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Martin Vander Weyer
LONG GONE SILVER
Treasure Islands: Tax Havens and the Men who Stole the World
By Nicholas Shaxson (The Bodley Head 329pp 14.99)

If you believe that capitalism is fundamentally a force for good, that excessive taxation is a blight on economic growth and a sure sign of bad government, that over-exuberance in the financial world can be restrained by cooperation between governments and global institutions, and that the fine traditions of the City coupled with an innate British sense of straight dealing make London the best place in the world to do business, then I strongly recommend you not to read this book. It will upset you too much.

Nicholas Shaxson is a journalist whose starting point is a special expertise in Africa. Watching the interactions of Western banks and governments with deeply corrupt African leaders has jaundiced his view of global finance; he makes clear that he does not, on the whole, subscribe to the set of beliefs I have just outlined. In Treasure Islands he sets out to explain the origins, mindset and modus operandi of the world's leading tax havens, which he groups together with other opaque parts of the global banking system - including, in effect, the whole of the City of London and the Corporation that governs it - as the evil empire of 'offshore'. It is an empire where democracy is shoved aside, the poor are ignored while the rich are protected, and no money is so dirty or bloodstained that it cannot be hidden away for the future enjoyment of those who have stolen it.

Ah yes, City stalwarts and proud British citizens will say, we know about all that stuff but we have no truck with it ourselves. It happens somewhere else, beyond our ken or control. Oh really? Take the case of President Sani Abacha of Nigeria, a brute who skimmed off billions of dollars of oil money that should have benefited his impoverished countrymen. After he died, 'poisoned while in the company of Indian prostitutes', heroic efforts were made to find and repatriate his loot. Swiss banks eventually yielded $500 million. But what about London, where he was known to keep many accounts? The new Nigerian government raised the matter 'many times with Prime Minister Blair', said finance minister Ngozi Okonjo-Iweala. 'Eventually he returned $3 million. We understand there are other monies but while all the discussion was going on those monies left the country and went somewhere else.'

From this and a multitude of other anecdotes we learn that (in Paris and Washington as well as in London) there is an extraordinarily two-faced attitude to 'offshore'. World leaders have often talked in recent years about closing down tax havens and forcing transparency upon the financial sector, but have done almost nothing about it because too many vested interests are threatened. No one wants to provoke a flight of capital from their own banks to those in safer, more secretive havens. No one wants to upset influential tycoons whose effective tax rates are a fraction of those of ordinary citizens. British offshore territories such as the Cayman Islands, governed entirely for the benefit of the banks and accountants who cluster there, operate regimes so impenetrable that it is illegal even to ask for financial or ownership details of locally registered companies - of which there are hundreds of thousands, no doubt representing every kind of wickedness. In America, the 'offshore' state of Delaware provides much the same sort of service.

And that system not only hides an awful lot of ill-gotten gains; it also encourages folly. All those securitised subprime deals that almost brought the global banking system crashing down in 2008 were registered offshore, so that they could not be subjected to close scrutiny or anything more than a bare minimum of taxation.

One of the most notorious was 'Abacus 2007-AC1', a Goldman Sachs deal allegedly designed to play both sides of the market by packaging subprime bonds that some investors were betting would fail while others were still willing to buy. Its 'Issuer' was a Cayman Islands company, one of 148 registered there by Goldman for similar confections; its 'Co-Issuer' was a Delaware company; and the benefit of having them in tandem was that, even for those closely involved, the offshore structures made it impossible for the left hand to know what the right was doing.

Treasure Islands is an odd combination of page-turning thriller and leftist rant, and not everything Shaxson throws into the mix is entirely convincing or germane. The right-wing nastiness he associates with the offshore mindset feels a bit forced, as does the implicit suggestion that all financiers are by nature dishonest and amoral.

But he has prised the lid off an important and terrifying can of worms. What cannot be denied is that an enormous portion of the world's financial resources has been siphoned into places where it is neither scrutinised nor taxed nor put to positive economic use. Maybe that also upholds a principle that governments should not be allowed to pry into private wealth; it certainly provides (entirely legal) mechanisms that enable multinational companies to pay bigger dividends into the funds that pay most of our pensions. But it also allows some very bad people to get away with theft and fraud on a giant scale. And in the onshore world, it means inequalities are wider and tax bills are inevitably higher than they ought otherwise to be. On reflection, if you believe all the things I set out at the start of this review, you really must read Treasure Islands.


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Martin Vander Weyer is business editor of The Spectator.