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Leaked documents reveal HSBC was helping a lot of people cheat on their taxes

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A few years back, I went on a junket to Switzerland on which I met a bunch of Swiss businesspeople including, naturally, several Swiss bankers. Over dinner one of them told me that he was saddened by the negative stereotypes of Swiss banking secrecy that prevailed in the United States. People, he told me, think of Swiss banks as helping drug smugglers or terrorists launder money. The truth is simpler. "There are many wealthy people in the world," he told me, "and they prefer not to pay taxes."

That is the basic message of a huge trove of documents that were leaked from the British bank HSBC's Swiss arm to journalists from The Guardian, Le Monde, BBC Panorama and the International Consortium of Investigative Journalists.

You can dive deep on the Guardian's site, but suffice it to say that while there's no al-Qaeda here there's an awful lot of tax evasion.

And not just in the sense that foreigners would use Swiss bank accounts to facilitate tax avoidance. HSBC Switzerland personnel were actively involved in helping clients formulate plans to dodge paying what they owed.

  • HSBC advised a British soccer manager named Keith Humphreys on how to use a credit card to extract funds from an undeclared Swiss account of his father's without paying tax.
  • Australian financier Charles Goode was advised on the use of a codename to disguise his ownership of an account.
  • Irish businessman John Cashell explicitly told the bank he was looking to hide money from tax authorities, and was assured he'd come to the right place.
  • The bank told a Serbian businessman looking to make a €20 million deposit that he should avoid attracting attention in the future by using smaller increments.
  • The owner of a London furniture store asked how he could take money from a Swiss account back to the UK without declaring it, and was told that he or a colleague could be provided sterling banknotes on a no-questions-asked basis.

It goes on and on. Some of it relates to matters that have already been prosecuted in the tax dodger's home country, and some of it relates to matters that perhaps should be prosecuted in the future. The real point, however, is the one my Swiss banking friend related to me back in the fall of 2008: bankers in Switzerland saw helping rich foreigners evade taxes as part of the job. They didn't think it was wrong, morally or legally, so they did it regularly and almost casually. If people were hiding money to arm ISIS, that might be wrong. But dodging taxes wasn't breaking the rules, it was the whole job.

For a quantitative look at this problem, Gabriel Zucman's paper on tax havens is indispensable. He shows that as inequality as risen in the United States there's been an exponential increase in the amount of money squirreled away in offshore tax havens:

Zucman also finds that while offshore wealth holdings are on the rise in the USA, they are more common in Europe, and even more common in Latin America and Africa.