An employee of Jetpack Cayman demonstrates the sport which costs $359 for half an hour. The jetpack is zero gravity, the Cayman are zero taxes, we are in the right place! said Mike Thalasinos, owner of Jetpack Cayman. Photograph: Paolo Woods and Gabriele Galimberti/INSTITUTE
You, dear reader, are a prolific and casual user of offshore tax havens. Im assuming you dont live in a cave or in a remote hunting community. Even if you did, though, youre probably a dabbler: you have little choice.
Many people, and perhaps youre one of them, share a queasy feeling that something has gone badly wrong with the world economy but cant quite put their finger on what the source of the trouble is. Once you understand the nature of offshore tax havens, you should feel closer to pinning down the answers.
Before I explain what they are, and why powerful governments dont just close them down, I want you to take part in a short challenge. See if you can dodge all my bear traps, and declare yourself untainted by tax havens. If you succeed, you win my Hermit of the Year prize.
Related: Inside the secret world of tax havens in pictures
Do you celebrate Christmas? If you do (or even if you do not), did you buy any gifts on Amazon last December? If so, then your goods were quite likely to have been routed through a byzantine world hosted only on paper, you understand by the Grand Duchy of Luxembourg, where Amazon has located its European headquarters, slashing its tax bills around the world. In 2011, Amazon revealed that the US Internal Revenue Service was chasing it for $1.5bn in back taxes. More recently, Amazon has said it will stop routing its UK sales through Luxembourg.
Perhaps you shun Amazon. You buy only local products: good for you. But did you search for any gifts online? Did a company called Google play any role in this? In 2011, Google shuffled four-fifths of its profits through a subsidiary in the tax haven of Bermuda, cutting its worldwide tax rate in half and its tax rate in some countries to nearly zero. Google boss Eric Schmidt said in 2012 he was very proud of the structure that we set up its called capitalism.
Youve never used Google? OK, lets say you did all your shopping in the real world: traipsing around your local stores, picking up homemade wooden artefacts that you could weigh in your hands. Wonderful. Youre nearly there.
But not quite. Did you listen to any music on those days? Lets hope iTunes wasnt part of that picture. The tech giant Apple achieved what Senator Carl Levin called, in 2013, the holy grail of tax avoidance, setting up offshore corporations legally incorporated in Ireland and the US but for tax purposes, not resident anywhere. Apple shifted $74bn into one of these subsidiaries between 2009 and 2012, paying 2% in tax on it.
Lets cut this challenge short. Did you at any point consume the services of any of these: AIG, Aviva, Barclays, Black & Decker, British American Tobacco, Burberry, Citigroup, Deutsche Bank, Facebook, FedEx, GlaxoSmithKline, Ikea, HSBC, JP Morgan, Microsoft, Pepsi, Skype, Starbucks, Vodafone or Walt Disney? This is just my quirky personal selection from a list of more than 350 multinationals whose convoluted tax schemes were revealed last November by a whistleblower, working for one accountancy firm, PricewaterhouseCoopers (PwC), in one European tax haven, Luxembourg.
Follow the money: inside the world’s tax havens | Business …