Pop Quiz:  What Country Ranks Second for Financial Secrecy?  Think Red, White, and Blue...

offsDespite dogged pursuit of US citizens for tax fraud and hidden foreign bank accounts, the US ranks a global number two as a reliably safe place to stash secret cash.


The Tax Justice Network is an independent watchdog group committed to driving change in global finance and tax issues related to the proliferation of tax havens around the world.  As part of its mandate to identify and highlight relevant issues, the organization develops, monitors, and releases a Financial Secrecy Index or FSI. The data from which the index is drawn is well-regarded and the results are considered non-partisan.


The FSI for 2018 illuminates shadowy tax havens that illicitly allow fraudsters to drain money away from budgets, accounts, and governments around the world. Some key points from the 2018 index include:


  • An estimated $21 to $32 trillion of wealth is held in secret offshore tax havens. When used legally, tax havens are a legitimate means to secure and grow wealth.  When tax havens are hidden, without robust regulation or reporting, these jurisdictions become abusive.
  • In terms of the illegal flow of dark money, the Tax Justice Network estimates $1 to $1.6 trillion quietly crosses international borders each year.
  • Relatively wealthy countries like Portugal, Greece, and Italy have suffered financial deprivation through austerity measures brought on in part by the outflow of wealth to abusive tax havens and what the FSI describes as “state looting via offshore secrecy.”


A dubious achievement in financial responsibility—number two on the FSI


Behind only Switzerland, the US ranks number two in the world as an abusive tax haven.  The top ten, in order, include:


  1. Switzerland
  2. US
  3. Cayman Islands
  4. Hong Kong
  5. Singapore
  6. Luxembourg
  7. Germany
  8. Taiwan
  9. United Arab Emirates
  10. Isle of Guernsey


The rankings are created from factors that include laws, treaties, and regulations in play at each jurisdiction.  Less regulation and transparency earns a higher secrecy score.  In addition, those scores are weighted relative to the size and influence of a country on the global market.


In addition to a ranking, reports are created for each country to provide a glimpse of the practices in place anywhere in the world. Points of interest about the report on the US include:


  • The US moved up to second place since the last report in 2015. This continues a general upward trend.  As noted in the report, “the country was one of the few to increase their secrecy score…”. 
  • The report indicates the US offers an extensive menu of tax-free facilities and processes for non-residents on both the state and federal level.
  • Some states, like Delaware, Nevada, and Wyoming are highly tolerant of secret shell companies registered in their jurisdictions.


As summed up in the report, the US has created vigorous means “to defend itself against foreign tax havens,” but has not effectively addressed its own role in offshore tax fraud and other global criminal tax matters.  While number two is better than first in the world for offshore tax crime, second place is still pretty close.


Skilled criminal tax defense in Cleveland, Chicago, and internationally


Robert J. Fedor, Esq., LLC provides strategic legal representation if you or your company are facing questions about a tax audit, FATCA, or your FBAR filings. We provide knowledgeable, strategic legal counsel and representation.  Contact us or call 800-579-0997 today.

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