Economist calls for tax havensto be closed down

(CNS): Continuing the chorus of international criticisms of offshore banking, Nobel laureate Joseph Stiglitz has called for an end to tax havens in a video interview with the Tax Justice Network-USA.

Stiglitz, a former Senior Vice President and Chief Economist of the World Bank who is known for his critical view of free-market economics, pounded on tax shelters in the interview, particularly the Cayman Islands, accusing them of enabling money laundering, drug trafficking, corruption, and even terrorism.

With a notable lapse in his knowledge ofthe geography and history of these islands, he said, “It was so clear that the reason there is 500 billion dollars is in the Cayman Islands is not because the Cayman Islands provides a better climate for banking than New York City. They might be able to grow better sugar canes in the Cayman Islands but…why is it better for banks? There is clearly one reason why banking goes on in the Cayman Islands – because it is a place where people can avoid taxes, regulations of all kinds. So the question is, why do we pass regulations to stop certain behaviour but we clearly condone, allow for these tax havens to continue.”

Stiglitz claimed, “Secret tax havens … are bad for developing countries, bad for money laundering, drugs corruption – bad in every dimension.”

He recalled that after he gave a lecture in an unnamed tax haven, “A couple of bankers came up to me a little bit sheepish and said, ‘We’re not as bad as you seem to think we are. We don’t do bank secrecy for corruption, drugs – all the nefarious things you accuse us of. We only do tax evasion.’”

He noted that the Organisation for Economic Co-operation and Development (OEDC) had drawn up a convention to reduce bank secrecy but that the Bush administration had vetoed it in 2001.

“In a way, the timing could not have been worse because we all know what happened in September of 2001,” he said, maintaining that tax havens also helped terrorists. Since then, the Bush administration had shown that it is possible to stop bank secrecy but that it had only been used for terrorism and North Korea, he said.

“All the united States would have to say is that no American bank can do business with any bank that operates in any jurisdiction that doesn’t subscribe to these basic transparency codes – these basic codes of conduct…for appropriate banking behaviour.”

Stiglitz said that if tax havens could not deal with the US and other G7 countries they would not be able to function as banks and their viability would be greatly undermined.

He asked the question, “How do we do something about this problem which I think costs all of our society in so many ways so much and benefit so few?”