Wolf Street - Credit Suisse is once again under international investigation for
allegedly helping its clients evade the prying eyes of national tax
authorities. This comes after the bank was fined $2.6 billion by the
U.S. government in 2014 for helping Americans evade taxes.
Helping high net worth private clients and corporations evade taxes,
and then getting caught is not unique to Credit Suisse. Fellow Swiss
megabank UBS and UK giant HSBC were fined hundreds of millions of
dollars for their troubles.
The banks are not just helping their clients evade taxes. In a report titled Opening the Vaults,
UK-based charity Oxfam International revealed this week that in 2015,
Europe’s 20 largest banks registered over a quarter of their profits in
tax havens – well out of proportion to the level of real economic
activity that occurs there. Once again, Luxembourg was a top destination
for funds, while in Ireland the same banks recorded profits that were
76% higher than the global average in 2015. Only the Cayman Islands was
found to have a higher profitability rate.
None of this should come as a surprise. If any organization knows how
to bend the rules and use and abuse the tools and levers of global
finance to minimize a company or individual’s tax “footprint,” it’s
today’s generation of global banks. And no matter how many fines they
are made to pay, they’re not going to change their ways.
And that is bad news for today’s governments, which need increasing
amounts of money to meet their obligations and service their debts, as
well as rescue the banks every time they get in trouble. It is also bad
news for regular taxpayers since they will have to make up the
difference, until that’s no longer possible.
The U.S. government alone loses $188 billion of tax revenue each year as a result of tax avoidance, according to calculations
by the International Center for Tax and Development. In China, it’s $66
billion; in Japan, $46 billion; in France, $19 billion and in Germany,
15 $billion. But it’s the resource-strained economies of the Global
South that pay the highest price. Between 2001 and 2010 alone, it is estimated that
developing countries lost US$5.86 trillion to illicit outflows —
outflows that in most cases flowed to and through banks in places like
Switzerland, Luxembourg, the Netherlands, and the City of London.