Where do billionaires hide their money?

Shruti Tripathi Chopra

The world’s biggest tax havens revealed

In what was probably the mother of all leaks in history, the Panama Papers have revealed the shocking extent of the use of tax havens by the world’s elite.

From Putin to Messi to Cameron’s late father, many of the world’s rich and famous are known to have used tax havens to hide their wealth.

But which are the world’s biggest tax havens? According to the Financial Secrecy Index (FSI), “Switzerland is the grandfather of all tax havens”.

The index ranks the world’s 82 largest tax havens based on a territory’s financial secrecy score and its share of the global market for offshore financial services. The higher the score, the more secretive a country is.

Take a look at the top 10 biggest tax havens and one puncy nugget about them from the FSI report:

1. Switzerland

Punchy nugget: “In September 2015 the Swiss Bankers’ Association reported that banks in Switzerland held CHF 6.65 trillion ($6.5 trillion) in assets under management, of which it said 51% originated from abroad.”

2. Hong Kong

Punchy nugget: “Hong Kong is one of the world’s fastest growing secrecy jurisdictions for tax havens today. Its fund management industry had $2.1 trillion under management in April 2015; and over $350bn in private banking assets. In 2015 it had the world’s highest density of Ultra High Net Worth Individuals with personal wealth over $100m.”

3. USA

Punchy nugget: “The U.S. provides a wide array of secrecy and tax-free facilities for non-residents, both at a Federal level and at the level of individual states. Many of the main Federal-level facilities were originally crafted with official tolerance or approval, in some cases to help with the U.S. balance of payments difficulties during the Vietnam War. However some facilities – such as tolerance by states like Delaware or Nevada of highly secretive anonymous shell companies – are more the fruit of a race to the bottom between individual states on standards of disclosure and transparency.”

4. Singapore

Punchy nugget: “According to the Boston Consulting Group in 2015, Singapore held around one eighth of the global stock of total offshore wealth, and an IMF report in 2014 estimated that over 95% of all commercial banks in Singapore are affiliates of foreign banks: a testament to its extreme dependence on foreign – and offshore – money.”

5. Cayman Islands

Punchy nugget: “Cayman is now the world’s sixth biggest banking centre, with banking assets worth US$1.4 trillion in June 2014; and it hosts over 11,000 mutual and other funds with a net asset value of $2.1 trillion. It has 200 banks; over 140 trust companies; and over 95,000 registered companies. It is by far the world’s leading domicile for hedge funds, and the second leading domicile for captive insurance companies. Financial services account for well over half of gross domestic product.”

What about Britain?

Britain ranks 15th on the Financial Secrecy Index. The report regards 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”.

Here are the two reasons why:

The report said: “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. Illustrating the fact that these links are above all financial, Jersey Finance, the official marketing arm of the Jersey offshore financial centre, states that ’Jersey represents an extension of the City of London.’”

6. Luxembourg

Punchy nugget: “As in Switzerland, the offshore financial sector has been underpinned by a history of political stability. This is bolstered by Luxembourg’s position at the geographical heart of Europe, catering largely to its immediate neighbours – and also its role as a founder member of the European Union. This latter factor has provided Luxembourg privileged access to the European market that other offshore centres cannot match; and Luxembourg also enjoys considerable political support from European economic élites who benefit from its offshore services. These factors have often protected it against being blacklisted or pressured to change.”

7. Lebanon

Punchy nugget: “The Lebanese diaspora is estimated at anywhere between 5 million and 16 million-strong: larger than Lebanon’s total population of around four million. Many members of the diaspora are high-net worth individuals and include e such world famous names as Carlos Slim, the Lebanese-Mexican telecoms tycoon who is one of the world’s richest men; Carlos Ghosn, the French-Lebanese-Brazilian boss of carmakers Renault and Nissan; and Nicholas Hayek, a Swiss-Lebanese who runs Swatch, the biggest maker of Swiss watches.”

8. Germany

Punchy nugget: “Germany is a safe haven for dictators’ loot, the assets of organised crime networks, and the proceeds of tax crimes and other illicit financial flows from around the globe. In his September 2015 book Tax Haven Germany, TJN researcher Markus Meinzer calculated that the amount of tax exempt interest-bearing assets held by non-residents in the German financial system ranged between €2.5 - 3 trillion as of August 2013.”

9. Bahrain

Punchy nugget: “The financial sector today is the largest employer in Bahrain, contributing to over 25% of GDP and employing some 14,000 people. Bahrain is one of the biggest global centres for Islamic finance, and hosts the largest concentration of Islamic finance institutions in the Middle East. This sector is growing fast, with total assets in the Islamic banking sector rising from US$1.9bn in 2000 to US$25.4bn by November 2014, out of total banking sector assets of $189bn, according to the Central Bank of Bahrain.”

10. United Arab Emirates (Dubai)

Punchy nugget: “Although the Dubai International Financial Centre (DIFC) describes itself as “an onshore financial centre,” Dubai is unquestionably one of the world’s best known tax havens or secrecy jurisdictions built on an increasingly complex array of offshore facilities: free-trade zones; a low-tax environment; multiple secrecy facilities and lax enforcement. In addition, Dubai has a strong culture of an ask-no-questions, see-no-evil approach to commercial or financial regulation or foreign financial crimes. It has consequently attracted large financial flows and some of the world’s most high-profile criminals. A significant slice of the inbound money comes in the form of cash or gold.”

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