First there were the Panama Papers. Then came the Paradise Papers. Each leak of these documents shone a light on how companies and individuals avoid tax payments to governments, currently estimated at USD 2 billion annually. Now, these revelations have also been analysed to look at the environmental impact of tax havens, and it’s bad news for oceans and the Amazon rainforest.
A newly published report in the journal of Nature Ecology and Evolution has used information from these previously classified documents to draw the link between how, through their lack of transparency, tax havens offer protection to companies responsible for environmental degradation and essentially act as an indirect subsidy to harmful activities. Andrea Marandino of WWF said, “Tax havens make it very difficult to track international flows of capital and that means there is no accountability.
An astonishing 70% of known illegal, and therefore unregulated, fishing vessels are registered in tax havens. Many tax havens also allow vessels to operate under the so called ‘flags of convenience’, making them harder to track and allowing them to take advantage of lax or unenforced regulations. In the Amazon, soy production and beef farming are known for significant deforestation of the area.
From a total of USD 27 billion of foreign capital going to these sectors, more than USD 18 billion came through tax havens. Marandino went on to comment, “If we are to secure a future for areas like the Amazon, we need to see greater corporate transparency and traceability of flows of capital around the world that fund the destruction of nature.”
The secrecy surrounding businesses registered in tax havens and their further investments, means that there is no accountability for these environmentally destructive activities. The study authors argue that a globally concerted effort to push for financial transparency and reporting from multinationals using tax havens must be prioritized on the global sustainability agenda to adequately quantify, analyse and regulate the issue. “This is part of the internal financing of companies, but we need a better assessment of the environmental consequences of the uses of tax havens both legal and illegal,” explained Victor Galaz, the study’s lead author from the Stockholm Resilience Centre.
While tax havens are primarily used for tax benefits, the study also shows that they can provide a cover for those companies looking to hide the environmental impact of their businesses.