Treasure Islands

One of the rare treats about blogging is occasionally getting sent things to read/review. One of these recently was Treasure Islands by Nicholas Shaxson, which is all about tax havens.

It's a longish read at 300 plus pages, and as it's all on the one subject it does require a bit of effort (and I say that as someone who generally enjoys reading textbooks). However it's written in a journalistic style, so that offsets things. If you don't know anything about tax havens this is a decent intro, but it's probably more aimed and getting people fired up about how tax havens operate and the political consequences that flow from this. On these terms it scores.

There's a disingenuous argument frequently deployed that the use of tax havens by big businesses doesn't really matter because all they are really doing is achieving the most favourable tax treatment within the law. (And by extension shareholders shouldn't be interested). Whilst we need to take the core of this seriously, and there are genuine issues about where profits are generated and therefore taxed, this obscures some more troubling issues for shareholders IMO.

First, the fact that tax havens make a point of putting a premium on secrecy should raise a red flag about investee businesses that utilising them. Even if the only intention is to reach the most favourable tax treatment the suggestion in this book is that this will inevitability threaten to reduce accountability. I want to dig into this further, but this seems a sound criticism to me.

Second, there's an interesting parallel between the use of tax havens and incorporation in Delaware. Not just the 'race to the bottom' point, but also the knock-on effects of small jurisdictions hosting very large businesses. These places may not have the local expertise to draw up reasonable rules on their own, so they effectively outsource the thinking to big law firms, consulting firms etc whose clients are the companies. The book argues that the net result is that the rules are drawn up in a way that works to the advantage of the companies. Again, worthy of exploration.

There are some interesting political themes in this book too. First is the overlap between defenders of tax havens and the libertarian right. On an ideological level I can understand this a bit, but there are some quite unpleasant people in this world too. It does make you wonder if some of the more genuinely political types aren't getting used a bit by 'libertarians' who see law and regulation as the enemy because they are, basically, crooks. I'm dimly aware of the online attacks on Richard Murphy (who I assume contributed quite a bit to this book), which I have to date considered to be an entirely political spat. Despite being a generally sceptical type, for the first time I wonder if there is something more to it.

Secondly, there's some interesting stuff in there about man of the moment Maurice Glasman. Anyone who really believes that Blue Labour is some kind of Blairite initiative would be well advised to read this. His campaigning, for example in respect of the Corporation of London, is not exactly in tune with light touch regulation of the City.

Anyway, worth a read, and you can pick up pretty cheap on Amazon now.