A tax haven, or secrecy jurisdiction, or offshore financial center, is any country or jurisdiction that offers minimal tax liability to foreign individuals and businesses. Tax havens do not require businesses to operate out of their country or the individuals to reside in their country to receive tax benefits. They use secrecy to attract illicit and illegitimate or abusive financial flows. A global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients.
Competition between jurisdictions to provide secrecy facilities has become a central feature of global financial markets, particularly since the era of financial globalisation really took off in the 1980s. The problems go far beyond tax. In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency. The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more.
It provides multiple ways for insiders to extract wealth at the expense of societies, creating political impunity and undermining the healthy ”no taxation without representation” bargain that has underpinned the growth of accountable modern nation states. Many poorer countries, deprived of tax and haemorrhaging capital into secrecy jurisdictions, rely on foreign aid handouts. This hurts citizens of rich and poor countries alike.
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. The Financial Secrecy Index (FSI) 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.
Here are the top 20 largest secrecy jurisdictions in the world.
British Virgin Islands
United Arab Emirates