TREASURE ISLANDS

Banks are the biggest corporate users of tax havens – by far

The first paragraph of the Introduction in Treasure Islands finishes with this sentence:

In each country, the largest user by far was a bank.

This is about the biggest users of tax havens among corporations around the world.The purpose of this blog is to point to the data sources this relies on. None of this data is new – nevertheless the data itself, and some of the nuances in it, are striking.

First, there’s the U.S. Government Accountability Office (GAO) whose rankings, in terms of numbers of tax haven subsidiaries, go like this

1. Citigroup                                427 subsidiaries
2. Morgan Stanley                   273
3. News Corporation               152
4. Bank of America                115
5. Procter & Gamble                83
6. Pfizer                                       80
7. Marathon Oil                         76
8. Pepsico                                   70
9. Wachovia                               59
10. Lehman                                  57
11. JP Morgan                             50

The ones in bold are the financials – though note the predominance of pharmaceutical companies and one important (ahem!) media company. Also note that the GAO uses a restrictive list (p12) of tax havens, missing out such massive players as the Netherlands and the UK (for a better list, see here.)

This is complemented by a survey of the Netherlands, the UK and France. Whereas the GAO only found that 83% of top U.S. cos had tax haven subsidiaries, this survey finds that:

As in the USA, the largest user of tax havens in France and the UK was a bank. In the USA the largest user was Citigroup, in France it was BNP Paribas and in the UK it was Barclays plc.

The report surveyed 95 of the largest quoted companies in the UK, the Netherlands and France. Of those companies all but one had tax haven subsidiaries. 99 per cent of the European quoted companies surveyed operate in tax havens. The most popular tax haven in the world is Cayman Islands.

And there was this, providing more fine-grained detail:

All the UK companies had tax haven subsidiaries. Barclays plc had the most (315), just beating BP plc (294) into second place. The Netherlands produced just one company (from a sample of 23) without a tax haven subsidiary. In France all of the 39 companies surveyed had at least one tax haven subsidiary. BNP Paribas had most with a total of 189.

Following this, the Swiss magazine Hebdo published its own study. It does something different: it considers subsidiaries in the UK and Delaware – and discovers the banks’ use of these places to be massive. The top of the list are:

1. Credit Suisse                           97 (tax haven subsidiaries represent 49% of all its subsidiaries)
2. Zurich Financial Services     89 (47%)
3. Swiss Re                                   83 (60%)
4. UBS                                           80 (42%)
5. Nestlé                                       80  (17%)

This brings interesting new perspectives. Again, the biggest tax haven users by far are banks. And banks have an unusual share of their activities in tax havens – the other companies listed have a far smaller share of their total subsidiaries in tax havens.

So there you have it. The data. And it’s quite striking, isn’t it?