Tax Havens: What They Never Tell You - VisualPolitik EN - YouTube

In recent years, the exposure of the Panama Papers and the Paradise Papers have once again

put tax havens on the public opinion radar.

In the last two years, criticism of these places has multiplied throughout the world.

Politicians, businessmen, soccer players, singers...

Or simply, investors and savers...

Many people transfer part of their fortunes to these places, supposedly to pay fewer taxes.

That’s why many critics state that if it weren’t for these millionaire paradises,

the 2008 financial crisis would’ve been less of a crisis.

We’re told that without these paradises, governments wouldn’t have had to make so

many cuts; we’d all pay fewer taxes and, ultimately, folks, things would work much

better.

Now, how true is all of this?

Are tax havens really so bad for the general welfare?

Let's check it out.

The first thing we need to be clear about is what a tax haven is.

Well, a tax haven is nothing more than a jurisdiction with low taxes, high legal security and an

extreme amount of protection of the savers' privacy.

This is very important, cutting taxes isn’t enough to turn a territory into a tax haven.

Absolutely not.

See, the international investors and savers who use these jurisdictions really want to

protect their assets.

That's why they not only demand low taxes, but also legal security.

That is, in addition to low taxes, they want to ensure that their assets are safe from

any kind of robbery, nationalization, confiscation, corruption or inflation, for example.

Therefore, what’s common to all tax havens, even more than low taxes, is legal safety.

There are the Cayman Islands, Switzerland, Singapore, Hong Kong, Cyprus, Jersey and Bermuda.

All of these jurisdictions that we recognize as important financial centers are characterized

by their high legal safety.

Savers know that the government won’t take their money.

It’s precisely this combination of low taxes and high legal security that makes these territories

receive so much capital from around the world and grow at rates much higher than in other

countries.

And, no, operating in these places isn’t illegal in itself.

Despite what the media might suggest, appearing in the Paradise Papers or in the Panama Papers

doesn’t necessarily mean someone has committed a crime.

In fact, most of the names on these lists are those of entirely innocent people.

There are people, such as Alex Crivillé and Shakira, whose assets have a legal origin

and who use tax havens to minimize their tax bills within the bounds of the law.

This may seem more or less immoral, but it’s perfectly legal.

Another very important detail, which we usually forget, is that these tax havens are a refuge

for millions of citizens who have had the misfortune of being born in authoritarian

and extractive countries.

I mean, we all know that there are many countries in the world where the most basic human rights

aren’t guaranteed, or where authoritarian governments arbitrarily decide who to repress

or prosecute.

That is, many investors don’t seek protection just for lower taxes, they are also escaping

political, ideological and religious persecution.

Think, for example, of political dissidents in Russia or Venezuela, of families who are

threatened by kidnapping in Mexico or entrepreneurs that come from countries with as few guarantees

as Zimbabwe or Belarus.

Well, they all benefit from being able to access jurisdictions that guarantee the safety

that tax havens do.

Because it’s also a matter of justice.

Allow me to explain, I’m convinced that most people think it’s an aberration when

some states prevent their citizens from leaving the country – as happened with the Berlin

Wall.

Well, we should also think it’s an aberration when states prevent their citizens from taking

their savings out of the country and depositing it in a more protective foreign jurisdiction.

Always, of course, as long as they do it in compliance with the law.

In any case, the truth is that both the media and politicians greatly exaggerate the consequences

that these tax havens have on our economies.

Let's check it out.

(A VERY EXAGGERATED ROLE)

According to many politicians and journalists, tax havens are greatly responsible for all

the ills we suffer, such as, the third world’s government budget cuts, inequality and underdevelopment.

This is what the Intermón Oxfam organization argues for example.

Check it out.

(AUDIO: “The current global inequality crisis has a clear ally in tax havens.

These jurisdictions represent the black hole where the development opportunities of millions

of people around the world.

Fall” The Money You Don’t See, Intermón Oxfam.)

Well, first of all we must state that Oxfam's definition of a tax haven is a bit lax: in

their opinion, a tax haven is any country that has very low taxes, especially for foreign

investment.

This definition includes countries such as Holland, Ireland and Luxembourg, which, of

course, don’t receive such a qualification from the European Commission, the European

Parliament, or the OECD.

But ok, even with this definition, let’s see how important these tax havens really

are.

To do so, let’s take the case of Spain, a European Union country, with a high average

income, that has many economic problems and quite high taxes.

Well, based their own government’s data, Spain invested 40.91 billion euros overseas

in 2016.

Of this total, 9.54 billion ended up in what Oxfam claims are tax havens.

9.54 billion, less than 5% of everything spanish people invested in the entire world, including

Spain, for that year!

Come on, the relevance of these tax havens isn’t as great as it’s made out to be.

In fact, the highest estimates place the world heritage of tax havens at about 7.6 trillion

dollars.

This, folks, is a very small number globally.

So we may not like it, but the truth is that tax havens can hardly be responsible for the

big problems many critics say they are.

But that’s not all.

Let’s return to Spain’s situation.

87% of the Spanish investments that went to “Oxfam's tax havens” in 2016 were concentrated

in Ireland, the Netherlands and Luxembourg.

We’re talking about a bit over 8 billion dollars.

Well, in that same year, these three countries invested just over 12 billion dollars in Spain.

Yes, that’s right.

As you can see, tax havens not only don’t decapitalize the business fabric of a country

as fiscally uncompetitive as Spain, quite the opposite.

These tax havens helped capitalize the weak Spanish economy.

(“Luxembourg is the country that invests the most in Spain--in factories, buildings,

farms, employment...

But it isn’t public, but private money.

Most comes from companies and saving vehicles established in the country.”

Javier G. Jorrín, economics journalist in El Confidencial.)

But... having said that, let's look at another key question: How much revenue do governments

lose as a result of tax havens?

Is it true that without them there would’ve been no cuts during the crisis?

Let's see.

((THE STORY OF THE MILKMAID))

As we’ve seen, one of the most common criticisms tax havens get is that if we hadn’t had

such unfair competition, governments wouldn’t have had to make budget cuts as a result of

the 2008 Financial crisis.

But...

Is this true?

Let's go back to the Spanish case.

As you know this is one of the countries that suffered the most from the recession.

Well, according to data from the Spanish Ministry of Economy, the investment accumulated in

Oxfam defined tax havens year after year amounts to 80 billion dollars.

Well, if all that money had been accumulated in Spain instead of tax havens, the extra

income that the Spanish State would’ve received would be of approximately 1 to 1.5 billion

euros.

An absolutely miniscule amount!

To give you an idea, this is about 0.1% of the Spanish GDP and less than 0.5% of all

the taxes collected.

In other words, it has a very limited impact.

And if instead of Spain, we took a look at what’s happening in the rest of the world,

the situation is quite similar.

In fact, even if we take the highest estimates of the Tax Justice Network, which is the source

that’s usually used to denounce tax havens, we’ll see that they show a global collection

loss of about 200 billion dollars, barely 1% of all the tax revenues of the world’s

governments.

No, the truth is that contrary to what’s usually claimed, tax havens aren’t to be

blamed for the cuts, nor do they force us to pay more taxes, or harm our economies.

We may not like it much, but that’s the way things are.

In 1980 Ireland was poorer than Spain.

Today, thanks to these policies it’s the second richest country in the eurozone.

To improve the general welfare we need more companies, not more politicians and public

spending.

The problems that countries with economic difficulties face don’t usually come from

tax havens, but from their politicians.

But now it’s your turn: Do you think tax havens should be persecuted?

Leave your answer in the comments as well as in the survey.

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