Tax havens, where many of the rich hide their wealth, are a major component of plutocracy. They are not just places that happen to have low taxes, but secrecy jurisdictions in which financial wealth can be hidden. They conceal who owns this wealth, how much they own and where it comes from. The owners may be individuals, banks, corporations, drug cartels, the mafia or arms dealers, but their identities are hidden by front or ‘shell’ companies and ‘offshore trusts’. According to research by ActionAid, in 2011, 98 of the top 100 companies listed on London’s stock exchange used tax havens, with 4,492 of their overseas companies located in subsidiaries. This doesn’t mean that the money actually stays there, for once its original sources have been concealed it can be recirculated, usually back to major financial centres, to be ‘invested’; but the ownership of that money is vested in anonymous companies registered offshore.

The Tax Justice Network estimates that in July 2012 at least US$21 trillion – and possibly as much as US$32 trillion – was hidden in tax havens by the world’s wealthiest people. Such figures do not include ‘the vast amount of wealth held in the form of real estate, superyachts, works of art and even racehorses that is “owned” by secretive offshore companies, trusts and foundations. An estimated c. $250 billion is lost in taxes each year by governments by wealthy individuals holding assets offshore.’

Tax havens enable companies not only to avoid tax but to escape regulation of their activities, so they can do offshore what is illegal onshore. They provide a means for banks to hide their most risky, indeed reckless, activities off their balance sheets and avoid reserve requirements and other regulations.