Financial Secrecy Index

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See also: Tax haven § Tax haven lists, and Tax havens § Definitions

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The Financial Secrecy Index (FSI) is a report published by the advocacy organization Tax Justice Network (TJN) which ranks countries by financial secrecy indicators, weighted by the economic flows of each country.[a]

It looks at how wealthy individuals and criminals can hide and launder money using the country's legal and financial systems. Automatic information interchange and beneficial ownership registration were among the ranking criteria. According to TJN, an estimated US$21 to US$32 trillion in untaxed or minimally taxed private financial wealth is held in secrecy jurisdictions (tax havens) around the world.[1]

It is a measure of each jurisdiction's contribution to the worldwide financial secrecy that combines qualitative and quantitative data.

To create a secrecy score for each jurisdiction, qualitative data based on laws, regulations, cooperation with information exchange mechanisms, and other verified data sources is used.

The secrecy countries with the highest rankings are less transparent in the operations they host, less engaged in sharing information with other national authorities, and less compliant with international money-laundering laws. A secrecy jurisdiction is more appealing for channeling illegal money flows and hiding criminal and corrupt activities due to its lack of openness and unwillingness to engage in efficient information exchange.[2]

After that, quantitative data is used to generate a global scale weighting for each jurisdiction based on its percentage of global offshore financial services activity. They did this by using publicly available data on each jurisdiction's international financial services trade. They employ the International Monetary Fund approach to extrapolate from stock measures to obtain flow estimates when incomplete data is required. The jurisdictions with the highest weighting are those that play the most important role in the market for non-resident financial services.[2]

A jurisdiction with a substantial proportion of the offshore financial sector but low opacity may earn the same overall ranking as a smaller but more secretive jurisdiction. The rating takes into account not only which countries are the most secretive, but also magnitude (the amount to which a jurisdiction's secrecy is likely to have a worldwide impact).[2]

Confusion[edit]

While related to tax havens, the FSI is not a list of tax havens per se, and it does not attempt to estimate actual taxes avoided or profits shifted, unlike the techniques used in compilation of modern tax haven lists. The FSI is therefore more correctly a list of financial secrecy jurisdictions. While having many similarities to tax havens, the FSI produces some results that are very different from established tax haven lists.[3][4]

The FSI showed jurisdictions like the U.S. and Germany, despite high tax rates, are large contributors to global financial secrecy,[5] however, this is often misinterpreted as implying that the US and Germany are "tax havens"; for example, foreign corporates do not move to the U.S. or Germany to avoid tax.[6][7] The FSI does not capture modern corporate tax havens, such as Ireland, the Netherlands and the United Kingdom, who maintain high levels of OECD–compliance and transparency, but are responsible for the global largest base erosion and profit shifting (BEPS) tax avoidance activity.[8]

For example, Apple's Irish "leprechaun economics" tax restructure in Q1 2015, the largest BEPS transaction in history, remained unknown for years due to Irish data-protection laws. The issue is the scoring by the FSI for some of the most favored secrecy tools of modern tax havens (or Conduit OFCs): the unlimited liability company ("ULC"), trusts, and certain SPV structures (e.g. Irish QIAIFs), none of which file public accounts in havens like Ireland and the United Kingdom.[9][10] The FSI focuses on ownership of these tools (e.g. is the owner of a ULC recorded), versus visibility into the tools (e.g. is the ULC paying tax). An example of this disconnect, was the EU's €13 billion tax fine on Apple's two Irish ULCs in 2016,[b] who while known, were found by the EU to be avoiding large amounts of Irish tax during the 2004–2014 period.

History[edit]

The biennial FSI releases are widely reported in the general[11][12] and financial media,[13][14] and FSI scores now are seen in EU reports.[15]

Country ranking[edit]

This is the ranking of 141 world countries based on their Financial Secrecy Index value published by the Tax Justice Network in 2022.[16]

Rank Country FSI Value Secrecy Score Global Scale Weight FSI Share
1 United States 1 951 67 25.78 % 5.74 %
2 Switzerland 1 167 70 3.91 % 3.43 %
3 Singapore 1 167 67 5.64 % 3.43 %
4 Hong Kong 927 65 3.87 % 2.73 %
5 Luxembourg 804 55 11.32 % 2.36 %
6 Japan 765 63 2.81 % 2.25 %
7 Germany 681 57 5.21 % 2.00 %
8 United Arab Emirates 648 79 0.22 % 1.91 %
9 British Virgin Islands 621 71 0.55 % 1.83 %
10 Guernsey 610 71 0.52 % 1.80 %
11 China 578 66 0.76 % 1.70 %
12 Netherlands 556 65 0.87 % 1.63 %
13 United Kingdom 547 47 14.14 % 1.61 %
14 Cayman Islands 516 73 0.25 % 1.52 %
15 Cyprus 510 62 1.05 % 1.50 %
16 South Korea 499 64 0.71 % 1.47 %
17 Taiwan 482 60 1.09 % 1.42 %
18 Panama 474 73 0.19 % 1.40 %
19 Jersey 459 63 0.58 % 1.35 %
20 Qatar 412 74 0.11 % 1.21 %
21 Italy 393 55 1.35 % 1.16 %
22 Bahamas 385 75 0.07 % 1.13 %
23 Thailand 380 70 0.14 % 1.12 %
24 Vietnam 375 81 0.04 % 1.10 %
25 Saudi Arabia 360 69 0.13 % 1.06 %
26 Belgium 359 53 1.52 % 1.06 %
27 Ireland 357 47 3.92 % 1.05 %
28 Canada 349 51 1.77 % 1.03 %
29 Spain 346 57 0.70 % 1.02 %
30 France 343 48 3.05 % 1.01 %
31 Macau 341 63 0.25 % 1.00 %
32 Israel 336 59 0.42 % 0.99 %
33 Angola 336 79 0.03 5 0.99 %
34 Algeria 335 79 0.03 % 0.99 %
35 Kuwait 334 75 0.05 % 0.98 %
36 India 318 55 0.73 % 0.94 %
37 Australia 318 56 0.58 % 0.94 %
38 Malta 299 54 0.69 % 0.88 %
39 Malaysia 296 66 0.11 % 0.87 %
40 Liberia 286 73 0.04 % 0.84 %
41 Kenya 282 67 0.09 % 0.83 %
42 Nigeria 271 65 0.10 % 0.80 %
43 Russia 270 60 0.21 % 0.80 %
44 Austria 270 55 0.46 % 0.79 %
45 Guatemala 265 75 0.03 % 0.78 %
46 South Africa 261 60 0.18 % 0.77 %
47 Oman 256 74 0.03 % 0.75 %
48 Norway 252 53 0.46 % 0.74 %
49 Bermuda 245 70 0.04 % 0.72 %
50 Sri Lanka 241 76 0.02 % 0.71 %
51 Marshall Islands 236 71 0.03 % 0.70 %
52 Bangladesh 232 75 0.02 % 0.68 %
53 New Zealand 230 63 0.08 % 0.68 %
54 Liechtenstein 217 72 0.02 % 0.64 %
55 Mauritius 216 70 0.02 % 0.64 %
56 Egypt 211 68 0.03 % 0.62 %
57 Portugal 201 57 0.13 % 0.59 %
58 Anguilla 200 75 0.01 % 0.59 %
59 Turkey 200 61 0.07 % 0.59 %
60 Bahrain 191 68 0.02 % 0.56 %
61 Isle of Man 190 65 0.03 % 0.56 %
62 Romania 178 59 0.06 % 0.52 %
63 Barbados 177 74 0.01 % 0.52 %
64 Puerto Rico 176 78 0.00 % 0.52 %
65 Jordan 170 72 0.01 % 0.50 %
66 Indonesia 170 56 0.09 % 0.50 %
67 Sweden 168 45 0.68 % 0.50 %
68 St. Kitts and Nevis 168 77 0.00 % 0.50 %
69 Venezuela 168 72 0.01 % 0.49 %
70 Ghana 167 53 0.15 % 0.49 %
71 Uruguay 163 58 0.06 % 0.48 %
72 Philippines 162 67 0.02 % 0.48 %
73 Chile 161 60 0.04 % 0.47 %
74 Pakistan 159 66 0.02 % 0.47 %
75 Aruba 159 71 0.01 % 0.47 %
76 Hungary 156 55 0.08 % 0.46 %
77 Lebanon 149 65 0.02 % 0.44 %
78 Kazakhstan 147 63 0.02 % 0.44 %
79 Morocco 146 66 0.01 % 0.43 %
80 Denmark 140 49 0.17 % 0.41 %
81 Cameroon 140 70 0.01 % 0.41 %
82 Mexico 139 53 0.08 % 0.41 %
83 Brazil 135 49 0.15 % 0.40 %
84 Dominican Republic 126 65 0.01 % 0.37 %
85 Ukraine 125 59 0.02 % 0.37 %
86 Poland 122 46 0.20 % 0.36 %
87 US Virgin Islands 120 72 0.00 % 0.35 %
88 Finland 119 52 0.06 % 0.35 %
89 Seychelles 118 72 0.00 % 0.35 %
90 Curaçao 117 76 0.00 % 0.35 %
91 Maldives 117 75 0.00 % 0.34 %
92 Czech Republic 114 50 0.08 % 0.34 %
93 Tanzania 113 69 0.00 % 0.33 %
94 Namibia 113 71 0.00 % 0.33 %
95 Latvia 113 55 0.03 % 0.33 %
96 Gibraltar 110 67 0.00 % 0.32 %
97 El Salvador 107 61 0.01 % 0.32 %
98 Rwanda 106 72 0.00 % 0.31 %
99 Greece 103 53 0.03 % 0.30 %
100 Croatia 102 53 0.03 % 0.30 %
101 Slovakia 102 53 0.03 % 0.30 %
102 Tunisia 101 60 0.01 % 0.30 %
103 Lithuania 97 51 0.04 % 0.38 %
104 Samoa 93 73 0.00 % 0.27 %
105 Costa Rica 91 56 0.01 % 0.27 %
106 Bulgaria 90 53 0.02 % 0.26 %
107 Peru 89 54 0.02 % 0.26 %
108 Colombia 88 54 0.02 % 0.26 %
109 Bolivia 87 79 0.00 % 0.26 %
110 Serbia 84 54 0.01 % 0.25 %
111 Argentina 82 49 0.03 % 0.24 %
112 Vanuatu 81 76 0.00 % 0.24 %
113 Botswana 80 57 0.01 % 0.24 %
114 Andorra 80 55 0.01 % 0.24 $
115 Belize 76 75 0.00 % 0.22 %
116 Ecuador 73 52 0.01 % 0.21 %
117 Paraguay 72 66 0.00 % 0.21 %
118 Monaco 66 74 0.00 % 0.19 %
119 Montenegro 61 61 0.00 % 0.18 %
120 Turks and Caicos Islands 59 76 0.00 % 0.17 %
121 Fiji 58 70 0.00 % 0.17 %
122 St. Vincent and the Grenadines 53 67 0.00 % 0.15 %
123 Albania 47 54 0.00 % 0.14 %
124 North Macedonia 47 62 0.00 % 0.14 %
125 Estonia 47 44 0.02 % 0.14 %
126 Iceland 46 42 0.02 % 0.13 %
127 Antigua and Barbuda 45 77 0.00 % 0.13 %
128 Dominica 44 65 0.00 % 0.13 %
129 Kosovo 41 69 0.00 % 0.12 %
130 Trinidad and Tobago 39 69 0.00 % 0.12 %
131 Cook Islands 39 70 0.00 % 0.11 %
132 Grenada 36 66 0.00 % 0.11 %
133 St. Lucia 33 72 0.00 % 0.10 %
134 Guam 32 70 0.00 % 0.09 %
135 American Samoa 30 69 0.00 % 0.09 %
136 Brunei 28 73 0.00 % 0.08 %
137 Slovenia 25 36 0.02 % 0.07 %
138 Gambia 21 73 0.00 % 0.06 %
139 Nauru 13 59 0.00 % 0.04 %
140 San Marino 12 60 0.00 % 0.03 %
141 Montserrat 5 74 0.00 % 0.01 %

See also[edit]

Explanatory notes[edit]

  1. ^ Because of the weighting of the financial secrecy indicators, the FSI is often mislabeled as a quantitative index; however it is a qualitative index.
  2. ^ Apple Sales International ("ASI"), and Apple Operations Europe ("AOE")

References[edit]

  1. ^ Kably, Lubna (19 February 2020). "Financial Secrecy Index: Cayman Island ranks first, Switzerland drops two places". The Times of India. Retrieved 28 April 2022.
  2. ^ a b c "Financial Secrecy Index 2020 Methodology". Coffers EU Horizon 2020 Project.
  3. ^ "Leading economies blamed for fiscal secrecy by Tax Justice Network". Financial Times. 30 October 2009.
  4. ^ "Lifting the Veil - An index of financial secrecy". The Economist. 6 November 2013.
  5. ^ "U.S.The mega-haven". The Economist. 5 November 2015.
  6. ^ Jesse Drucker (27 January 2016). "The World's Favorite New Tax Haven Is the United States". Bloomberg.com.
  7. ^ Swanson, Ana (5 April 2016). "How the U.S. became one of the world's biggest tax havens". The Washington Post. Retrieved 23 April 2016.
  8. ^ "Ireland is the world's biggest corporate 'tax haven', say academics". The Irish Times. 13 June 2018. New Gabriel Zucman study claims State shelters more multinational profits than the entire Caribbean
  9. ^ "New report: is Apple paying less than 1% tax in the EU?". Tax Justice Network. 28 June 2018. The use of private 'unlimited liability company' (ULC) status, which exempts companies from filing financial reports publicly. The fact that Apple, Google and many others continue to keep their Irish financial information secret is due to a failure by the Irish government to implement the 2013 EU Accounting Directive, which would require full public financial statements, until 2017, and even then retaining an exemption from financial reporting for certain holding companies until 2022
  10. ^ "Ireland's playing games in the last chance saloon of tax justice". Richard Murphy. 4 July 2018. Local subsidiaries of multinationals must always be required to file their accounts on public record, which is not the case at present. Ireland is not just a tax haven at present, it is also a corporate secrecy jurisdiction.
  11. ^ Pegg, David (30 January 2018). "UN urged to launch global effort to end offshore tax evasion". The Guardian. Retrieved 22 March 2019.
  12. ^ "Australia a safe haven for illicit funds, but Switzerland the world's worst". Sydney Morning Herald. 31 January 2018.
  13. ^ "Report Says U.S. Is World's Second-Biggest Tax Haven". Bloomberg News. 30 January 2018.
  14. ^ "U.S. Becomes World's Second-Biggest Tax Haven". The Wall Street Journal. 30 January 2018.
  15. ^ "Offshore activities and money laundering: recent findings and challenges" (PDF). EU Parliament. March 2017. p. 41.
  16. ^ "Financial Secrecy Index 2022". Tax Justice Network. Retrieved 16 April 2024.

External links[edit]

Retrieved from "https://en.wikipedia.org/w/index.php?title=Financial_Secrecy_Index&oldid=1219338022"