BY JULIO GODOY (IDN)

During the last couple of months, the governments of the industrialized countries of the world appear to be fighting a serious war against tax havens, supposedly as part of the global efforts to eliminate the roots of the present, devastating financial crisis.

The rationale behind this fight is simple: Because the tax havens do not allow any controls, and serve as harbours to hedge funds and other speculative capital tools, they have contributed to spread the so-called toxic financial transactions, and therefore to the present financial instability.

But there are several reasons to doubt the seriousness of the industrialized world. For one thing, the fight against the tax havens has been so far only a long and yet futile war of words. Since 1989 the Organisation for Economic Cooperation and Development (OECD) and its associated Financial Action Taskforce on Money Laundering (FATF) have developed numerous tools and strategies to compel tax havens to obey some basic rules. However, the governments of the industrialized countries, all officially represented at the OECD and at the FATF, have been at best witness, at worst obstacles to these efforts.

This is particularly the case of the U.S. and Britain, which during the early 2000 firmly opposed the creation of a serious set of rules for tax havens. Even immediately after the terror attacks of Sept 2001, when the OECD and the FATF dubbed their campaign against tax havens "a fight against terrorism financing", the governments of George W. Bush and Anthony Blair actively defended tax havens as contributors to economic growth and prosperity, despite their obvious involvement in laundering of criminal money. At the time, the largest European countries, which today boast about their efforts to seal off tax havens, watched discretely from the sides.

On the other hand, the OECD and FATF never disposed of a serious arsenal to fight against tax havens. The best both organisations could do to intimidate tax havens was to black list them as "non cooperative territories and jurisdictions." You do not need much fantasy to imagine the shivers the tax havens' leaders – let's say Jean Claude Junker of Luxembourg, or Prince Albert of Monaco, to name but two – suffered of at the mere idea of seeing their countries on that ominous black list. Ironies apart, that the amount of money stacked away in tax havens across the world grew by ten during the last eight years is a measure of the success – rather, the lack thereof – of this battle against tax havens.

Another indicator of the OECD's futility is the black list itself: In the year 2000 the organisation and the FATF blacklisted 15 countries, jurisdictions, and territories for not co-operating in the fight against tax evasion. By October 2008, that is, at the time when the financial crisis was already ravaging the whole world, the famous black list was blank.

Even though it is obvious that the OECD and the FATF could not go this way any further without becoming definitively laughable, they have actually took the next steps to that end: This March, the OECD concocted two lists, one black and one grey. The black one included dozens of countries and territories that do not apply any rules to prove the legitimate (or, for that matter, illegitimate) origins of the capitals hidden away in their banks. The grey one listed countries conspicuously called "financial centres" – strangely enough, the OECD member countries that operate as tax havens were in this list.

As of April 2, the black list was again empty. Instead, the OECD formulated new four categories to qualify tax havens. The fourth category, "Jurisdictions that have not committed to the internationally agreed tax standard", include only four countries: Costa Rica, Malaysia, Uruguay and the Philippines. These four are, so to speak, the only black sheep in a world apparently inhabited by honest financial operators. Conspicuous tax havens such as Jersey, the Isle of Man, Luxembourg, Monaco, Belgium, Liechtenstein, Austria, Switzerland – all of them member countries (or territories under their jurisdictions) either of the European Union or of the OECD, or both – are listed as "jurisdictions … committed to the internationally agreed tax standard, but have not yet substantially implemented" or simply as "financial centres". Some others, such as the U.S. state of Delaware and the city of London, are not even mentioned by the OECD. And that its tortuous wording tries to conceal the fact that the international agreed tax standard, despite all its hopeless inadequacies, is still not being applied there should go without saying.

So much for the war of words against tax havens. But now, to come to the major reason to doubt the seriousness of the fight against financial instability: While it is true that tax havens did play a role in the speculative bubble that gave birth to the financial crisis, they actually represent but the second step in the process. Speculation is possible because of the deregulation and lack of costs of capital flows in industrialized countries – that you can transfer money from one place to another across the planet by the touch of a computer key and practically without controls and costs. That the governments of the industrialized world continue to avoid this subject can not be consequence of their ignorance, but of their complacency and complicity with the speculators.
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Editor's Note: GLOBAL PERSPECTIVES is a monthly magazine on international cooperation. This article appeared first in May 09 issue.