says that more than 50% of the cash holdings of
rich individuals in Latin America is now held offshore and that some
30% of the GDP of sub- Saharan African nations disappeared offshore
in the second half of the 1990s. The situation in the Middle East
and north Africa is even worse. Since the 1980s, banks have targeted
the world's roughly 8 million "high net-worth individuals" and
encouraged them to hide their funds offshore. As a result, around
$11.5 trillion of their assets are now in tax-free or protected
havens.
Today's Geneva meeting is one of the first acknowledgements that
greedy individuals and companies and compliant banking systems and
governments are far more responsible than corrupt dictators for the
state of the poorest countries. It should be welcomed - though we
shouldn't hold our breath. The scandal has only begun to be
addressed.
duncan.campbell@guardian.co.uk
© Guardian Newspapers Limited 2005
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