The Financial Secrecy Index: Shedding New Light on the Geography of Secrecy

Abstract

Both academic research and public policy debate around tax havens and offshore finance typically suffer from a lack of definitional consistency. Unsurprisingly then, there is little agreement about which jurisdictions ought to be considered as tax havens—or which policy measures would result in their not being so considered. In this article we explore and make operational an alternative concept, that of a secrecy jurisdiction and present the findings of the resulting Financial Secrecy Index (FSI). The FSI ranks countries and jurisdictions according to their contribution to opacity in global financial flows, revealing a quite different geography of financial secrecy from the image of small island tax havens that may still dominate popular perceptions and some of the literature on offshore finance. Some major (secrecy‐supplying) economies now come into focus. Instead of a binary division between tax havens and others, the results show a secrecy spectrum, on which all jurisdictions can be situated, and that adjustment for the scale of business is necessary in order to compare impact propensity. This approach has the potential to support more precise and granular research findings and policy recommendations.

Measuring misalignment: The location of US multinationals’ economic activity versus the location of their profits

“…This is in line with the similar selection of profit shifting tax havens by Clausing (2016) and with the existing literature on international profit shifting, which indicates that the corporate tax base is sensitive to tax rate differences across countries (de Mooij & Ederveen, 2008). Furthermore, most of these six countries are also important secrecy jurisdictions, providing financial secrecy to other countries (Cobham, Janský, & Meinzer, 2015). Table 3.…”

Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network

“…Zoromé 14 as well as Cobham et al . 15 used flow data on the export of financial services to calculate ratios that indicate how significantly a jurisdiction acts as an OFC. Fichtner further expanded this approach by using stock data on international banking assets, portfolio investment, and foreign direct investment (FDI) in relation to the gross domestic product (GDP) of a jurisdiction to calculate an ‘offshore-intensity ratio’ 16 .…”

Automatic Exchange of Information as the New Global Standard: The End of (Offshore Tax Evasion) History?

“…Major financial centres such as the United States, the United Kingdom and its empire of overseas satellite jurisdictions as well as Germany all host substantial offshore assets and provide secrecy (Cobham et al 2015;.…”

“…For example, Gaggero (et al 2007) estimate that 85% of wealth held abroad by 2 see Tax Justice Network's Financial Secrecy Index for a discussion of the full range of issues involved, e.g. www.financialsecrecyindex.com (Cobham et al 2015; While the exact amounts at stake are necessarily uncertain given the hidden nature of these activities, there is no doubt that the resulting revenue losses are substantial. The lowest estimate of global financial wealth held 'offshore' is $7.6 trillion in 2013 (Zucman 2014), the highest is $21-$32 trillion in 2010 (Henry 2012 (Meinzer 2015b: 50).…”