The term "tax haven" is a bit of a misnomer, because such places aren't just about tax. What they sell is escape: from the laws, rules and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering. The notion of elsewhere (hence the term "offshore") is central. The Cayman Islands' tax and secrecy laws are not designed for the benefit of the 50,000-odd Caymanians, but help wealthy people and corporations, mostly in the US and Europe, get around the rules of their own democratic societies. The outcome is one set of rules for a rich elite and another for the rest of us. Nearly every multinational corporation has offshore subsidiaries (not counting those in London) - and the biggest users of offshore finance are banks. Financial Mail recently counted over 550 offshore subsidiaries just for Barclays, RBS and Lloyds - each of which far outstrips any other multinational. Barclays chief executive, Bob Diamond, who told the UK Treasury select committee that he didn't know how many offshore subsidiaries his bank had.
The 1.2-square-mile slab of prime real estate in central London that is the City of London is an offshore island inside Britain, a tax haven in its own right. A Teflon-like, medieval institution dedicated to keeping finance strong and free.The City's "elsewhere" status in Britain stems from a simple formula: over centuries, sovereigns and governments have sought City loans, and in exchange the City has extracted privileges and freedoms from rules and laws to which the rest of Britain must submit. A few symbolic examples illustrate the carve-out. Whenever the Queen makes a state entry to the City, she meets a red cord raised by City police at Temple Bar. In this ceremony, the lord mayor recognises the Queen's authority, but the relationship is complex: as the corporation itself says: "The right of the City to run its own affairs was gradually won as concessions were gained from the Crown.". Then there is the Remembrancer, the City's official lobbyist in parliament, sitting opposite the Speaker, and is "charged with maintaining and enhancing the City's status and ensuring that its established rights are safeguarded". And the City's Cash, "a private fund built up over the last eight centuries". Its assets are beyond proper democratic scrutiny. The corporation has two main claims to being a tax haven: first, as a semi-alien entity, floating partly free from Britain (just as the Cayman Islands are), and second, as the hub of a global network of tax havens sucking up offshore trillions from around the world and sending it, or the business of handling it, to London. the role of the City of London Corporation as a municipal authority (and Lord Mayor) is it is a hugely resourced international offshore lobbying group pushing for international financial deregulation, tax-cutting and tax havenry around the world. In 2008, the City of London accounted for 4% of UK GDP
In his book Treasure Islands, Nicholas Shaxson, describes how Bank of England, in effect encouraged tax havenry in British outposts of the Caribbean and elsewhere. By the 1980s, the City was at the centre of a great, secretive financial web cast across the globe. The Crown dependencies of Jersey, Guernsey and the Isle of Man, which focus heavily on European business, form the web's inner ring. In the second quarter of 2009, Jersey alone provided £135bn in bank deposits upstreamed to the City. Jersey Finance, the tax haven's promotional body, puts the relationship plainly: "Jersey is an extension of the City of London." The next ring of the web contains the British overseas territories, such as the Cayman Islands and Bermuda. Like the Crown dependencies, they have governors appointed by the Queen and are controlled by Britain in myriad ways, but with enough distance to allow Britain to say "There is nothing we can do" when it suits. The web's outer ring contains an assortment of havens, such as Mauritius in the Indian Ocean, Hong Kong and the Bahamas, which Britain does not control but which still feed billions in business to the City from around the world.
Over the centuries, reformers in Britain have tried, and failed, to have the corporation merged into a unified London authority. In 1917, Peter Mandelson's grandfather Herbert Morrison, plainly declared "Is it not time London faced up to the pretentious buffoonery of the City of London Corporation and wipe it off the municipal map?" he asked. "The City is now a square mile of entrenched reaction, the home of the devilry of modern finance." Clement Attlee in 1937. "Over and over again we have seen that there is in this country another power than that which has its seat at Westminster," he said. "Those who control money can pursue a policy at home and abroad contrary to that which has been decided by the people." In 1996, Tony Blair got Labour to replace its pledge to abolish the corporation with a promise merely to "reform" it.
Like any other local authority, the City of London is divided into wards. These elect candidates to serve on the Court of Common Council, the City's principal decision-making body. Unlike any other local authority, however, individual people are not the only voters: businesses can vote, too. Political parties are not involved - candidates stand alone as independents. Before 2002, the 17,000 business votes (only business partnerships and sole traders could take part) already swamped the 6,000-odd residents. Blair's reforms expanded the business vote to about 32,000 and gave a say, based on the size of their workforce in the Square Mile, to international banks and other big players. Voting reflect the wishes not of the City's 300,000 workers, (these workers did not have control of their own votes - the reform programme was comparable to the voting rights of chattel owners in the pre-war American South: the slavery franchise.) but of corporate managements. So Goldman Sachs and the People's Bank of China get to vote in what is arguably Britain's most important local election.
"The Corporation, which runs the City like a one-party mini-state, is an unreconstructed old boys' network whose medievalist pageantry camouflages the very real power and wealth which it holds." - Rough Guide to England, 2006
taken from here