Switzerland, United States and Cayman Islands are the world’s biggest contributors to financial secrecy, according to the latest edition of Tax Justice Network’s Financial Secrecy Index (FSI).
The Index ranks jurisdictions according to their secrecy and the scale of their offshore financial activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight. Kenya surprisingly is now one of the tax havens, where the rich can hide their wealth with little taxes or prying eyes of the authorities. “Kenya, which this year set up its own tax haven in the form of Nairobi International Financial Centre, is an example of how interests of western financial service lobbyists have successfully lured governments into a race to the bottom,” – Tax Justice Network says in a statement.
It says Kenya, which has been assessed for the first time in the 2018 FSI, has an extremely high secrecy score of 80/100. The centre is one of the projects of Vision 2030. It is aimed at encouraging Foreign Direct Investment (FDI), safeguarding the economy from external shocks, and establishing Kenya as a leading financial centre in Eastern and Southern Africa. International Monetary Fund defines an International Financial Centre (IFC) as a centre (usually a city) where the bulk of financial sector activity is offshore, the transactions are initiated elsewhere, and the majority of institutions involved are controlled by non-residents.
IFCs typically have large numbers of financial institutions engaged, primarily, in business with non-residents, financial systems with external assets and liabilities out of proportion to domestic economies and, more popularly, centres which provide low or zero taxation, moderate or light financial regulation, banking secrecy and anonymity. In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency.
The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more.
Switzerland, the global capital of bank secrecy, retains the worst ranking, and the US has moved up to second.