Treasure Islands
The tax-haven system and Switzerland's founding role in it.
Summary
Shaxson, a journalist who had written on oil and Africa, wrote an account of offshore finance covering its history, its mechanisms and its effects.
His central structural argument concerns Britain. He describes what he calls the British spider's web: the City of London at the centre, surrounded by the Crown Dependencies of Jersey, Guernsey and the Isle of Man, and beyond them the Overseas Territories including the Cayman Islands, the British Virgin Islands and Bermuda. He argues these are not independent jurisdictions competing with London but a connected system that captures business which could not be conducted in London directly and channels it there, with British legal and political protection but without British disclosure requirements.
The historical material traces the origins to the 1950s eurodollar market, when the Bank of England permitted dollar business conducted in London to be treated as outside its jurisdiction, which created the template for regulatory escape. He then covers the American development of offshore centres, the role of Delaware and other American states, and the specific mechanisms: transfer pricing between subsidiaries of multinationals, trusts and their treatment of ownership, shell companies with nominee directors, and the secrecy that prevents any authority establishing who benefits.
He argues that the effects fall hardest on developing countries, whose resource revenues and tax bases leave through these structures, and that the standard defence, that offshore centres provide efficient capital allocation, does not survive examination of what the structures actually do.
The book is journalism and campaigns for a position. Its estimates of amounts involved are inherently uncertain and drawn from advocacy sources. The historical and structural analysis of the British network is well documented and has been supported by subsequent disclosures including the Panama and Paradise Papers, which came after publication.
Key takeaways 7
- The City of London sits at the centre of a connected network of Crown Dependencies and Overseas Territories rather than competing with them.
- The eurodollar market established the template for regulatory escape when the Bank of England treated dollar business in London as outside its jurisdiction.
- Offshore secrecy rather than low tax rates is the product these jurisdictions sell, because the rate can be matched but the anonymity cannot.
- Transfer pricing between subsidiaries lets multinationals locate profit in jurisdictions where no economic activity occurs.
- American states including Delaware provide corporate anonymity comparable to offshore jurisdictions.
- Developing countries lose resource revenues and tax base through these structures in amounts comparable to the aid they receive.
- Secrecy jurisdictions exist because larger states permit and protect them, so the remedy lies with those states rather than with the islands.
Who should read it
Investors, advisers and policy readers who want the structural account of how offshore finance is organised and who sustains it.
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Where it sits in the reference 2
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