6 The scale of tax havens and
6.2 The economies of tax havens
6.2.1 Market share for banks in tax havens
placements in and from tax havens are very limit
ed, and such information is not in itself an esti
mate of illegal behaviour but illustrates the size of financial activity in tax havens.
In a report from 2000 (IMF, 2000), the IMF es
timated that 50 per cent of international positions in the world’s banks are held by banks in OFCs.
See the discussion of the various definitions of tax havens in chapter 2. The IMF utilises a broad defi
nition of OFCs in the report, which includes Lon
don, Dublin, the Netherlands, Singapore and Swit
zerland.
Data from the Bank for International Settle
ments (BIS) can be used to illustrate how the po
sition of tax havens as financial centres has changed over time. These statistics are based on bank balances in countries which report to BIS, but only includes the international positions of the banks. Over time, BIS has persuaded a growing
number of countries – and particularly tax havens – to report data.
As noted earlier in the Commission’s report, no unambiguous definition exists for which coun
tries and jurisdictions should be regarded as tax havens. Whether the major financial centres, such as London, Singapore, Luxembourg, Dublin, Hong Kong and the Netherlands, are included is particularly important when assessing the scale of international banking operations in tax havens.
These centres are regarded as tax havens (or se
crecy jurisdictions or OFCs) by some but not by others. The figures below show data for tax ha
vens based on both narrow and broad definitions of these jurisdictions.
Figure 6.2 shows that positions in tax havens expanded strongly until the financial crisis con
tributed to a contraction in 2008. The BIS banks have net debt with tax havens – liabilities exceed assets. This probably reflects the fact that many placements in tax havens involve the establish
ment of shell companies, trusts, foundations and so forth, and that some of the assets in such enti
ties are deposited in banks.
0 1 000 000 2 000 000 3 000 000 4 000 000 5 000 000 6 000 000 7 000 000 8 000 000 9 000 000
dec.77 mar.79
jun.8 0
sep.81 dec.82
mar.84 jun.8
5 sep.86
dec.87 mar.89
jun.9 0
sep.91 dec.92
mar.94 jun.9
5 sep.96
dec.97 mar.99
jun.
00 sep.01
dec.02 mar.04
jun.
05 sep.06
dec.07 Ak tiv a
Passiv a
Figure 6.2 The position of banks in BIS' countries towards tax havens. Narrow definition.1 Million USD
1 Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Overseas Territories, Cayman Islands, Cyprus, Dominica, Gibral
tar, Grenada, Guernsey, Hong Kong, Isle of Man, Jersey, Lebanon, Liechtenstein, Luxembourg, Macao, Malta, Mauritius, Nether
land Antilles.
Source: Bank for International Settlements
Ak tiva
0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0
mar.
99 sep.99
mar.00 sep.00
mar.01 sep.01 mar.02
sep.02 mar.0
3 sep.03
mar.04 sep.04
mar.05 sep.05
mar.06 sep.06
mar.07 sep.07
mar.08 sep.08 Passiva
Figure 6.3 The position towards tax havens as a share of total international positions of banks reporting to the BIS (narrow definition). In percent
0,0 5,0 10,0 15,0 20,0 25,0 3 0,0
mar.
99 sep.99
mar.00 sep.00 mar.01
sep.01
mar.02 sep.02 mar.0
3 sep.03
mar.04 sep.04
mar.05 sep.05
mar.06 sep.06
mar.07 sep.07
mar.08 sep.08 Ak tiva
Passiva
Figure 6.4 The postion towards tax havens as a share of total international positions of banks reporting to the BIS (broad definition). In percent1
Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Overseas Territories, Cayman Islands, Cyprus, Dominica, Gibraltar, Grenada, Guernsey, Hong Kong, Isle of Man, Jersey, Lebanon, Liechtenstein, Luxembourg, Macao, Malta, Mauri
tius, Netherland Antilles. Panama, Samoa, Singapore, St. Lucia, St. Vincent, Switzerland, Turks and Caicos Islands, Vanuatu, West Indies Great Britain, Netherlands and Ireland
1
0,0 5,0 10,0 15,0 20,0 25,0 3 0,0
mar.
99 sep.99
mar.00 sep.00
mar.01 sep.01
mar.02 sep.02 mar.0
3 sep.03
mar.04 sep.04
mar.05 sep.05
mar.06 sep.06
mar.07 sep.07
mar.08 sep.08 Ak tiva
Passiva
Figure 6.5 The international positions of banks reporting to the BIS. Positions towards tax havens in percent of total.
Although there has been strong growth in the absolute level of positions between tax havens and BIS banks, the tax havens’ share of the total posi
tions of the BIS banks has not actually increased.
See also Figure 6.4, which shows the proportions for a narrow and broad definition of tax havens re
spectively.
If the UK, the Netherlands and Ireland are in
cluded in a broader definition of “tax haven”, a higher proportion of positions are naturally found with tax havens. But the pattern is otherwise the same since the end of the 1990s. See Figure 6.4.
Figure 6.3 shows that the proportion of assets in the BIS banks placed in or lent to tax havens as narrowly defined has been at a stable level of about 12 per cent since the end of the 1990s. The share of international deposits and borrowings deriving from the same tax havens has been 15-16 per cent since 2002.
Excluding inter-bank positions, placements from tax havens account for just over 25 per cent of liabilities in the BIS banks (deposits and bor
rowings). See Figure 6.5. The tax haven share showed a rising trend until 2003, but has since been relatively stable. The proportion of the BIS banks’ assets (loans, securities, etc) in tax havens
has tended to rise over time, but has never ex
ceeded 20 per cent of total assets.
The BIS figures could be used as an indication of which tax havens are the largest and how the extent of tax haven use has developed over time.
As mentioned above, however, these data do not measure the scale of capital flight associated with illegal activities.
– First, illegal money flows do not necessarily find expression in a loan or deposit between a tax haven and a bank in another country. The funds could, for instance, be injected into a company or a trust which in turn buys shares or other securities in an open jurisdiction.
– Second, it is important to note that not all posi
tions related to tax havens are associated with illegal behaviour. This applies particularly when using a broad definition of tax havens.
The broad definition used above embraces financial centres which are also among the most competitive for activities which do not require particular secrecy. Even the narrow definition includes centres fairly certain to encompass substantial international activity which is not attracted by the secrecy on offer.
1
0 500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000
EU+ME+AF WH AP
UA ME AP EU WH AF US JP UK
Figure 6.6 Claims on banks in different groups of tax havens. Geographical break down by source1. Million USD 2006
The specified countries and country groups are: The United Kingdom (UK) Japan (JP), USA, Africa (AF), America except USA (WH), Europe (EU), Asia and Oceania (AP), Middle East (ME) and unallocated (UA). The tax havens are grouped in (1) Europe, Middle East and Africa (EU+ME+AF), (2) America (WH) and (3) Asia (except Middle East) and Oseania (AP) Source: IMF (2008)
6.2.2 Where does the capital in tax havens