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Tax havens: Can promises to shut them down be believed?

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After World War II, Switzerland – famous for pocketknives and yodeling, as well as providing the world's largest tax haven – often noted that Jews and opponents of Hitler were able to hide assets safely in the mountainous nation. Christensen regards this as "a clever argument" because banking secrecy also helped Nazis, thieving African rulers, the Mafia, and others to hide their money. "This secrecy actually fosters criminality," he says.

If the G-20 fails to tackle bank secrecy, it could lead to another financial crisis in the years ahead, warns Raymond Baker, another anti-tax-haven activist and director of Global Financial Integrity in Washington. Last November, the G-20 put greater banking transparency on a par with banking regulation reform as necessary to deal with the financial crisis. Now, adds Mr. Baker, G-20 leaders appear to be backing off secrecy reform.

A possible exception is Germany. Last week the German finance ministry in Berlin promised to push for international measures to crack down on offshore tax havens at the London summit.

The issue is bigger than just a bunch of millionaires trying to reduce their tax burden. In the US, the "effective" federal income-tax rate (what is actually paid after all deductions) for the wealthiest 1 percent was 19.4 percent in 2005. In some European nations, the burden on the rich is higher.

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