Is there a link between tax havens and environmental damage?

The release of the Panama Papers and Paradise Papers has shed light on how businesses and politicians have been using offshore tax havens to reduce the amount of tax they pay. However, the other impacts of this, like the environmental costs, have been largely ignored. But, a new investigation has shown that these activities could be affecting the environment more than we realise.

The analysis has shown that industries that are involved in the world of offshore tax havens could be more likely to be involved in environmentally damaging activities, such as deforestation and illegal fishing. It also found that large quantities of money used in the Brazilian soy and beef sectors are going through countries that are considered to have less transparency when it comes to taxation.

According to the authors of the report, tax havens could be supporting numerous types of environmentally damaging activities around the world. “Using tax havens reduces financial transparency in general, and if you don’t have transparency there is also lack of accountability,” said Dr Victor Galaz from the Stockholm Resilience Centre, who led the investigation.

In one part of the study, the team looked at the link between tax havens and illegal fishing activity. They found that “there is an overlap between tax haven jurisdictions and flag of convenience states – which are known to have very loose regulations on marine activities either because they don’t want to or they don’t have the capacity.” They found that 70% of boats that were involved in illegal or unregulated fishing were under tax havens, even though overall, only 5% of vessels were actually registered in these countries.

Dr Galaz added: “If – and it is an ‘if’ because we do not prove it – there is a loss of tax revenues over a very long time, that is actually money that could be used to invest in other things. It could be used to invest in social welfare, healthcare or environmental protections. When we talk about tax havens normally we think about the social, political and economic implications – we are adding the environmental dimension to it.”