Reviews | Pandora documents expose Britain’s role in money laundering
In the 1970s, this rapidly growing market began to merge with UK and other tax havens into a seamless global network. British havens have since served as collection vessels for various financial activities around the world, legal or not, often handing over accounting, banking and law to the City’s businesses.
In tandem, the two caused untold damage. The lost tax revenues are mind-boggling: companies use tax havens to evade payment of around $ 245 billion to $ 600 billion a year. (A new global deal for a 15% minimum corporate tax rate will reduce these losses.) Individuals are also hiding huge sums of money. But tax is only part of the story. The global game of deception, played for decades by the wealthy and their city officials, has eroded the rule of law – and eroded citizens’ trust in the system.
After the 2008 global financial crash, which exposed the extravagant excesses of the financial system, reform efforts were made. The “London gap,” as the chairman of a US regulatory agency, Gary Gensler, called it, has been closed. But now, as memories of the crisis fade and Brexit begins to bite, the government wants to rekindle the City’s dark arts. “A New Chapter for Financial Services,” a key policy document he released in July, clearly signaled a return to more permissive times. “Competitiveness” and “competitive,” code words for low taxes, weak regulation and lax enforcement, appear more than 15 times.
Britain’s deference to sneaky money is doomed to fail. Its overly “competitive” financial center is a curse with numerous consequences: regional inequalities, an unbalanced economy, declining productivity, stalled investment, inflation in asset prices and political corruption. After years of austerity and amidst food and fuel shortages, Britain can hardly afford an oversized city.
But it is the world that suffers the most. For shady businessmen and longtime political leaders, the offshore ecosystem offers impunity, masks capital, and protects wealth. Inexplicable and often untraceable, the system ensures that prosperity remains the prerogative of a few. To reverse the inequalities and injustices so brutally exposed by the pandemic, we must tackle the havens – and the vested interests in London that protect them.