The financial crisis seems as if it emerged from nowhere and struck as hard and fast as lightning. How did so many financial institutions crumble with so little warning? There are many reasons, but one that has not been given much attention is how tax havens helped enable the mess — and how several of the big companies that have received billions of bailout dollars were also the most active in the shady world of offshore finance.
Everyone points to all the risky bets made on overpriced mortgages as the main cause of the financial crisis. But if financial institutions were making such risky bets for so long why didn't anyone stop them? One of the reasons is that no one knew quite what was going on-- and the roll that Tax Havens played in creating such an opaque international financial system should be examined much closer.
There is an estimate 11.5 trillion dollars stashed offshore in places like the Cayman Islands or Lichtenstein or Jersey islands or about 80 other equally obscure tiny countries that have gotten rich off of helping people hide their money and/or their sketchy investments.
Countries like Bermuda for instance offer secret banking, miniscule tax rates for corporations, and sometimes a willingness to ignore money laundering. CIA Factbook, notes that Bermuda enjoys the third highest per capita income in the world. Its economy is primarily based on providing financial services for international business and luxury facilities for tourists. According to SEC reports the most any corporation can pay in taxes is about $28,000 a year. The low tax and the lack of regulation are surely why major U.S. corporations such as Accenture, Tyco, Ingersoll-Rand and Nabors have "moved" their headquarters from the United States to Bermuda—and of course the golf courses are pretty nice as well.
In addition to helping destabilize the financial system a senate investigation led by Senator Carl Levin estimated the U.S. losses $100 billion a year in tax revenue. The issue of tax avoidance seems particularly relevant now considering that the richest Americans control more of the country’s wealth than any time since the Gilded Age.