The Strategist

Tax Justice Network publishes money hideouts rating 2020

02/20/2020 - 08:22

The non-governmental organization Tax Justice Network ranked countries for financial opacity and closeness. The top 10 included not only offshore territories such as the British Virgin Islands and Cayman Islands, but also countries such as the United States, Japan, Switzerland, the Netherlands and the UAE.

The non-governmental international organization Tax Justice Network (TJN), which studies tax evasion, offshore legislation, money laundering, etc., has published a rating of countries where it is easiest for non-residents to hide their income or launder it.

This rating is not a rating of offshores; on the contrary, it assesses the relationship between the volume of export of financial services of a country and transparency of its legal or financial system.
A country's place in the ranking means how much its legal and financial system allows wealthy individuals or even criminals to hide or launder their money in it. The fewer points a country scores on a scale from 0 to 100, the more transparent its financial and legal system is. The previous rating was published in 2018.

TJN emphasizes that a higher ranking does not always mean that a given jurisdiction is more opaque. This means that this jurisdiction contributes more to the global industry of opaque or insufficiently transparent banking, anonymous ownership of shell companies, anonymous ownership of real estate. So, for example, Samoa (86th place) is one of the most secretive states in the field of disclosure of ownership of companies or real estate; at the same time, this state neither provides its services to non-residents, nor provides them on a minimal scale. Thus, Samoa’s place in the overall ranking is much lower than a country such as Japan (7th place), which is one of the world's leading exporters of financial services.

This year, the Cayman Islands took the first place in the ranking (third place in 2018). The authors note the country added 4 points in terms of the degree of opacity of its legal and financial system, while increasing the volume of financial services for non-residents by 21%. TJN researchers believe that the hedge fund industry in this jurisdiction, which uses opaque companies, trusts, and limited partnerships, is the most concerning.

The United States, which surpassed the past leader of the rating, Switzerland, came in second in the 2020 ranking, largely due to a 15% increase in the volume of exports of its financial services to non-residents. Switzerland, on the contrary, reduced this volume by 12%. The rating’s authors note that the increase in the volume of exports of US financial services can partly be explainedby the adoption of a law in New Hampshire that allows the creation of charitable private funds without mandatory disclosure of financial statements.

Such countries and jurisdictions as Hong Kong, Singapore, Luxembourg, Japan, the Netherlands, the British Virgin Islands, and the United Arab Emirates occupied the top 10 of the 2020 ranking with the places from 4th to 10th.