Trailing Indicator: Tax Havens

Where not to stash the cash.

trailingind-manIt’s tax time, and who hasn’t been tempted to tuck some cash away in a secret offshore account? But since the recession, the Organization for Economic Co-operation and Development has led a crackdown on tax havens, and many countries—including Canada—are trying harder than ever to catch cheats. There’s evidence it’s working. A study published in the American Economic Journal last year found that jurisdictions that have signed tax-information exchange agreements, under which a nation could demand offshore tax details related to its citizens, have seen the value of bank deposits held by foreigners decrease since 2008. Meanwhile, havens that have retained their secrecy have experienced a boost in foreign deposits. Updated figures show the trend is still underway.

Total foreign-held bank deposits (in billions)

March 2008 (Q1)
September 2012 (Q3)

Jersey 60%trailingind-arrowdown

The largest of the Channel Islands has been tightening regulations to fight perceptions it’s a hub for tax dodgers and money launderers.

$182.3   $72.9

Bahamas 31%trailingind-arrowdown

After being shamed by OECD over its tax policies, the Bahamas agreed to a number of tax information treaties and now sits on the OECD’s “white list” of tax-compliant jurisdictions.

$149.7   $103.1

Cayman Islands 30%trailingind-arrowdown

Last year, the Cayman government proposed its first-ever income tax. The 10% levy would apply only to expats. The plan was heavily opposed and dropped in August.

$759.4   $531.8

Switzerland 16%trailingind-arrowdown

The U.S. government’s resolve in chasing tax dodgers resulted in a $780-million settlement with Basel-based UBS in 2009 and a $74-million fine for Wegelin & Co. in January 2012.

$574  $480.3

Austria 4%trailingind-arrowdown

Every country in the European Union has agreed to information-sharing agreements – except Austria.

$69.7  $72.5

Singapore 12%trailingind-arrowdown

The lack of tax-information treaties with Asian jurisdictions could be a boon for the region. Macao, Hong Kong, and Malaysia, have also seen growth in foreign deposits.

$235.3  $263.8

Cyprus* 52%trailingind-arrowdown

Billions have poured into Cyprus over the past few years, but in March the EU had to bail out the country’s banking system, resulting in a new levy on bank deposits €100,000. It was fun while it lasted.

$23.2  $35.4

* Only began reporting in Q4 of 2008.

Panama 86%trailingind-arrowdown

You’re in good company. According to a German news report, the Porsche family has registered companies in the Panama. The family denied the firms were created to avoid taxes.

$10.1  $18.8

Source: Bank for International Settlements
Illustrations by Paul Hoppe