Tax Evasion and Tax Havens since the Nineteenth Century

This book is a brilliant collection of case studies depicting an in-depth overview of the origins of tax evasion and tax havens in select countries in Europe during the nineteenth and twentieth centuries. It does an excellent job in enhancing our understanding of the history of tax havens and its link to capitalist globalisation. Aretha Campbell, author of Money Laundering, Terrorist Financing, and Tax Evasion (Palgrave, 2021) This book is the very best in-depth historical study we have of tax evasion and tax havens, and the related development of modern states, over the period since globalisation gathered momentum in the late nineteenth century. W. Elliot Brownlee, Department of History, University of California, Santa Barbara This collective book offers a panorama of the history of tax evasion, tax avoidance and tax havens from the nineteenth century to the present day, based on the latest research in contemporary history. It aims to show that this phenomenon is at the heart of global capitalism, partly as a response of the ruling classes to the rise of progressive taxation, but for other reasons too: notably the development of a powerful tax evasion and avoidance industry in different countries. The book argues that tax competition between states has stimulated the development of tax havens. It discusses the notion of the tax haven and proposes a more rigorous concept - that of the tax predator. Finally, the book sheds light on the socio-political conflicts that have developed around tax evasion and the way in which states have fought against or tolerated the phenomenon. Sbastien Guex is Full Professor of History at the University of Lausanne, Switzerland. His research interests lie in social, economic and political history, and he has studied public finance, taxes, and tax havens - in particular the Swiss tax haven. He is a member of the federal commission in charge of the publication of the Diplomatic Documents of Switzerland series. Finally, he is one of the founders, in 2002, of one of the most influential NGOs on tax policy at the international level, the Tax Justice Network (TJN). Hadrien Buclin is a part-time Lecturer at the University of Fribourg, Switzerland. He was also, in 2017-2019, a visiting research fellow at Paris 1 University. His research focuses on the social and political history of Switzerland in the twentieth century. He is the author of Les intellectuels de gauche: critique et consensus dans la Suisse daprs-guerre (1945-1968) (2019), as well as several scientific papers Preface 5 Contents 8 Editors and Contributors 11 About the Editors 11 Contributors 12 List of Figures 19 List of Tables 23 1 Introduction. “Low-Tax Predators” Rather Than “Tax Havens”: New Perspectives on the History of the International Tax Evasion and Avoidance Market 25 A History Still in Its Infancy 26 A New Periodization and Its Consequences 30 Factors Behind the Formation and Development of Tax Havens 37 The Predatory Role of Tax Havens 43 The Need for a Rigorous Definition and a Sound Concept of Tax Havens 47 References 53 Part I Emergence and Expansion of Tax Havens 59 2 The Emergence and Expansion of Tax Havens, 1850–2000: Insights from a New Dataset 60 The Construction of a Dataset on Tax Havens’ History 63 The Role of Legal Reforms 63 Data 66 The Development of Tax Havens 67 Determinants 69 The Role of Demand 70 Other Determinants 72 Conclusion 74 Bibliography 75 3 Emergence and Expansion of the Swiss Tax Haven: The Tax Privileges for Rich Foreigners in the Canton of Vaud, 1840–1959 78 Some Figures 79 Why Attract Wealthy Foreigners? 81 The Tax Exemption of Wealthy Foreigners at the Heart of the Emergence and Development of Wealth and Income Taxation (1840–1916) 83 The Lump-Sum Taxation: A Product of the First World War (1918–1946) 86 The Effects of the Second World War: A Minimal Revision of Lump-Sum Taxation (1947–1959) 90 Conclusion 93 Bibliography 94 4 Emergence of, and Threats to, the Belgian Tax Haven During La Belle Epoque, 1890–1914 96 ‘A Convenient and Safe Haven’ 97 New Military Expenses and the French Initiative 101 Levie’s Taxes 104 The Excellence of Levie’s Speech 107 The Four Tax Rules of Charles Woeste 109 Conclusion 111 Bibliography 114 5 The Oil Multinational Shell’s History of Using Tax Evasion Methods, Including Tax Havens and Political Pressure, 1914–1974 116 Introduction 116 Avoiding Dutch Taxes Via a ‘Trick’ 117 Amendment of Statutes 118 Failed Attempt to Deceive the Tax Authorities 119 Political Influence 121 Tax Gifts on Curaçao 122 Complicated Construction 122 Position of Power 123 Higher Taxes for the Oil Concern 123 Tax Evasion of 100 Million 124 Using the Tax Haven of Curaçao 125 A ‘Sweetener’ of 35–100 Million 127 Conclusion 130 Bibliography 130 6 Swedish Emigration to Switzerland in the 1960s–1980s Period: Tax Exile and Settlement Choices 133 Settlement Choices of the Wealthy—to Minimise Taxes or to Live with Other Wealthy People? 136 Sources and Data 139 Taxation in Sweden and Switzerland—An Overview 139 Swedish Immigration in Switzerland 141 Tax Rates in the Swiss Cantons 144 Settlement of Swedes in Swiss Cantons 146 Swedes as Important Lump-Sum Taxpayers 152 The Clustering of Swedes in Switzerland and Their Socio-Economic Background 154 Conclusion 156 Bibliography 157 7 The Rise of Tax Havens and Conduit Countries from the Early 2000s 161 Characteristics of Corporate Tax Havens and Conduit Countries 165 Recent Developments 167 The Proof of the Pudding Is in the Eating 169 Conclusions 175 Bibliography 177 8 Luxury Free Ports as Purpose-Built Conduits for Tax Evasion, 1990–2020 180 The History of Free Ports 181 Geneva Free Port 182 UK Free Ports 189 Conclusion 191 Bibliography 192 Part II Tax Evasion: Extent, Causes, and Conflicts 197 9 Income Tax Evasion and Avoidance in Germany, 1850–1920 198 Tax Collection and Evasion of UK Income Tax 199 Progressive and Comprehensive Income Tax in German States 201 Criminal Tax Law and Tax Evasion in Prussia 202 Bremen 205 The German Pioneer of Progressive Income Tax: Saxony 1874–1914 209 Tax Avoidance and Evasion in Saxonia in WWI 211 Outlook 215 Bibliography 216 10 Volume, Social Distribution, and the Instrumentalisation of Tax Evasion in Switzerland: The Case of Zurich, 1860–1945 219 The Extent of Tax Evasion and Its Social Distribution (1860–1919) 220 The Political Mobilisation of Tax Evasion Before World War I 227 Tax Evasion in Zurich During the Interwar Period and the Second World War 230 Conclusion 235 Bibliography 237 11 War Profits and Tax Evasion: Italian Fiscal Policies in the First World War and After the War, 1915–1924 240 The Tax on War Profits 241 The Main Tax Evasion Practices 244 The Assessment of Income and the Collection of the Tax 249 The Payment of the Tax and Its Vision 251 Conclusions 253 Bibliography 255 12 Tax Compliance in a Crisis: Evidence from the Great Depression, 1929–1936 256 Introduction 256 Background 258 Data 261 Factors Associated with Tax Non-compliance 262 Persistent Effects of Tax Non-compliance 266 Discussion 273 Limitations 273 Implications 274 Concluding Comments 275 Appendix 275 Bibliography 277 Part III Fighting Tax Evasion and Tax Havens? 279 13 Criminalising Tax Evasion in France, Early Nineteenth Century–2008 280 Criminal Sanctions Limited to Indirect Taxes During the Long Nineteenth Century 282 The Difficult Extension of the Repressive Regime to Direct Taxes (1900–1936) 286 Punishments and Convictions in the Second Half of the Twentieth Century 293 Conclusion: A Purely Symbolic Penalisation 299 Bibliography 300 14 “These Patriots Who Misuse the Law”: The Background to the United Kingdom’s Anti-Tax Haven Legislation of 1936 304 Offshore Tax Avoidance in the Pre-1914 Era 306 Taxpayers Shift from Offshore Investment Accounts to Offshore Holding Companies and Trusts 312 The Revenue’s Search for a Legislative Solution to Offshore Tax Planning 318 Problems Regarding Information and Enforcement, and the Subsequent Fate of the Legislation 322 References 328 15 Tax Evasion as Seen by French Tax Administrations from the 1920s to the 1970s: Pragmatism in Action 332 Propaedeutic Between Two World Wars 334 The Ideas Are in Place: The National Bloc 334 An Uncompromising Assessment in 1929 339 1.3 Late but Promising Reforms 340 Between Resistance and Accommodation 342 The Tax Problem 343 Time for Reforms and Compliance Teams 344 Tax Intolerance 346 Conclusion—Fighting Tax Evasion: Is It an Impossibility? 348 Bibliography 349 16 Detecting Ordinary Tax Evaders: The Example of the 1945 National Solidarity Tax in France 351 A Reparation Tax Threatened by Evasion 353 Fighting Tax Evasion: A Political, Financial and Moral Imperative 353 A Campaign Plan to Fight Tax Evasion Upstream 354 Massive Evasion and Avoidance? The Statistics in Relation to the Files 357 A Systematic and Methodical Control of the Files 360 From Arbitration to Arbitrariness? The Controller’s Personal Interpretation 362 Conclusion 366 Bibliography 367 17 Tax Education After WWII: How Spain, the USA, and West Germany Tried to Make Their Citizens Pay Honestly 369 Introduction: Tax Education as One Field of Tax Compliance Improvement 369 Tax Education as “Training in Citizenship”: A Transnational Comparison 370 USA: The International Forerunner in Tax Education 371 Tax Education as War Propaganda 371 The 1950s/1960s 371 The 1970s/1980s 374 Spain: Tax Education Under Dictatorship, Transition and Democracy 376 Tax Education in an Authoritarian Regime 376 From Subjects to Citizens 377 Tax Education in Developed Democracy 380 Western Germany: Largely an Abstinence of Tax Education 381 Widespread Tax Evasion After WWII 381 No More Tax Education: When the Economic Miracle Starts 382 Conclusion and Open Questions 383 Bibliography 385 Index 391