The same aggressive and uncompromising international effort used to combat terrorism must be employed to eliminate tax havens, says Nobel Prize-winning economist Joseph Stiglitz in a report being released Tuesday.

In a copy of the report, obtained by the International Consortium of Investigative Journalists and shared with the Star, Stiglitz says the United States and Europe, which effectively co-operated to strangle terrorism financing after the Sept. 11 attacks, “have an obligation to force (tax havens) to comply with global transparency standards.”

“That they have the instruments to do so has been forcefully shown in the fight against terrorism. That they do not do so in the fight against corruption and tax … evasion is testimony to the power of the interests of those who benefit from secrecy.”

Seven months after the Panama Papers detailed a pervasive network of offshore tax havens that siphon money out of government coffers while fuelling corruption and organized crime, pressure is building to curb this dark side of globalization. Joining efforts in dozens of countries, the Canada Revenue Agency revealed this week it is investigating 85 suspected tax cheats identified in the data leak.

Tuesday’s report, co-authored by Stiglitz and Swiss law professor Mark Pieth, described the stakes of the problem:

“If we cannot show our citizens that globalization can be tempered, that it can be tamed for the benefit of the vast majority, there will be a backlash. And the first order of business in taming globalization is to make sure that the secrecy havens are shut down.”

The report suggests three laws to isolate and punish blacklisted tax havens:

Make it illegal to have a bank account in a tax haven.

Prohibit citizens and corporations from being a director, shareholder or trustee of any company, foundation or trust in a tax haven.

Outlaw any correspondence between banks and financial institutions in tax havens.

“U.S. and European regulators should treat secrecy havens like the carriers of a dangerous disease. If left unchecked, it can spread like a dangerous virus. We know what to do with dangerous contagious diseases: quarantine.”

The report, being released Tuesday in Brussels, is the fruit of months of research originally carried out by Stiglitz and Pieth for the government of Panama, which hired them to make recommendations shortly after the Panama Papers were made public in April.

But when the authors learned that their report would not be made public, they resigned and continued their work independently.

“We believed that a report on transparency that was not itself transparent would simply not be credible. We had to lead by example,” they wrote.

The Panama Papers, a massive leak of 11.5 million documents from Panamanian law firm Mossack Fonseca, provided copious amounts of proof that individuals have been defrauding tax collectors around the world by using complex webs of offshore corporations and trusts located in tax havens.

The Organization for Economic Co-operation and Development estimates offshore tax havens deprive public coffers of between $100 billion and $240 billion (U.S.) each year. Canada’s share has been pegged at $6 billion to $7.8 billion annually.

The implications of offshore havens go beyond tax evasion. The Star and CBC/Radio-Canada, the only Canadian media to have access to the Panama Papers documents, have published dozens of exclusive reports on how these secretive financial structures are used to conceal conflicts of interest, money laundering and corruption.

Stiglitz’s report picks up where the Panama Papers leave off, asking what can be done to stop the use of tax havens.

The authors highlight global efforts to share tax information, and hold up the promise of automatic exchanges that will begin in 2018, but they emphasize that “current initiatives are but the first step in a far more aggressive encounter.”

Loading... Loading... Loading... Loading... Loading... Loading...

Publicly searchable databases of corporate information are essential to ending financial secrecy, they say, including the so-called “beneficial owners” of companies, who are now frequently hidden from public view by figurehead directors and shareholders.

“In a globalized world, if there is any pocket of secrecy, funds will flow through that pocket. That is why the system of transparency has to be global,” the report states.

“If secrecy havens serve as centres for tax avoidance and evasion or in any way facilitate corruption or illicit activities, they are acting as parasites, and should be cut off from the global financial community.”