The so-called post-colonial, post-empire era resulted from a series of economic and financial events that led to the development and expansion of tax havens and the embedding of offshore finance into the global economy. As nations claimed their independence from colonial rule, and white ‘settlers’, colonial officials, and businesspeople left the colonial world, they wanted more sophisticated mechanisms for taking ‘their’ assets with them, and in some cases, they wanted to maintain their assets offshore and untaxed. Today many of these offshore jurisdictions continue to facilitate the continuing extraction of wealth, illicit outflows of money, and tax revenue from these nations as multinational companies artificially shift their profits and wealthy and powerful elites take full advantage of the system in ways not available to ordinary people. The proceeds of their activities almost always flow in the direction of the old empires, and is facilitated by armies of lawyers, wealth managers and accountants which are referred to as “the enablers”.
It is a common perception that ‘the west’ is pouring money into Africa through aid, without receiving much in return. Yet research shows there is far more flowing the other way in terms of illicit financial outflows. Africa is actually a net creditor to the rest of the world when looking at the profits and wealth illicitly flowing out of Africa. As during the times of empire, the global south continues to enrich the global north, and this continues to harm opportunities for populations and severely hamper economic development and stability in the global south.
Post-empire, some governments have retained some of their overseas ‘outposts’. While some decided to fund them as parts of the state such as France, others like the UK pushed their overseas territories into tax havenry as a development strategy in order to try to avoid their fiscal responsibility. Many of these former British colonies were focal points for slavery and empire. Now, their secrecy services and low/no tax regimes have opened up a whole new era of exploitation and inequality that have not benefited local people.
These small island nations have become important satellite havens, using secrecy to help clean up money, often before it gets to the City of London and to other large finance sectors. They have fuelled increasing inequality, and led to what’s known as path dependence. This is when nations have all their eggs in one basket and fail to invest in additional development strategies that would provide more opportunities for people and benefit the economy. Even the IMF has recognised that finance sectors above a certain size relative to an economy are economically damaging. The Tax Justice Network has long referred to this effect as “the finance curse”.
While it’s common for small island nations like Barbados and Bermuda to defend their finance sectors as empowering, allowing them to participate in the global economy, in many cases they are conduits facilitating the extraction of wealth from the global south by the global north, serving bigger financial centres in London and New York. It’s also common for them to complain that large centres like London and New York are given a free pass while they tend to be the ones targeted by the so-called international community as being the problem. We’d agree, and this is why we assess the worst offenders in our Corporate Tax Haven Index and Financial Secrecy Index, without fear or favour. However, all finance sectors must stop selling financial secrecy services to the powerful so they can hide their wealth and stop competing against other nations in a race to the bottom on multinational corporate tax rates.
Unfortunately, many people living in wealthy nations do not understand their own history, the roots of their wealth in slavery and empire and how that exploitative relationship continues to this day. It has therefore been relatively easy for the world’s most powerful governments to perpetuate the global system of extraction through what we often call these second empires of tax havenry and secrecy jurisdictions.
We need to end these second empires and decolonise the way our global economy works for the benefit of all people. Financial secrecy and tax havenry benefits only a tiny elite at the expense of the overwhelming majority.
One of the problems is that global rules on tax and financial transparency are decided by the OECD, a club of rich countries that has been the leading rules-setter on global tax for the past century. The voices that are disproportionately heard are from some of the nations which were former empires and whose jurisdictions are among the world’s worst financial secrecy and corporate haven offenders. As the saying goes, “if you’re not at the table, you’re on the menu” and part of decolonising the global economic system must accept the right for all nations to have an equal say on these matters, which is why the United Nations must become the forum where international tax rules are decided.