Financial Secrecy Index

Confusion

While related to tax havens, the FSI is not a list of tax havens per se, and it does not attempt to estimate actual taxes avoided or profits shifted, unlike the techniques used in compilation of modern tax haven lists. The FSI is therefore more correctly a list of financial secrecy jurisdictions. While having many similarities to tax havens, the FSI produces some results that are very different from established tax haven lists.

The FSI showed jurisdictions like the U.S. and Germany, despite high tax rates, are large contributors to global financial secrecy, however, this is often misinterpreted as implying that the US and Germany are "tax havens"; for example, foreign corporates do not move to the U.S. or Germany to avoid tax. The FSI does not capture modern corporate tax havens, such as Ireland, the Netherlands and the United Kingdom, who maintain high levels of OECD–compliance and transparency, but are responsible for the global largest base erosion and profit shifting (BEPS) tax avoidance activity.

For example, Apple's Irish "leprechaun economics" tax restructure in Q1 2015, the largest BEPS transaction in history, remained unknown for years due to Irish data-protection laws. The issue is the scoring by the FSI for some of the most favored secrecy tools of modern tax havens (or Conduit OFCs): the unlimited liability company ("ULC"), trusts, and certain SPV structures (e.g. Irish QIAIFs), none of which file public accounts in havens like Ireland and the United Kingdom. The FSI focuses on ownership of these tools (e.g. is the owner of a ULC recorded), versus visibility into the tools (e.g. is the ULC paying tax). An example of this disconnect, was the EU's €13 billion tax fine on Apple's two Irish ULCs in 2016, who while known, were found by the EU to be avoiding large amounts of Irish tax during the 2004–2014 period.

History

The biennial FSI releases are widely reported in the general and financial media, and FSI scores now are seen in EU reports.

Explanatory notes

References

References

1. Kably, Lubna. (February 19, 2020). "Financial Secrecy Index: Cayman Island ranks first, Switzerland drops two places".
2. "Financial Secrecy Index 2020 Methodology". Coffers EU Horizon 2020 Project.
3. (30 October 2009). "Leading economies blamed for fiscal secrecy by Tax Justice Network". Financial Times.
4. (6 November 2013). "Lifting the Veil - An index of financial secrecy". The Economist.
5. (5 November 2015). "U.S.The mega-haven". The Economist.
6. Jesse Drucker. (27 January 2016). "The World's Favorite New Tax Haven Is the United States". Bloomberg.com.
7. Swanson, Ana. (5 April 2016). "How the U.S. became one of the world's biggest tax havens". The Washington Post.
8. (13 June 2018). "Ireland is the world's biggest corporate 'tax haven', say academics". The Irish Times.
9. (28 June 2018). "New report: is Apple paying less than 1% tax in the EU?". [[Tax Justice Network]].
10. (4 July 2018). "Ireland's playing games in the last chance saloon of tax justice". [[Richard Murphy (tax campaigner).
11. Pegg, David. (30 January 2018). "UN urged to launch global effort to end offshore tax evasion". The Guardian.
12. (31 January 2018). "Australia a safe haven for illicit funds, but Switzerland the world's worst". Sydney Morning Herald.
13. (30 January 2018). "Report Says U.S. Is World's Second-Biggest Tax Haven". Bloomberg News.
14. (30 January 2018). "U.S. Becomes World's Second-Biggest Tax Haven". The Wall Street Journal.
15. (March 2017). "Offshore activities and money laundering: recent findings and challenges". EU Parliament.