Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens

by Nicholas Shaxson

A thrilling ride inside the world of tax havens and corporate masterminds

While the United States experiences recession and economic stagnation and European countries face bankruptcy, experts struggle to make sense of the crisis. Nicholas Shaxson, a former correspondent for the Financial Times and The Economist, argues that tax havens are a central cause of all these disasters.

In this hard hitting investigation he uncovers how offshore tax evasion, which has cost the U.S. 100 billion dollars in lost revenue each year, is just one item on a long rap sheet outlining the damage that offshoring wreaks on our societies. In a riveting journey from Moscow to London to Switzerland to Delaware, Shaxson dives deep into a vast and secret playground where bankers and multinational corporations operate side by side with nefarious tax evaders, organized criminals and the world's wealthiest citizens. Tax havens are where all these players get to maximize their own rewards and leave the middle class to pick up the bill.

With eye opening revelations, Treasure Islands exposes the culprits and its victims, and shows how:

*Over half of world trade is routed through tax havens

*The rampant practices that precipitated the latest financial crisis can be traced back to Wall Street's offshoring practices

*For every dollar of aid we send to developing countries, ten dollars leave again by the backdoor

The offshore system sits much closer to home than the pristine tropical islands of the popular imagination. In fact, it all starts on a tiny island called Manhattan. In this fast paced narrative, Treasure Islands at last explains how the system works and how it's contributing to our ever deepening economic divide.

Genres: Economics, Nonfiction, Finance, Politics, Business, History, Crime

272 pages, Hardcover

First published January 6, 2011

About the author

Shaxson was born in Malawi and has lived at various times in India, Brazil, England, Lesotho, Spain, Angola, South Africa, Germany and the Netherlands. Since 1993 he has written on global business and politics for the Financial Times, Reuters, the Economist and its sister publication the Economist Intelligence Unit, International Affairs, Foreign Affairs, American Interest, the BBC, Africa Confidential, African Energy, and others.

Shaxson currently lives with his partner and their two children in Zürich, Switzerland.

Reviews

[Zach Cohen · Rating 5 out of 5]

Before I get into my review, I wanted to point out that for someone without a lot of financial knowledge, this could be a very difficult book to read. I have a college degree in accounting, did some graduate work in tax, and worked for one of the big four accounting firms for a year in their international tax consulting department. I quit working for them and left the field entirely after I realized in vague generalities what they were doing, which was one of the reasons I was so interested in this book. The international system Shaxson describes coincides perfectly with what I saw in the accounting firm I worked for, and some of the specific techniques he describes correspond exactly to the tax structures I used to see discussed in trainings and other meetings. Given that background, I found this book incredibly engrossing and informative, but if you have low financial literacy, you may have a tough time with it. However, it is incredibly well written, uses a minimum of jargon, and tries its hardest to break down complex tax and financial concepts into lay terms.

Treasure Islands does a really incredible job in shedding light on an arcane, complex international financial system that has evolved mainly over the past 100 years. Like most people, when I heard the term tax haven, I would think of a few rogue Caribbean islands who helped a few rich people and crime lords launder money or hide it from taxation. Shaxson turns that conception on its head. While the term tax haven sounds like it specifically refers to taxes, Shaxon defines it more broadly: "Tax havens can be loosely described as a jurisdiction that seeks to attract money by offering politically stable facilities to help people or business entities get around the laws, rules, and regulations of jurisdictions elsewhere."

Using that definition, Shaxson aggregates the international network of such jurisdictions under the label "the offshore system". In this book, he investigates the three main components of the offshore system, which may surprise you. While the small island states are integral fortifications of the offshore system, the main poles are actually the United States, London, and a grouping of states in continental Europe (mainly Luxembourg, Switzerland, Lichtenstein, and the Netherlands). Considering that about one half of world trade passes through tax havens, they are integral to the current global system. Also, while terrorists and crime lords are significant users of the offshore system, the primary beneficiary and architect is the financial services industry. The bankers on Wall Street and in London have constructed a system to help them undermine democracy, drastically boost profits, destabilize the global markets, shape international regulation to their liking, and evade taxes, and this very same infrastructure enables the financing of international terrorism, corrupt third world rulers, and greatly facilitates the illegal drug trade. One key takeaway from the book is that all of these phenomena have their roots in the same underlying financial network, and none of them can be addressed without confronting the offshore system.

The main services that tax havens provides are secrecy, tax evasion, and freedom from unwanted regulation. A very important consequence of such a system is the creation of a race to the bottom in terms of regulatory environments. Shaxson examines this process both in the United States and internationally. While the US is an international tax haven (offering secrecy to foreign donors, allowing banks to accept proceeds from criminal activities as long as they were committed abroad, offering tax breaks to foreign investors), there is also a tax haven network at the state level. States such as South Dakota and Delaware, in an effort to attract corporations to incorporate in their states, abolished interest rate caps, giving birth to the credit card industry in the 80s. Delaware also has a long history of offering the most permissive rules of corporate governance, giving maximum power to corporate managers. Barack Obama criticized the Caymans, where he alleged that there was a building where 12,000 corporations supposedly had business offices. Well, there is an office building in Delaware with about 219,000.

Internationally, the offshore system allows banks to exercise this deregulatory leverage at the national level. The city of London, which has long maintained an extremely lax regulatory environment for fascinating historical reasons detailed in the book, began attracting massive amounts of business from US banks chafing under the Bretton Woods system of capital controls and Glass Steagall regulations separating commercial and investment banking. London had no such controls, so US banks were able to begin doing business there and use the threat to relocate to London to eventually force the US to deregulate in the late 90s and 2000s. As we know, this was a crucial development in setting the stage for the financial crisis of 2008. In addition, the unregulated markets that were based in London allowed banks to set up investment vehicles that were free of reserve requirements, allowing them to issue massive amounts of debt.

A final theme discussed in the book is the devastating effects of the offshore system on poor countries. For every one dollar of foreign aid that has flowed into developing countries over the past 30 or so years, TEN dollars have left the country and into the offshore system, building the portfolios and secret accounts of corrupt ruling elites. The offshore system creates a neocolonial dynamic where western countries back corrupt leaders and their allies, and provide the international financial infrastructure for these corrupt elites to steal their country's wealth and hide it abroad, free of tax. As pernicious as that is, the real consequence to that is that poor populations are saddled with the debt (the proceeds of which the rulers stole), which then of course requires the IMF to come in and radically undermine democracy by imposing harsh structual adjustment programs that mainly benefit rich investor countries and cause great pain to average people.

In summary, this book details the most important aspect of the global economy that you probably never knew existed. If you are interested in understanding poverty, inequality, development economics, international terrorism and the drug trade, and how corporations have amassed such great political power, you are missing a huge piece of the puzzle if you don't read Shaxson's epic work.

[Jan-Maat]

The truest sequel to Robert Louis Stevenson's classic that could ever be written. Why trouble yourself about a little buried treasure on one little island with only a few corpses on a dead man's treasure chest when the capital outflows of entire countries or industries can be redirected?

This is an easy to read introduction to tax havens and the offshore system. It's disturbing in that you can see why Africa will remain poor and why we will remain at risk of financial shocks like the collapse of the sub-prime mortgage market in the USA for the foreseeable future and see one of the reasons why the rich will continue to get ever richer. Worth a read or two.

[Nathan · Rating 1 out of 5]

Sometimes fascinating insight into the history of tax shelters, ruined in my eyes by the author's style which that of an incensed early 1980s Greenpeace leaflet writer. By the nature of tax shelters, you're going to have multinational corporations as villains so, unless you *want* to come off sounding like a stereotyped leftie loon, you had better get that tone and voice just right. Shaxson has not.

My favourite story was that of the wealthy British Vestey family with Argentinian meat interests. They were shipping meat from Argentina to Britain before World War I, when British income tax was 4%, and making a tidy profit doing so. They owned the entire supply chain: farms, packing, shipping, stores. When the British government substantially raised income taxes at the start of WWI, the Vestey brothers fought the taxes and then manipulated the prices that their companies sold animals/meat/shipping/etc. to each other so that their profit was made before the meat landed in Britain--they invented this method of sheltering from taxes. The story doesn't end there--the British government after them, so they decamped to France. Or, rather, their company was put in a French trust out of the reach of the British government. The to-and-fro continued, with the Vesteys wanting to live in Britain but not to pay its taxes. They were eventually given a title, to widespread uproar (and modern parallel: a Tory peer recently admitted he still isn't a tax resident in the UK). The Vestey family is rich to this day.

Other takeaway points: (1) tax shelters have different rules for natives than for the foreigners with money; (2) they're a form of colonialism; (3) they're deeply damaging to the economies of the countries that host them; (4) they are set up and run by the UK and US and other sources of money, and in particular Jersey and other Channel Islands have a close and unassailable connection to the finance industry in the UK whose monied lobbying prevents any changes.

[Heikki · Rating 5 out of 5]

I picked up this book (actually its Finnish translation) at a book fair, because it seemed to handle tax evasion and planning, as well as tax havens and offshoring, which have been of interest to me for a while.

It did. I had three questions I hoped it would answer: what are tax havens, what is the effect of offshoring, and how can we start to rectify the appalling financial problems in the world. I am also happy to report this book does indeed answer all three.

Having read some other books on postwar economy, ie. Bretton Woods and after that, I had been under the illusion that the little hot islands in the Caribbean are the root of all evil. That is not at all true. They do contribute to the problem in a massive way, but much more blame is to be put on the politicians who shied away from setting robust rules on financial markets and transactions. The development in the City of London in the 1950s, as well as the Thatcherite Big Bang of the 1980s serve as illustrations on just how clueless, and powerless, politicians have been in the glare of financial empire building.

The modern financial system supplies companies with almost limitless means for hiding profits by moving vast amounts of money between subsidiaries at the click of a mouse. In another source I read that while banks used to hold on to stock for four years on the average, the current time is 22 seconds. If all that stock selling and buying is supposed to create tangible value, I do not see how that would be even possible, and after this book I know it doesn't. It creates money for nothing (I wonder if Dire Straits was right and tricks are for free) and it is all just a big bubble.

The way corruption and use of advanced loopholes in national and international law are used to siphon real assets such as oil and other commodities, not to mention money, out of developing countries, is nothing short of appalling. In the name of fast and efficient transfer of money, it has become possible to fade out any trail of real ownership of money once it enters one of these tax havens. Shaxson brings out some people who used to work in the financial sector but left it, usually due to nausea incurred by the flaunting of rules, regulations and especially the lack of any trace of shame, and the way these people are able to illustrate, first-hand, what goes on behind the scenes is hard to read. You have your eyebrows on the dome of your head from time to time.

And the third thing, the way out, is listed at the end in about ten key actions. All these would spell the doom of the financial world as we know it today, and therefore I am not at all confident they will be picked up any time soon. I definitely hope that the people of all nations, everywhere, would pick up the standard and start yelling out for honesty, transparency, and fairness in trading and financial action in their respective countries. But faced as we all are with local big companies and a financial sector interested plainly and exclusively with the making of more money out of thin air, it will be an uphill battle.

After reading this excellent book, I am more convinced than ever of this: greed will be the ruin of this world.

[Rashi Chandok · Rating 4 out of 5]

For a detailed review, checkout - https://www.cmpltime.com/post/book-re... ✨ (This is my first time doing a book review for Compliance Time and I would love to hear your comments or feedback about this😍)

Want to have a deep dive into the creation and history of tax havens? Want to comprehend how multinational corporations manage to pay a negligible amount of tax while making enormous profits? Want to figure out how the offshore havens are continuing to thrive despite the worldwide criticism of their secrecy laws? This book by Nicholas Shaxson is the perfect one to pick for getting a clear picture of this secret and hidden world.

Targeting the layman using simple language, multiple examples, and insightful conversations, Shaxson has made an effort to explain this mysterious phenomenon that has swept the world in the last century. A bit hard to follow because of the journalistic style of writing, this book rewards the reader with a lot of information and well-researched facts about the creation and sustenance of this web of secrecy.

[Maru Kun]

Fascinating body of work by Gabriel Zucman, assistant professor at UC Berkley, linking leaked information from the Panama Papers, HSBC etc with national tax records in order to investigate not tax avoidance but tax evasion: Gabriel Zucman, Tax Evasion and Inequality.

This presentation sums up a lot of the work.

[Adrian White · Rating 5 out of 5]

A remarkable book that gives a real insight into how the world works - particularly into the power of the City of London.
It's a rigged game and I don't want to play.

[Markus · Rating 5 out of 5]

Tax heavens, the missing piece of every book that has dealt with the 2008 financial crash, or least those that i have read so far. It gives a clear answers why a poor countries remain poor and it makes the current European bail out sums seems like a pocket money when compared to trillions of dollars/euros that have gone through the tax heavens and disappeared to somewhere in pockets of the plutocrats and their like.

Easy to read and understand even to a simpleton like me, Shaxson writing is good and like Matt Taibbi and Michael Lewis, he can make a potentially boring subject very interesting. The most fascinating chapter was one dealing with the City of London Corporation, i have read and heard bits and pieces, but now i know so much more, it's a truly bizarre story and hard to believe that it really exist. If there really is the Illuminati, then City of London is it's headquarters. And speaking of the secret societies, those pesky Freemasons seems to pop up at the tax heavens, a funny thing that. Truly an eye-opener kind of a book. Highest recommendation.

[Liam Curran · Rating 4 out of 5]

The content was simply dumbfounding; Treasure Islands really illuminates the infinitely gloomy world of tax havens, secrecy jurisdictions and corruption. The sheer scale of financial criminality that lies beneath the surface of modern society will leave any unexpecting world-view altered.

The only reason I did not give 5* is because I felt at times the writing style was not as methodical or poetic as it could have been. But in all fairness I was reading Sapiens at the same time which is a book rarely challenged in terms of explaining concepts and facts in the most coherent and satisfying way possible.

[Nabilah · Rating 5 out of 5]

I truly wish we can hunt these rich people and their accountants to death for sport. Goddammit.

[noblethumos · Rating 5 out of 5]

Nicholas Shaxson’s Treasure Islands (2011) is a forceful and meticulously researched investigation into the global system of tax havens and offshore finance. Combining elements of investigative journalism, political economy, and historical narrative, the book seeks to expose the extent to which offshore jurisdictions have reshaped global capitalism, facilitated illicit financial flows, and undermined democratic governance. This review evaluates Shaxson’s analytical framework, evidentiary approach, and contribution to academic and public debates about financial transparency and international political economy.


Shaxson’s central thesis is that tax havens—often portrayed as marginal or exotic anomalies—are in fact integral components of the global financial system. He argues that offshore jurisdictions enable corporate tax avoidance, regulatory arbitrage, secrecy-driven capital mobility, and the concealment of wealth by elites. Rather than existing on the periphery, these jurisdictions function as the “central nervous system” of contemporary capitalism, shaping investment flows, public finances, and political accountability. This claim places Shaxson in dialogue with scholars of international political economy who emphasize the structural role of financial networks and regulatory asymmetries in enabling capital dominance.


The book is organized thematically, tracing the evolution of offshore finance from its origins in the postwar era to its entrenchment in Anglo-American financial systems. One of Shaxson’s most significant contributions is his historical reconstruction of how Britain and its network of Crown Dependencies and Overseas Territories—such as Jersey, Guernsey, the Cayman Islands, and the British Virgin Islands—became pivotal nodes in the offshore world. He deftly illustrates how the City of London transformed itself into a hub for Eurodollar markets and global capital flows, relying on the legal and regulatory privileges of overseas jurisdictions to cultivate a system of semi-detached financial power.


Shaxson’s narrative is grounded in extensive interviews, archival material, and secondary scholarship, producing a rich empirical foundation. He describes in detail how multinational corporations use transfer pricing, shell companies, and complex ownership structures to minimize tax liabilities; how banks create and service opaque offshore structures; and how wealthy individuals shield assets from scrutiny. These chapters reveal the organizational complexity and political insulation that enable the offshore system to persist.


A notable strength of the book is its attention to the political implications of offshore finance. Shaxson argues that tax havens not only erode national tax bases but also distort global development patterns by facilitating capital flight from poorer countries. He highlights the interplay between offshore secrecy and corruption, showing how illicit flows weaken democratic institutions, entrench oligarchic power, and restrict governments’ fiscal capacity. His framing of offshore finance as a challenge to democratic sovereignty aligns with broader critical political economy literature that views financial globalization as producing new forms of private authority.


However, the book also exhibits several limitations. Shaxson’s moral and political urgency—one of the book’s strengths—can occasionally lead to overstatement. At times, the offshore system is portrayed as a cohesive and unified network directed by a small set of powerful actors, which risks underestimating the heterogeneity of offshore jurisdictions and the complexity of the political incentives that sustain them. Some critics have argued that Shaxson’s focus on British imperial legacies and Anglo-American finance, while empirically rich, underplays the roles of other global financial centers, such as Switzerland, Singapore, and Hong Kong, as well as the regulatory dynamics within the European Union.


Methodologically, the book privileges journalistic investigation over formal theoretical modeling. While this approach enhances accessibility and narrative force, it may limit the book’s appeal among economists or political scientists seeking systematic comparative frameworks. Nonetheless, Shaxson’s empirically grounded argument has been influential precisely because it brings together disparate strands of research and converts them into a coherent and compelling indictment of offshore finance.


Despite these limitations, Treasure Islands is an important and provocative contribution to debates on tax justice, financial regulation, and global inequality. It played a significant role in drawing broader public attention to the political economy of tax havens prior to the Panama Papers (2016) and Paradise Papers (2017), which further substantiated many of Shaxson’s claims. The book remains widely cited across fields including international political economy, development studies, legal scholarship, and global governance.


Treasure Islands offers a powerful critique of the offshore financial system, combining investigative rigor with a strong normative argument about transparency, sovereignty, and democratic accountability. While the work is more polemical than purely academic, its analytical insights and historical detail make it a valuable resource for scholars and practitioners concerned with the governance of global finance. Shaxson’s central contention—that the offshore world constitutes a structural pillar of contemporary capitalism rather than a peripheral anomaly—continues to shape scholarly and policy debates on financial reform.

GPT

[Karel Baloun · Rating 3 out of 5]

The debasement of the global economy is a threat to everyone who depends on it working, on its currencies maintaining trust and value.
The start of the book is a slightly repetitive summary of the main ideas, but by page 50, the historical facts of elites avoiding taxation, and Keynes working valiantly to stop them, become interesting.

Tax dodgers are evil, and gop ideology of minimizing the government aligns. Dems like money too, especially senators from Delaware, but libertarian starve the beast doctrine is a core evil. Way to easy to lead the wrong cheers while sounding like a good American.

Ironically, the US fiscal deficit requires both low interest rates and these huge capital inflows, just to sustain normalcy. Capital flight if a target existed would limit political fight.

Most of this book is about history, and its modern third is 1980-2010, even if publication date is 2015. The list of solutions, saved for the very short “conclusion” don’t feel credible or sufficient to me. Certainly persistence and global coordination are required. The opportunity window closes if democracy and rule of law become unable to coordinate global actions

In a $100T/yr formal global economy, how much corruption and theft can the system take, before losing credibility and public support? Maybe 2-4cx more? Perhaps 1-3% of annual theft? Around the rate of inflation... but those assets keep growing :-(

“The interested of industrial capitalists and financial capitalists often conflict too. Financiers, for instance, tend to like high interest rates for which they can derive considerable income, while industrialists want low interest rates to curb their costs.” (p52) I find more justification for hating big finance and the large chunk of GDP which it steals, while liking capitalism and market economics. The size of financial industry profit seems to me an excellent proxy for how the main street economy is failing and inequality is growing.

“Capital no longer flows simply to where it gets the best return but to where it can secure the best tax subsidies, the deepest secrecy, and to where it can most effectively evade the laws, rules, and regulations it does not like.” (p53)

[Martina · Rating 5 out of 5]

Devastating book.

*insert bad joke about likely substance abuse following the completion of the book*

[Anastasia Alén · Rating 5 out of 5]

Loistava tietopaketti veroparatiiseista ja offshoringista!
Hidas lukea ehkä sanaston ja teeman takia mutta tosi mielenkiintoinen, suosittelen lämpimästi!

[Thomas Ray]

A taste of it in Foreign Affairs magazine March/April 2018 pp. 94-107. Shaxson is on staff of Tax Justice Network. Twitter @nickshaxson

[burak · Rating 4 out of 5]

some very interesting chapters (esp about the euromarket & eurodollar) dedicated to historical vignettes about the origin of tax evasions and the city of london, although slightly didactical in tone

[Andrew Davis · Rating 4 out of 5]

A well written account of Tax havens and how the impact on the world’s economy. A lot of interesting facts and references. With discussion of the historical background on the tax evasion it helps to understand the current situation. Well recommended.
Some of the notes follow:
More than half of world trade passes, at least on paper, through tax havens. Over half of all banking assets and third of foreign direct investment by multinationals are routed offshore.
The world contains about 60 secrecy jurisdictions, divided roughly into 4 groups:
1. European havens – Switzerland, Luxembourg, Netherlands, Austria and Belgium, Lichtenstein and Monaco, Andorra and Madeira.
2. British zone centred on the City of London, which spans the world and is loosely shaped around Britain’s former empire. It has 3 layers:
a. City of London,
b. Jersey, Guernsey and the Isle of Man, Cayman Islands, Bermuda and British Virgin Islands, the Turks and Caicos Islands and Gibraltar.
c. Hong Kong, Singapore and Bahamas, Dubai, Vanuatu
3. Zone of influence focused on the USA – Florida, Wyoming, Deleware and Nevada, the American Virgin Islands, Marshal Islands, Panama
4. Others, like Somalia and Urugway.
Brothers William and Edmund Vestey are quoted among the biggest individual tax avoiders in history. They started in 1897 by shipping meat trimmings from Chicago to Liverpool. They set up cold stores and retail outlets in Britain, France, USA, Russia and South Africa. In 1911 they moved into shipping. From 1913 they expanded into ranches and meat packaging in Argentina. When Britain started in 1914 to increase taxes to cover costs of the war, they moved overseas to cut their tax bill. When they returned in 1919 they continued to be treated as visitors, not taxable residents, and started lobbing to decrease their taxes. Having failed they set up a trust in Paris and claimed that technically they were abroad. Despite changes in law to tax overseas trusts, they continued to avoid taxes. When Queen finally started paying income tax in 1993, the latest Lord Vestey smiled and said, ‘Well, that makes me the last one’.
In 1934 the Swiss law was adopted a law to criminalise any banking secrecy violations. This was done in response to French requests to collaborate with their investigation of some French tax evaders. After the war Swiss claimed they enacted it to protect Jewish money from the Nazis, which wasn’t true.
As London banks got restricted in using pounds to loan to overseas borrowers, they set up a Euromarket to deal in Eurodollars – the US dollars to loan instead. In late fifties Soviets did not want too many dollars in New York and started depositing them in London. American bankers soon realised that if this strange new market in London was free of US banking laws and started using London banks instead. By 1997, nearly 90% of all international loans were made through this market. Without any regulations about holding some percentage of their assets in cash (usually 10%) they could lend all their money and increase profits sixfold.
With a normal bank it needs to keep some cash reserves (say 10%), so if it lends 100$ dollars it has to have $110 instead. Next out of that $100, the next lender can only lend $90, which turns into $81 for the next lender, and so on. That way $100 can contribute $1000 to the economy. In case of Euromarket there is no need for reserves and $100 can be multiplied endlessly.
In 1981 when Reagan became president, America approved a new offshore possibility – the International Banking Facility. The American banker could sit in Manhattan office and open a new set of books and operate as if he was a branch in Nassau and operate under Nassau regulations.
The second smallest state in the USA, Delaware is the home to many of the world’s biggest corporations. They have been there incorporated to follow Delaware corporation laws which are much more lax than in the other states. All the major corporations: Ford, General Motors, Coca-Cola, Google, Intel follow Delaware law.
The narcotics industry alone generates some $500 billion in annual sales worldwide.
Two organisations worth watching:
- Tax Justice Network - http://www.taxjustice.net. An European organisation.
- Global Financial Integrity - http://www.gfintegrity.org. An American organisation.
The author raises an issue of the International Accounting Standards Board, that sets the rules how the companies publish their financial data. This is a private company funded by the banks and large accounting firms, operating in London and registered in Deleware. It’s an example of privatising of the public policy making.
When William the Conqueror commissioned the Doomsday book, the City of London was excluded from it.

[Jonny White · Rating 4 out of 5]

Probably the most interesting book you could possibly read on taxes. Shaxson outliens the history surrounding tax havens, before going into detail about the consequences and hidden mechanisms within our governments to enable these places to exist.

[LATOYA JOVENA · Rating 4 out of 5]

This book has shaken my entire world view. Money isn’t real. It’s all just made up in banks. The whole thing is a scam. And we can't just raise taxes on rich people to solve social ills, because they have ways, both legal and illegal, to prevent that.

Well researched and plainly explained!

[Sara · Rating 5 out of 5]

The neoliberal sense of place

[Through my ratings, reviews and edits I'm providing intellectual property and labor to Amazon.com, Inc., listed on Nasdaq, which fully owns Goodreads.com and in 2013 posted revenues for $74 billion and $274 million profits. Intellectual property and labor require compensation. Amazon.com, Inc. is also requested to provide assurance that its employees and contractors' working conditions meet the highest health and safety standards at all the company's sites.]

We generally think that it is places like New York, Shanghai, or Rio that represent globalization. Saskia Sassen's global cities, network hubs attracting and trasforming people and resources, and spitting externalities back into the flow. This book shows how little this vision reflects the real power balances, and how tiny a place the world has become for its cosmopolitan elites. Neoliberalism knows that what matters to control the world economy is not the techno-mass but only one thing: jurisdiction. A tiny somewhere where conensus is guaranteed and decisions are taken effortlessly behind closed doors.

“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” Off-shore jurisdictions are fulcrums, the rotating Mont Pelerin venue is a fulcrum, Delaware, the World Economic Forum's Davos, the London School of Economics... It's from those places that it gets so easy to pass a bill, cut a deal, have the tactical op-ed published.. Effortlessly, pleasantly. All the levers close to hand.

This is for me the major revelation of the book. An activist at some point says: "There are so few of us, and so many of them". Clearly, it's not a matter of numbers. There are so few of them, but they are so well co-ordinated in small shabby places - and so many of us, lost in breathtakingly huge and marvelous cities.

[Ahmed Mohsen]

فكرة الكتاب جيده جدا ....
يتحدث المؤلف عن احد اهم الأفكار الاقتصادية التى تحكم النظام الاقتصادي العالمي ، و هي فكرة الأوف شور Off shore و هي الطريقة التى من خلالها تتجنب الشركات متعددة الجنسيات دفع الضرائب من خلال طرق و آليات معروفة .
الكتاب ملئ بالأرقام و الحكايات الصحفية الصادمة ، و التى تبعث على الدهشة الطويلة ...كيف يكسب أغنياء العالم كل هذه الاموال دون اي ضرائب أو التزامات حقيقية عليهم تجاه المجتمع ....لكن لأن المؤلف صحفي ...فإن الكتاب يعيبه التطويل المبالغ فيه ، و الكثير من الحكايات الصحفية التى تتحدث عن نفس المضمون .
لو أردت الاختصار ...انصحك ان تقرأ المقدمة و الفصل الأول و الفصل الأخير بتعمق ...و فيهم أهم افكار الكتاب الرئيسية ، باقي الكتاب اقرأ منه ما تعتقد انه يفيدك أكثر او تستمع به .
الكتاب رغم انه يتكلم في الاقتصاد لكن لست بحاجة لخلفية اقتصادية عميقة لفهم أفكاره .
كتاب بفكره جيده يعيبه التطويل الشديد .

[David · Rating 3 out of 5]

I gave up on it about halfway through. He has some strong points and great historical context, but he is so hell-bent on showing what can go wrong that he presents the efforts to fight tax evasion and money laundering as little more than trivia. We will never track down every dollar that has been pushed into a tax haven, but we can go beyond bemoaning our failures and focus a bit more on (1) the investigations against major international banks that have yielded billions of dollars in fines and (2) statutes like the Foreign Account Tax Compliance Act (FATCA). Are either of these perfect? Of course not, but we can look at how these efforts have forced financial institutions to change their behavior, and then look for ways to strengthen our existing laws and regulatory efforts. We need to move beyond cynical complaining on this issue...

[Bert Bruins · Rating 5 out of 5]

"Taxes are for the little people", the New York millionnairess Leona Hemsley once famously said. This one quote sums up the essence of tax havens, as most of us with normal jobs or small businesses pay our taxes, whereas this book makes abundantly clear that different rules operate for those willing to avoid tax and with the funds to buy the best advice on how to do it, be they wealthy individuals, transnational corporations (TNCs), criminals or corrupt autocrats.

This tour de force by Nicholas Shaxson is already 9 years old, and no doubt can do with an update. But one thing it made abundantly clear to me is that if you don't know about tax-havens you don't know about modern economics AND politics.

Shaxson uses a wide definition of tax havens that includes off-shore (the Cayman Islands, Jersey) as well as on-shore (Delaware, the City of London). He uses the term SECRECY JURISDICTIONS as a synonym for tax haven, because, as he explains, secrecy lies as much at the heart of these global constructs that facilitate the crooked as does their low tax rate.

Shaxson even got a compliment for this book by a "well known tax haven supporter" (yes, they exist) who said that they had hoped that the book would be shallow and full of errors, but "we have been disappointed".

After an introduction the author roughly describes how the current tax haven system where approximately 1/3 of the worlds money is thought to be hiding (!) developed. So Switzerland gets covered, and the myth the Swiss still peddle that its banking secret was strengthened to protect the money of Jewish people who were fleeing from the Nazis is shown to be false.

He describes the invention of TRANSFER PRICING by the meat trading Vesty Brothers from Liverpool, who dodged taxes on a grand scale by owning the whole supply chain between Argentina and Britain around the time of WWI, and over- or undercharged within their own supply chain to avoid making a profit where taxes are high. Due to the opacity of global accounting of TNCs this is still widespread in global trading and robs governments around the world of billions of tax revenue.

An important sub-plot in this riveting yet sordid story is the rivalry between the USA and the British Empire as was. The case has been made that WWII was actually 2 wars as far as these two nations are concerned: One was the war against the Axis powers where they were allies, and the other an economic battle for world economic supremacy between the two, which Britain lost. In Shaxson's account the City of London and the Bank of England (both for reasons of history and financial clout rather independent institutions barely controlled by government) started from the 1950s onwards to undermine the new US hegemony by slowly re-erecting a British Empire mark 2, through the underwater projectiles of tax havens (conveniently just of the coast of America). The US was at this time still influenced by 1930s New Deal legislation, the world economy was regulated through the Bretton Woods system of capital controls (to avoid another 1929 style economic crash), and high value individuals and companies paid fairly high taxes.

The Brits managed to bore holes in this system by inventing the EURO DOLLAR market, which has nothing to do with the current Euro currency, but everything with UK banks catching a large part of the dollars that were flowing around the world as a kind of world currency, out of the reach of US tax authorities. With the help of secrecy laws, and the development of more and more complicated secrecy structures (like the layers of an onion, you peel one layer after another and still can't find the real owner of an asset), tax havens like the Cayman Islands and the Bahamas have grown and grown, and are now basically vehicles for tax evasion (the same can be said for Jersey and the Isle of Man).

The US, having lost this battle, eventually decided to join the club, and, to redirect dollars back to the States, allowed US tax havens to establish themselves such as the states of Delaware and Wyoming and overseas dependencies like the Marshall Islands. One of the saddest things about this is that whilst tax avoidance and tax evasion are a huge drain on developed nations and their abilities to maintain a well-funded welfare state and health-systems etc, the impact of secrecy jurisdictions on the developing world is even larger. Shaxson argues that through tax havens the UK and US have resurrected the benefits (to the wealthy) of the colonial era by allowing trillions of developing nations' stolen wealth to be hidden in western controlled tax havens. Money flows out of the developing world are said to be 10 times that of the value of development aid going the other way!

Another important sub-plot are the ideological defenders of tax havens (yes, really!) such as the Institute for Economic Affairs and (in the UK) the Tax Payers Alliance (the Tax Justice Network in the US), who have all but bought certain politicians and political parties to make the point that the competition of tax havens has forced onshore, "big spend" developed nations to reduce taxation (on the wealthy of course) and therefore reducing the power of "fat burocrats".

Another important sub-story here is the importance of tax havens in every financial scandal that has erupted over the last decades, from ENRON in the States to the 2007 crash of international banking (bailed out by the regular tax payer of course).

Oh and then there are the culpable global accounting firms (the big four), that are supposed to check TNCs's accounts on behalf of national governments (after all corporations are ultimately licensed by national governments to exist and operate). These accounting giants (Price Waterhouse Coopers, Ernst & Young and a few more) have time and time again failed to spot danger and/or alert others about dangerous financial shenanigans within large businesses, thereby hurting the interests of the owners (shareholders) and governments.

This book is information-dense, and I'm going to stop here. Shaxson does come up with very practical solutions to this highly damaging disease in the world economy, that could be implemented straightaway if politicians were informed enough and willing. People who want radical reform are up against both resistance (by the usual suspects such as the City of London Corporation) and defeatism by others ("What can we do about this, this battle is lost" kind of thing). Knowing what is actually going on, who are the major actors in this global tragedy, and how it came about surely are important for anyone who cares about the health of the world economy, so do read this book and share it!

[Marco · Rating 2 out of 5]

Una lettura deludente. Il tema è molto interessante e senza dubbio l'autore fa bene a sostenere come esso sia trascurato e meriti più attenzione e più interventi. Anche la tesi generale — molto negativa nei confronti dei paradisi fiscali e del loro impatto sull'economia globale — è senz'altro sottoscrivibile; purtroppo però l'analisi dei fenomeni è spessissimo affrontata in maniera deterministica e puramente strumentale all'affermazione di questa linea di pensiero. Diversi resoconti contenuti nei vari capitoli fanno sorgere il sospetto di un continuo cherry-picking finalizzato ad amplificare i contorni sensazionalistici di quanto descritto; quando poi si tratta di entrare nel merito e affrontare in maniera se necessario anche tecnica le dinamiche finanziarie e contabili alla base del sistema offshore, le ricostruzioni dell'autore sono alquanto reticenti, limitate a un name-dropping superficiale che sa tanto di "non serve che capiate davvero come funziona (visto che in fin dei conti non lo ho capito bene nemmeno io)".
Peccato. Concludo la lettura con molte curiosità non soddisfatte e qualche dubbio di parzialità — ma con l'intenzione di approfondire ulteriormente, visto che le pulci nell'orecchio messe dal testo sono tante e — nonostante i limiti — la gravità del quadro economico (se non geopolitico) condizionato dall'offshore emerge in maniera chiara.

[Stephen Heiner · Rating 5 out of 5]

I first heard of Nicholas Shaxson when he appeared in the eye-opening documentary, The Spider's Web, about Britain's shadow banking empire (very much worth a watch: https://www.youtube.com/watch?v=np_yl...). I was interested enough in what he had to say to watch his full uncut interview for the film (https://www.youtube.com/watch?v=0sgnN...) which then led me to reading this book.

So the City of London corporation is an offshore entity in the Square Mile at the very heart of London. This is where all "offshore" roads started. That is a cancer at the very heart of England and at the heart of Europe.

The offshore system was a way that England retained its empire financially while appearing to lose it legally. It is a cancer at the heart of world finance.

The knock-on effects of the offshore system are at the heart of major problems in almost every country in the world. The worst bit? Offshore benefits a fraction of a fraction of the world population, at the expense of everyone else.

While I think Shaxson is naive to believe that there will ever be real change coming, it's important to read this book to acquaint yourself with the full scope of the problem. In fact, it's only in reading this book that anything like the Panama Papers will make sense to you.

[Carlos · Rating 5 out of 5]

This is an eye-opening book that explains well the offshore world and its consequences to the countries hosting tax havens and to the rest of the world. It is an incredible history, also covered in Moneyland: Why Thieves and Crooks Now Rule the World and How To Take It Back, but I found this one better researched. The main point is that there is a network of tax havens across the world roughly following the frontiers of the former British Empire that specializes in hiding money from national taxes and regulations. The author does a good job exposing all the pieces of this network, from the Cook to the Cayman Islands, including its core in the city of London - actually a corporation completely outside the control of the British government. We know little about all this because of libel litigation in the UK, which is a powerful weapon for those seeking to hide from authorities, but the offshore world is a corrupting force that takes control of small countries, that become dependent on finance-export (such as others become dependent on commodities-export), and ignites a race to the bottom among other countries.

[Peter · Rating 4 out of 5]

Overall, the book achieved its core goal: it made me angry about tax havens. It also made me confused about how to govern corporations, and more convinced than ever of the need to totally eliminate the corporate tax and focus more on progressive income taxes and capital gains. This is obviously a bit under-developed, but at the same time, paragraphs like this one just don't offer a lot of other options:

"Each country taxes its citizens, residents, and corporations in different ways, and different countries’ tax systems often clash in unpredictable ways. Multinationals based in these different countries face very different tax bills on similar incomes, enabling one to out-compete another on a factor that has nothing to do with efficient management or real productivity."

From a technical level, the prose was a bit ranty and overly polemical in a lot of places. But it maintained a fervent anger that I appreciated, and I think that the overall argument was quite strong - at the end of the day, I think more people should read this book.

I will say though - there is a certain amount of joy that seems to come from openly flaunting taxes, and there were some hard-working lawyers who just seemed to have found their calling in this arcane subfield.

[Eashwari · Rating 5 out of 5]

This broke my belief of the promise of developing nations and the idea of development.

A subtle form yet incredibly powerful form of colonialism that continues exist and thrive.

The darkside is seductive and reigns you in.

It's crazy that human beings build such strange systems that defies rational thought. It is political. It's Bizzare.

[Liam Porter · Rating 4 out of 5]

Treasure Islands is an investigation into the world that many of us have heard of but who few of us have had direct interaction: so-called "tax havens". Shaxton has done a lot of travelling to these places and explains to us how they have become a fixture of the international marketplace. He puts an emphasis on how diverted profits have damaged third world countries:

I had spent years watching, living in and writing about the countries along the curve of Atlantic coastline ranging from Nigeria in the north, through Gabon and down to Angola in the south. This region supplies almost a sixth of US oil imports and about the same share of China's, and beneath the veneer of great wealth lies terrible poverty, inequality and conflict. Journalists are supposed to start on the trail of a great story somewhere dramatic and dangerous; unexpectedly I found my story here, in a series of polite if unsettling meetings in Libreville, [Gabon]. p.1

Shaxton claims that a process called "transfer pricing" allows profits to be hidden from the presumptive country of sale, and also for the costs of production to be refunded according to the ost favourable tax code - regardless of where it was produced:

Consider the banana.

Each bunch takes two routes into your fruit bowl. The first route involves a Honduran worker emploued by a multinational who picks the bananas, which are packaged and shipped to Britain. The multi-national seels the fruit to a big supermarket chain, which sells it to you.

The second route - the accountant's paper trail - is more round-about. When a Honduran banana is sold in Britain, where are the final profits generated, from a tax point of view? in Honduras? In the British supermarket? In the multinational's US head office? How much do management expertise, the brand name, or insurance contribute to profits and costs? Nobody can say for sure. So the accountants can, more or less, make it up. They might, for example, advise the banana company to run its purchasing network from the Cayman Islands anmd run its financial services out of Luxembourg. The multinational might locate the company brand in Ireland; its shipping arm in the Isle of man; "management expertise" in Jersey and its insurance subsidiary in Bermuda.

Say the Luxembourg financing subsidiary now lends money to the Honduras subsidiary and charges interest at $20 million per year. The Honduran subsidiary deducts this sum from its local profits, cutting or wiping them out (and its tax bill). The Luxembourg's subsidiary's $20 million in extra income, however, is only taxed at Luxembourg's ultra-low tax haven rate. With a wave of an accountant's wand, a hefty tax bill has disappeared, and capital has shifted offshore.

Big Banana has done a common offshore trick known as transfer pricing, or transfer mispricing.. By artificially adjusting the price for the internal transfer, multinationals can shift profits into a low-tax haven and costs into high-tax countries where they can be deducted against tax. p.11

Shaxton also claims that a common trick is for companies to resell to its own subsidiaries at high prices on paper. Why? In order to make these subsidiaries, located in high-tax countries, unprofitable on purpose:

Chase was the oil company's preferred bank, and [in the early 1960s] it had asked [young economist] Hudson to study the balance of payments of the petroleum industry, in order to show that the oil companies were "good for America" and help them lobby for special perks from the government. Hudson had been asked to find out where the oil companies made their profits. At the producing end? At the refineries? In the gas stations? David Rockefeller, Chase's president, arranged for Hudson to meet Jack Bennett, treasurer of Standard Oil of New Jersey, now part of the ExxonMobil empire. Bennett gave him his answer. "The profits are made right here in my office," the oil man said. "Wherever I decide."

He was talking about transfer pricing...Bennett showed Hudson exactly how large vertically integrated multinationals could shift profits around the globe, apparently without breaking the law. The company would sell its crude oil cheap to a shipping affiliate registered in zero-tax Panama or Liberia, which in turn sold it on at nearly retail price to its refineries and marketing outlets. In the high-tax countries where the oil is produced and consumed, the subsidiaries buy at a high price and sell cheap, so they are unprofitable. But in the middle, in zero-tax Panama or Liberia, the subsidiaries buy cheap and sell dear, making vast profits. But these havens levy no tax on those profits. To this day, accounting standards effectively hide this kind of trickery, letting companies shovel results from different countries into a single category (often called simple "international") which cannot be unpicked to work out who takes what profit where. "Only the immense political power of these extractive sectors," said Hudson, "could have induced their governments to remain so passive in the face of the fiscal drain."

In the 1960s this kind of offshore leakage was relatively restrained when compared to today. p.190

Shaxton proposes that the largest companies crush innovation on the market since the advantage of tax havens is not available to smaller businesses:

A lot of innovation - I'm talking about useful innovations to make better and cheaper goods and services, not the City of London's innovations that simply shift wealth upwards and shift risks downwards - happen in small and medium-sized enterprises. But the offshore system works directly against this.

It subsidises multinationals by helping them cut their taxes and grow faster, making it harder for the innovative minnows to compete. And when small innovative firms do emerge they become targets for predators who seek to "unlock value" from "synergies" created by bringing the small firm into the bigger, more diversified one. Some synergies may be useful - economies of scale, for instance - but too often the predator unlocks value simply by being better at obtaining abusive, unproductive offshore tax privileges. Some make their best profits by seeking out and harvesting small, genuinely innovative companies that haven't yet managed to unlock those abuses for themselves.

This harvesting removes nimble, competitive and innovative firms from the marketplace and relocates them inside large corporate bureaucracies, curbing competition and potentially raising prices. Debt rises, and ordinary people pay more tax or see their schools and hospitals fall into disrepair. And if the predators leave their earnings offshore they can defer tax on them indefinitely. Deferred taxation is, as I have mentioned, effectively an interest-free loan from the government, with no repayment date. In other words, more debt. p.190

Shaxton regards the permanent residents of the tax havens as kooks. It surprised me that Shaxton did not take the libertarian philosophy seriously in this book, since it seems to me that in such a book there ought to be some principled stand against the theory of "libertarian" or "neoliberal" economic growth:

British private equity tycoon Guy Hands revealed that after moving to the British crown dependency of Guernsey to legally avoid tax, he had "never visited" his school-age children or his parents in England since he left, in order to preserve his non-resident tax status. Konrad Hummler, a vocal senior Swiss banker, calls Germany, France and Italy "illegitimate states" because their taxes are too high. Tax evasion, or what he calls "Swiss-style saving outside the system", is, he says, a legitimate defence by citizens attempting to "partially escape the current grasp of the administrators of a disastrous social welfare state and its fiscal policies."

Offshore attitudes are characterised by amazing similiarities of argument, of approach and of method, and some striking psycological affinities in a geographically diverse but like-minded global cultural community. A peculiar mixture of characters populates this world: castle-owning members of ancient continental European aristocracies, fanatical supporters of American libertarian writer Ayn Rand, members of the world's intelligence services, global criminals, British public schoolboys, assorted lords and ladies and bankers galore. Its bugbears are government, laws and taxes, and its slogan is freedom. p.231

Elsewhere, Shaxton looks into the history of some tax haven technologies. Many have surprisingly deep roots, such as the colonial history of the term "non-dom":

the concept of domicile was originally developed to help colonials identify themselves wherever in the empire they lived. And English colonial administrator in India would be resident in India, but domiciled in England. England was their "natural" home, and they would remain domiciled in India, and never fully British. In 1914 the tax rules were twisted to let those resident but not domiciled in England escape tax on their worldwide income - they would only be taxed on what was actually earned in Britain. A rule originally created to discriminate against foreigners now discriminated against ordinary British residents. And that is essentially the situation today. A "non-dom" hedge fund owner can make sure all his income is booked outside Britain and escape tax on it.

About 60,000 non-doms live in the UK now, including Greek shipping magnates, Russian oligarch foot club owners, Saudi princesses and the Indian steel magnate Lakshmi Mittal, many of whom pay very low taxes. Just to add another layer of absurdity to the system, many resident non-domiciles were born in this country, including Lord Ashcroft. Born in Sussex and member of the House of Lords, his heart belongs to Belize, at least for tax purposes.

...The celebrity entrepreneur Sir Richard Branson - who owns his business empire through a maze of offshore trusts and companies, said in 2002 that his company would be half its size if he hadn't legally avoided tax via offshore structures. The British media treats Branson with awe. p. 251

...and the continuity of the City of London's institutions since the medieval ages.

The House of Lords was originally bsed on the City's Court of Aldermen; the House of Commons was based on the City's Court of Common Council. The prime minister's office was strongly modelled on the office of the lord mayor, elected by the Court of Common Council, which refers to itself as the Grandmother of Parliaments....

[Maurice] Glasman describes four pillars of the ancient constitution: the King at its head, the Church at its soul, the parliament as the country and the City as the money - not so much subordinate to the Crown or parliament but intertwined with them in complex political relationships. When William the Conqueror invaded England in 1066 and the rest of the country gave up its rights, the City kept its freehold property, ancient liberties, and its own self-organizing militias - even the King had to disarm when entering the City. When William commissioned the Domesday Book - a survery of the kingdom's assets and revenues that determined taxation - the City of London was excluded.

At the Protestant Reformation 500 years later, the English Church became subject to the Crown, and in the centuries that followed, the power of the monarch declined, parliament steadily lost its aristocratic character and broadened the suffrage to include almost all adults. But the City remained apart. It was, a nineteenth century reformer said, "like some prehistoric monster which had mysteriously survived into the modern world". Monarchs, firebrands and demagogues who tried to roll back the City's special rights and privileges had occasional success, but most came to a sticky end, and the City vigorously reasserted its rights afterwards. ...King Henry VIII's powerful advisor Cardinal Wolsey enraged the City by introducing progressive taxation and forcing the nobility to cough up large "benevolences," even taking all the armour and plate of the City's livery companies. The City helped engineer Wolsey's demise in 1529 with accusations such as "he having the French pox presumed to come and breath on the king." The City never forgot that and in 1571 instituted the post of city remembrancer to remind the King of his debt. The remembrancer, the world's oldest institutional lobbyist, remains a potent force in the British state today... the only non-parliamentary person allowed into the Commons chamber, he sits unobtrusively behind the speaker p. 256

As an interesting epilogue, in the year after this book was published, Glasman was appointed to the house of Lords.

What are we to make of all this? I take seriously the notion that competitive advantages are being given especially to the biggest companies in the form of highly expensive, but economic, accounting wizardry. Whether this crushes innovation is hard to argue on the face of it - have we ever lived in such a technologically innovative time? What on earth would it look like if the supposed parasite on innovation was lifted?

Then I think that it's quite right that these tax havens are grimly reminiscent of the feudal or colonial class disparities of old, even sharing hsitories with them. However the libertarian arguments for the benefits of wealth disparity, even their ultimate benefit to the poor, are unanswered in this book. If these arguments have been answered, Shaxton does himself an injustice by not including them in this otherwise very comprehensive and powerfully argued work.

[Alexander · Rating 4 out of 5]

A very good book on an important and under-studies subject. Any businessman or top-manager must read the first 5 chapters to understand what’s going on, and the conclusion to see which way the wind might blow in the future.

That said, the second part of the book is a bit repetitive and simplistic, but the overall book is very good.