The current crisis exposes weaknesses in a development strategy that puts financial services at the heart of Britain’s political economy. But the City of London depends heavily on its role as a major tax haven in its own right. John Christensen, Director and International Coordinator of the Tax Justice Network, explains how the UK has led the world in de-regulating financial services, in promoting tax havens, and in resisting moves to strengthen international cooperation. Having become the victim of its own follies, the UK urgently needs a new development strategy, but how can any government – progressive or otherwise – resist the strongest political lobby in the world?
Hidden from public scrutiny, businesses and banking systems have been reconfigured to bypass nationally-based tax and regulatory regimes. Using around 65 global tax havens, wealthy individuals and businesses employ aggressive tax avoidance strategies and force governments to engage in harmful tax competition to attract investment. These practices distort trade patterns, undermine economic growth, increase wealth inequality, and cause endemic poverty, social instability and failed states, whilst poorer countries lose an estimated US$50 billion annually to dirty money flows. John Christensen, International Coordinator of the Tax Justice Network and former economic adviser to the States of Jersey (a tax haven) outlines the problem and the steps needed to mobilise against it.