By the end of 2017, offshore tax havens were (again) in the spotlight. This was largely thanks to the International Consortium of Investigative Journalists (ICIJ), which helped release the “Paradise Papers”, a trove of documents primarily concerning the clientele of Appleby, a prestigious law firm with offices in the Cayman Islands and the Bahamas. These documents illustrated how firms like Appleby help wealthy individuals use offshore tax havens to avoid or evade paying taxes in their home jurisdictions; this is possible because tax havens offer significantly lower tax rates compared to the home jurisdiction, and also offer a measure of secrecy surrounding financial transactions. (Tax havens often have little to offer but these discounts; they rarely have good governance, and opportunities outside the finance industry are difficult to find for the locals.)

The movement to crack down on offshore tax havens has gathered much support from anticorruption activists. Pointing to leaks like the Paradise Papers (and the Panama Papers before them), anticorruption activists argue that the secrecy associated with offshore tax havens exacerbates the problems of kleptocracy and corruption. While I agree that offshore tax havens pose serious problems, I’m skeptical whether this issue should be a focal point for anticorruption activists (rather than, say, advocacy groups concerned primarily with tax justice or global wealth inequality). There are two reasons for this:

• First, the main reasons that tax haven jurisdictions may contribute to the corruption problem—secrecy in financial dealings regardless of the party involved, and abusing corporate personhood for illicit purposes—are already high up on the anticorruption agenda, as they should be. But these problems are not at all specific to the offshore tax haven jurisdictions per se. Indeed, focusing attention on offshore jurisdictions like the Grand Cayman Islands or the Bahamas as facilitators of kleptocracy would deflect attention from the hard work done during the past decade of showing how, with respect to the problems of non-transparency and abuse of the corporate form, these jurisdictions are not exceptional. This offshore industry is supplemented by an equally strong onshore industry offering the same secrecy and shell corporations which undermine accountability and facilitate wrongdoing. Significant attention has been justifiably placed on the City of London, which remains a hotspot for illegal money and anonymity, but not much attention is paid to countries like Singapore and Iceland, which are also contributing to these problems. It is very well to celebrate any steps for tackling legal measures promoting secrecy, for example in the British Virgin Islands, but these remain pyrrhic victories if we allow similar problems to subsist in countries with greater political clout. This discrepancy between the offshore and onshore is also on display in the recent EU “blacklist” which in its naming and shaming of countries with legal systems facilitating tax avoidance (more on that below) does not mention any EU members.
• Second, for anticorruption activists to commit decisively to one side of the debate over offshore tax havens risks taking on unnecessary baggage and wading into debates that are largely orthogonal to the problem of corruption as such. After all, a respectable group of scholars argues that offshore tax havens are a good thing for the global economy, as they free up more profits that can then be used and distributed to shareholders. This economic justification implicates thorny legal and policy debate concerning the distinction between illegal tax evasion and legal tax avoidance. Getting bogged down in debates about tax policy is only going to distract anticorruption activists from their core mission, which in this context concerns fighting for greater transparency in corporate ownership in order to ensure that corporations aren’t used to facilitate illegal transactions or to launder illicitly-obtained wealth (for an example of a spirited debate along these lines, see this exchange over on the FCPA Blog between Martin Kenney and Alison Taylor).

To be clear, wealth concentration and income inequality are serious problems, perhaps among the most important issues facing us today. There may well be good reasons to crack down on offshore tax havens specifically, as distinct from corporate secrecy more generally. But anticorruption activists should probably avoid getting drawn into debates over the merits of global tax competition and the like. We must pick our battles. The information made available by organizations like the ICIJ should be used to redouble our efforts to promote changes—both offshore and onshore—that will promote transparency and fight corruption.