The TJN argues, for example, that tax havens – which, depending on one’s viewpoint, are places providing a shelter for illicit money or shelter for unpopular groups against rapacious regimes – should be eradicated. For example, it argues that the tax information exchange agreements that have been signed by many jurisdictions under OECD principles are inadequate, because in many cases a country trying to catch alleged tax evaders has to have sufficient suspicion about a citizen stashing away money in another country to request information. Also, regimes can stymie requests for data. The TJN also argues that while people may have sometimes had a genuine excuse for using such havens decades ago, few excuses exist today. .

This lobby group argues that it is in the mainstream of policy debate and not biased against free enterprise and trade. I disagree with the TJN’s self-description, although it is undeniably to TJN's credit that tax havens have been put under pressure to explain their activities and also, where necessary, to remove abuses. While I think that some tax havens would go out of business if major countries adopted better, simpler and less oppressive tax codes, other jurisdictions will still perform a valuable service in a world of free capital and migration. A lot of what these financial centers do has nothing to do with tax but financial security and convenience.

Message the Tax Justice Network

Last week, I wrote an email to one of the moving spirits in the TJN, John Christensen. He has had years of experience as an advisor to the government of Jersey and today is a fierce critic of such places. I have amended the content of my original email to expand and clarify key points. I have not printed Christensen's response as it would be inappropriate for his remarks, sent in a private message to me, to be printed without his permission. However, if the TJN wishes to respond in public, this publication would be very happy to do so.

John,

First of all, the idea that tax havens undermine democracy is, it could be argued, based upon the idea that 51 per cent of voters, for example, are entitled to grab much, if not all, of the wealth of the unfortunate 49 per cent, and that therefore it is terrible that some people, such as the affluent/rich, can avoid some of this tax by moving their affairs offshore. This raises the serious point of political philosophy over to whether even democracies should have unfettered powers to confiscate citizens' wealth. . This is not just an extreme "libertarian" concern, in my opinion.

Some people dislike tax havens since they create a partial barrier to using tax to significantly redistribute wealth. It is an open issue, though, whether this is a bad thing in every case. Do we really want a situation where a government with a temporary majority can just grab money without restraint? We have checks and balances in modern political systems, and for good reason. The ability of people to move some money out of the taxman's reach might be regarded as such a "check". Would the TJN support the idea of banning people from emigrating abroad if they happened to be in a highly remunerated job?

Tax competition

It is true that some free marketeers laud tax havens and low-tax jurisdictions for acting as a bit of a brake on the potential for a sort of Group of 20 global tax cartel . Tax competition is a "race to the bottom" in the sense that all competition is a "race to the bottom" if by "bottom" you mean lower taxes overall or lower prices for goods and services. In a world of free movement of capital, people and firms will want to locate in places where they keep rather more, than less, of their wealth than otherwise. It is hard to see why this is necessarily an evil or "distortion": it is economic liberty in action. Different countries will always, if they are sovereign, want to cut or raise taxes; does this mean that any country that cuts taxes below a global average is "distorting" trade? This presumes there is some sort of ideal "level playing field". Indeed, the argument that different tax rates “distort” trade could justify a global, one-tax-regime approach. This is not just unworkable but it is also a severe restraint on national sovereignty and liberty. For example, if we go to the smaller scale level, and imagine if, say, Bavaria in southern Germany is “distorting” interior German trade by having a lower tax than, say, Saxony. Is Texas “distorting” trade because it has no state income tax? Does Nevada "distort" trade for the same reason? Hardly.

Secrecy and privacy

I am not sure about the secrecy issue as being key here in the perpetuation of tax havens any longer, although Swiss secrecy laws, dating in their modern form to 1934, remain a key source of controversy and seem to be eroding since the UBS-US tax case of 2009. There may be other regimes that need to clarify the proper boundaries between unacceptable secrecy where criminal, questionably-sourced money is held out of reach, and legitimate privacy. The difference between what is secrecy and privacy is not an easy one to judge. But critics should not dismiss the legitimate need for people to protect wealth from prying eyes; this is an important civil liberties issue, no different from privacy of health records, for example. I note that the TJN has generally scorned the argument that Swiss bank secrecy laws have, for example, shielded money of certain persecuted groups from attack. A certain level of cynicism on the TJN's part might be justified, it is true. But the truth is also complicated. Before ripping up bank secrecy, we need to be sure that legitimate protections are kept in place. As for regimes such as the Cayman Islands, I would have thought that if, say, the US was convinced person A had held illicit funds in the jurisdiction, it could freeze any accounts.

A final issue; I have never quite grasped how it can be claimed that offshore jurisdictions harm the world's poor, unless one adopts the zero-sum argument that wealthy persons are somehow robbing the poor by not paying more tax. If the wealthy acquired their wealth in a free market without force or fraud, this is clearly not the case. To the extent that this "tax havens rob the poor" argument has force, it only holds when people using tax havens are, say, crooks and dictators hiding ill-gotten gains, as in the suspected cases of Libya, Egypt, many a Middle East fiefdom, Russian oligarchs, etc. .

Remember, the wealth that is put into these havens has to be invested in assets somewhere, such as into bonds and stocks, so it should be channelled into productive investments to earn a positive rate of return. The money does not simply vanish into a hole where it is not put to use and loses its value. What would be the point of that?

I agree there have been many problems and concerns about tax havens in the past and that these places continue to need to improve in terms of openness and accountability. But I find some of the language directed against them to be extreme and frankly, unbalanced. I also cannot help but feel that some of the attacks on offshore tax jurisdictions are part of a wider counter-attack on global capitalism and free trade, and as such, those who launch such attacks should be more open about their ideological motivation.