Illegal fishing, harm to Amazon forest linked to tax havens

Christopher Davidson
August 16, 2018

"Tax havens make it very hard to track global flows of capital and that means there is no accountability".

Some 68% of the investments tracked in the Amazon came from companies based in countries where no tax is paid. Essentially, most of these tax havens are convenience states - and many of them are also coastal states, which makes it additionally troubling for illegal fishing.

"The use of tax havens - and its associated problems such as loss of tax revenues, reduced transparency and lack of compliance - make tracing of fisheries resource use and allocation of accountability extremely hard and costly", the authors explain.

The release of classified documents such as the so-called Panama and Paradise papers in recent years has provided a glimpse into the opaque world of tax havens and their role in the global economy.

The release of the "Paradise Papers" and "Panama Papers" exposed how multinationals, politicians and the wealthy use offshore tax havens to hide their wealth and money flows, and reduce their exposure to tax.

The study, which also involved experts from the Global Economic Dynamics and the Biosphere (GEDB) and the Royal Swedish Academy of Sciences, is the first published research to expose that tax havens are linked to economic activities that can have serious environmental impacts. The study found that while only 4 percent of all registered fishing vessels are now flagged in a tax haven, 70 percent of the known vessels implicated in IUU fishing are, or have been, flagged under a tax haven jurisdiction.

Victor Galaz, also of the Stockholm Resilence Centre and lead author of the study, told the Guardian: "The use of tax havens is not only a sociopolitical and economic challenge, but also an environmental one". The secrecy that companies gain from using tax havens helps them reduce their tax payments, by transferring money among jurisdictions to take advantage of low tax rates. It is led by GEDB and the Stockholm Resilience Centre in collaboration with Future Earth.

Most previous analyses of the environmental impacts of tax havens have been done by investigative journalists focusing on a few locations.

"This is a global issue it requires worldwide action - we need to acknowledge that tax havens as a social, economic and now environmental issue needs to be tackled globally".

That needs to be recognised at a global level say the authors if something is to be done about it.

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The paper includes the first quantification of foreign capital that flows into the beef and soy sectors operating in the Brazilian Amazon - two sectors linked to deforestation.

In terms of total sums, they analyzed $26.9 billion associated with Amazon deforestation, with $18.4 billion coming through tax havens.

The biggest provider for these activities was the Cayman Islands. The well-known tax haven provides three benefits to investors: legal efficiency, tax-minimization and secrecy.

The new study also includes a systematic analysis of tax havens' role in Illegal, Unregulated and Unreported (IUU) fishing activities around the world.

While four percent doesn't seem like much, what's happening with this particular group of fishing vessels is perturbing.

"Tax havens make it very hard to track global flows of capital and that means there is no accountability".

The Guardian reports that a study performed at Stockholm University found that over 70 percent of illegal fishing operations and companies contributing to deforestation in the Amazon are registered in tax havens. 2018. Tax havens and global environmental degradation. Nature Ecology and Evolution (Perspective).

"What we can see in the data, in these sectors there are subsidiaries placed in tax havens that are providing loans to activities in Brazil and the Amazon". Another widely used practice is to fly flags of convenience, which is when owners register a ship in a country other than their own and display the flag of the other country on their vessel.

The definition of "tax havens" has been contested and revised at multiple occasions.

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