Countries providing the most financial secrecy services are experiencing a shift towards autocracy, according to the latest Financial Secrecy Index published by the Tax Justice Network.
The United States retained its position as the world’s largest supplier of financial secrecy services, while being downgraded this year by the Polity Project from a democracy to an anocracy.
The development demonstrates the established risks that financial secrecy poses to democratic systems.
Democratic decline
Analysis comparing the Financial Secrecy Index with democracy monitoring data reveals concerning patterns among the highest-ranking jurisdictions.
Of the top 10 suppliers of financial secrecy, eight experienced worsening autocracy scores between 2018 and 2024 on the Liberal Democracy Index.
South Korea entered the top 10 for the first time, rising eight positions to become the world’s eighth-largest supplier of financial secrecy.
The jurisdiction was downgraded from a liberal democracy to an electoral democracy following a failed political coup in 2024.
Singapore maintained its classification as an electoral autocracy despite marginal improvements, whilst continuing to score below average democracy levels.
US maintains top position
The US retained first place on the index, accounting for 25% of global offshore financial services, down from 26% previously.
However, the jurisdiction increased its secrecy score from 67.4 to 68.6, indicating less transparent financial practices.
Under the new Trump administration, the US launched what researchers describe as an unprecedented attack on tax sovereignty.
This happened by demanding countries surrender their right to collect taxes from US corporations operating within their borders, threatening economic repercussions for non-compliance.
EU’s dual standards
The analysis reveals what researchers term the EU’s Jekyll-and-Hyde approach to financial transparency.
More than half of EU countries were found to be using provisions in international law to shield non-EU countries’ tax evaders from accountability while simultaneously assisting each other with tax compliance matters.
EU countries now account for over 21% of the world’s supply of financial secrecy, representing the largest regional increase.
The findings show EU countries operating two-tier systems of transparency and cooperation, sharing information with EU or higher-income countries whilst withholding assistance from lower-income nations.
Thirteen EU countries were identified as exercising reservations on the Convention on Mutual Administrative Assistance, allowing them to withhold tax collection assistance specifically from non-EU countries.
Contrasting trends
While traditional secrecy jurisdictions captured smaller and less transparent shares of international finance, several countries demonstrated the opposite trend.
Spain, Denmark and the UK increased their shares of international finance while improving transparency standards.
Spain’s share of global offshore financial services grew from 0.7% to 0.9% while improving its secrecy score from 57 to 56.
Denmark’s share increased by 46% from 0.17% to 0.25% while improving its secrecy score from 49 to 39.
The UK’s share grew from 14% to about 16% while improving its secrecy score from 47 to 45.
UN tax convention negotiations
The findings emerge as negotiations continue on a proposed UN tax convention designed to reform international tax cooperation.
Only nine countries remain opposed to the convention – the US, South Korea, Japan, Canada, the UK, Israel, Australia, New Zealand and Argentina.
EU countries shifted from opposition to abstention in 2024.
The convention aims to address systematic issues with the current global tax system, which researchers estimate costs countries nearly half a trillion dollars annually in lost taxes to multinational corporations and wealthy individuals.
The current system of financial secrecy costs countries US$37.5 billion annually in lost taxes from wealthy individuals alone.
Countries altogether lose $492 billion in tax revenue each year to multinational corporations and wealthy individuals using tax havens to underpay taxes.
Methodology updates
The Tax Justice Network implemented changes to how the Financial Secrecy Index is published, moving from biennial updates to rolling updates in batches.
The new approach allows researchers to capture regulatory changes closer to when they occur and provide more dynamic assessments of countries’ roles in enabling global financial secrecy.
The index evaluates how much legal wiggle room countries provide for financial secrecy and monitors offshore financial services provided to other countries’ residents, determining each jurisdiction’s practical role in enabling financial secrecy globally.
