*Treasure Islands*

by on April 20, 2011 at 7:20 am in Books, Economics | Permalink

The author is Nicholas Shaxson and the subtitle is Uncovering the Damage of Offshore Banking and Tax Havens, excerpt:

The Cayman Islands is the world’s fifty largest financial center, hosting eighty thousand registered companies, over three quarters of the world’s hedge funds, and $1.9 trillion on deposit — four times as much as in all the banks in New York City.  And it has, at the time of writing, one cinema.

Chris F. Masse draws my attention to this forthcoming documentary on a whistleblower for financial and tax havens.   You will find reviews of the book here.  I found the quality patchy, but nonetheless it was a useful critique.  There is also a direct engagement with the pro-offshore arguments associated with Dan Mitchell (video).  As the fiscal crunch proceeds, these issues will move increasingly into the public eye.

By the way, on Bitcoin I’ve read through all the responses in the comments — some vitriolic against me — and I stand by my original arguments.

1 Rodrigo Miranda April 20, 2011 at 9:01 am

What is the difference between it and this other book besides the publisher? http://www.amazon.com/Treasure-Islands-Havens-Stole-World/dp/1847921108/ref=pd_sim_b_2

2 mark April 20, 2011 at 11:13 am

A lot of those companies are pools of NON-US capital managed by US hedge funds and private equity funds. The foreigners require the capital to be kept offshore to avoid establishing a US presence that could impose a US tax filing burden on them, even if the US taxes are de minimis.

3 Brian McDaniel April 21, 2011 at 12:33 am

Mark is correct, but incomplete. Why do investors invest through offshore (non-US) jurisdictions? Two reasons: (1) The “effectively connected income” rules make it much more likely for non-US investors to report US taxes (a difficult and expensive process), and (2) the “controlled foreign corporation” rules may subject US and non-US investors to the punitive CFC rules. In other words, if the US had a rational and territorially-based tax system there would be no incentive for private equity investors to invest through offshore jurisdictions.

Moreover, investment funds must file K-1s with the IRS. So the US government knows which US investors are not paying their taxes. Its not clear at all why the US government should have the right to tax non-US investors in non-US investments.

BTW, I’m a genuine expert. I’m a “fund formation” lawyer who help structure international investment funds.

4 Nicholas Shaxson April 21, 2011 at 6:38 am

I’ll take that as a broadly positive review “useful critique” (btw, on the reviews, you linked to google, whereas you might have linked to this page http://treasureislands.org/praise-for-the-book/ ). Rodrigo, the British version, published in January, is longer than the US version covered here: it contains a chapter on Switzerland, and a full chapter at the end on the City of London. The US version contains a few more US-related facts, but is otherwise a slimmed-down version of the UK one.

I would say, though, that the focus on Cayman here misses a central message of the book: that tax haven activity mostly isn’t about the small offshore islands of the popular imagination, but about large OECD economies.

5 Justin April 21, 2011 at 5:46 pm

What does it mean to be the fifty largest anything mean, it feels ungrammatical to me. Is this supposed to mean fiftieth largest, or it has the 50 largest holdings? Or is the author from the UK and not really write in English :p.

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7 sharronlog chutke April 23, 2011 at 2:13 am

I am trying to get hold of this film, so would like as many details as possible, please! The film featured a treasure supposedly buried on the island.

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