Bermuda Ranked 36th In Financial Secrecy Index

Bermuda is ranked 36th in the 2018 Financial Secrecy Index, which was recently released by the UK-based Tax Justice Network, who stated that some of the world’s “important providers of financial secrecy” are “mostly not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest countries.”

The Tax Justice Network describes itself an “independent international network” who “analyse and explain the role of tax and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens.”

Top Ten Countries

The top ten countries listed, in order, are Switzerland, USA, Cayman Islands, Hong Kong, Singapore, Luxembourg, Germany, Taiwan, United Arab Emirates [Dubai], and Guernsey.

Tax Justice Network Rankings

In releasing their rankings the Tax Justice Network said, “The Financial Secrecy Index ranks jurisdictions according to their secrecy and the scale of their offshore financial activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight.

“An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Secrecy jurisdictions – a term we often use as an alternative to the more widely used term tax havens – use secrecy to attract illicit and illegitimate or abusive financial flows.

“In identifying the most important providers of international financial secrecy, the Financial Secrecy Index reveals that traditional stereotypes of tax havens are misconceived.

Mostly Not Small Islands, But Bigger Countries

“The world’s most important providers of financial secrecy harbouring looted assets are mostly not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest countries. Rich OECD member countries and their satellites are the main recipients of or conduits for these illicit flows.

Tax Justice Network video about their index

“The implications for global power politics are clearly enormous, and help explain why for so many years international efforts to crack down on tax havens and financial secrecy were so ineffective, it is the recipients of these gigantic inflows that set the rules of the game.

Things Have Started To Improve

“Yet our analysis also reveals that recently things have genuinely started to improve,” they said.

“The global financial crisis and ensuing economic crisis, combined with recent activism and exposure of these problems by civil society actors and the media, and rising concerns about inequality in many countries, have created a set of political conditions unparalleled in history.

“The world’s politicians have been forced to take notice of tax havens. For the first time since we first created our index in 2009, we can say that something of a sea change is underway.”

112 Jurisdictions

“The 2018 Financial Secrecy Index [FSI] focuses on 112 jurisdictions, including several that are not traditionally considered to be tax havens, such as China, France, Germany and Japan,” the organisation said.

The FSI measures two things, one qualitative and one quantitative, they explained, saying, “The qualitative measure looks at a jurisdiction’s laws and regulations, international treaties, and so on, to assess how secretive it is. It gets assigned a secrecy score: the higher the score, the more secretive the jurisdiction.

“The second, quantitative, measurement attaches a weighting to take account of the jurisdiction’s size and overall importance the global market for offshore financial services.”

‘US Rise In Rankings Part Of Worrying Trend’

In regards to the USA, which they rank 2nd, the organisation states, “The US’ rise in the FSI 2018 rankings is part of a worrying trend. This is the second time in succession that the USA has risen up the Financial Secrecy Index. In 2013 the States was in 6th place, and in 2015 it took 3rd. In 2015 the country was one of the few to increase its secrecy score.

“This time the increase in ranking is driven by a huge rise in their share of the market in offshore financial services that wasn’t neutralised by a significant reduction in their secrecy. In total, the share of global offshore financial services taken by the United States rose by 14% between the 2015 and 2018 index from 19.6% to 22.3%.

“The United States remains a secrecy jurisdiction as it refuses to take part in international initiatives to share tax information with other countries, and has failed to end anonymous companies and trusts aggressively marketed by some US states.”

‘UK Intricately Connected To Large Network Of British Secrecy Jurisdictions Around World’

In a separate 15-page ‘Narrative Report’ on the UK [PDF], the Tax Justice Network they state,”The United Kingdom’s relatively low ranking on the secrecy index hides a much bigger story. We regard the UK as one of the biggest, if not the biggest, single player in the global offshore system of tax havens [or secrecy jurisdictions] today. There are two reasons for the discrepancy between its ranking and its importance.

“The first is that the City of London, or ‘the City’, a term used to describe the UK financial services industry centred on London, is on some measures the world’s largest financial centre. As this report explains, this is built substantially on ‘offshore’ characteristics – though these characteristics in the UK’s own case aren’t particularly predicated on financial secrecy but on other offshore offerings, particularly lax financial regulation.

“The second is that the UK is intricately connected to a large network of British secrecy jurisdictions around the world, notably the three Crown Dependencies [Jersey, Guernsey and the Isle of Man] and the 14 Overseas Territories, which include such offshore giants as Cayman, the British Virgin Islands and Bermuda. Though these jurisdictions have a measure of independence on internal political matters, Britain supports and controls them: the Queen appoints many of their top officials, and her head is on their stamps and banknotes.”

They also claim that Britain “controls” the territories, stating: “The vague nature of political relations between Britain and its OTs and CDs is extremely convenient for the City of London and for the tax havens: each claimed their dependence on Britain or independence from it, as it suits them, and Britain often claims ‘there is nothing we can do’ when scandal hits – though this is untrue. The bare truth is that Britain controls these places: all their secrecy-related [and other] legislation has to be approved in London, and Britain can step in and impose direct rule when it wants to, as it did in the Turks & Caicos in 2009.”

The 2018 Financial Secrecy Index follows below [PDF here]