The 2015 Financial Secrecy Index by the Tax Justice Network reveals that the United States has moved from sixth to third place as one of the world's most financially secretive countries.
The British advocacy group issued the index earlier this month with the mission of ranking governments by secrecy and by the amount of their offshore financial activity.
âA politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight,â according to a description on the network's website.
The Tax Justice Network, whose team includes researchers and economists (and director John Christensen also is a forensic auditor), estimates that $21 trillion to $32 trillion in private wealth is untaxed or lightly taxed in what it calls worldwide âsecrecy jurisdictionsâ â otherwise known as tax havens.
âA 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,â the network's website states. â'Competition' between jurisdictions to provide secrecy facilities has â particularly since the era of financial globalization really took off in the 1980s â become a central feature of global financial markets.â
The secrecy scores are based on 15 indicators under four topic areas. Of the index's 92 ranked countries, here are the top five and the network's description of their ranking.
1. Switzerland. The granddaddy of them all, the network says, has made some changes to its secrecy laws under pressure from other countries, but its âaggressive and apparently illegal pursuit of secrecy-breaking whistleblowers highlights the strength of the Swiss secrecy lobby,â the report states. It will begin using the Organization for Economic Cooperation and Development's Common Reporting Standard (CRS) of automatic information exchange in 2018, but will be selective with which countries it shares information.
2. Hong Kong. Of âgreat and growing concern,â it hasn't signed the CRS, and China's control over the country has protected it from global transparency efforts. âIt still allows owners of bearer shares â vehicles for some of the world's most criminal activities â to remain unidentified,â the report states.
3. United States. The Tax Justice Network declares the United States is more cause for concern than any other country because of the size of its offshore sector and âits rather recalcitrant attitude to international cooperation and reform.â Despite the Foreign Account Tax Compliance Act, the United States offers little information to other countries, âmaking it a formidable, harmful, and irresponsible secrecy jurisdiction at both the federal and state levels,â the report states.
4. Singapore: Similar to Hong Kong, Singapore's threats include a lack of serious reforms to corporate secrecy, little country-by-country reporting, and lack of interest in public registries of beneficial ownership. âYet Singapore has probably been somewhat more serious than Hong Kong in terms of seeking to enforce its own laws and curtailing some of its worst excesses,â the report states.
5. Cayman Islands: A large offshore financial services sector and secrecy score still rank Cayman high, but it has adopted the CRS, was one of the 14 âfirst moverâ jurisdictions to ratify the CRS multilateral agreement, and agreed to begin an information exchange in 2017. But it's still secretive, and a law allows people to be jailed for asking for confidential information, not just revealing it, the report states
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.