Treasure Islands, By Nicholas Shaxson

If you would like to know why your taxes are going up quite as much as they are this year, then Nicholas Shaxson has a one word answer: "Offshore". Lost income from income "sheltered" in tax havens around the world costs the UK exchequer about £20bn, though it's anyone's guess. That is enough to put VAT back down to 15 per cent, or scrap tuition fees. Globally, the stashed cash runs to a total of about $6 trillion ($6,000 billion).

Offshore is as much a psychological, cultural place as a jurisdictional or geographic one. It has its origins in the reasonable desire of international companies not to pay tax twice on their profits, once overseas and again when the money is repatriated. To facilitate this, some places volunteered to hardly tax at all, and to protect confidentiality. Thus do many huge corporations and rich individuals pay no tax at all. It is costing many developed and poor nations alike dearly.

We are all familiar with the names of the territories traditionally associated with dodging tax and the law. First are the leftovers of the British empire and similar curiosities – Jersey, Guernsey, the Isle of Man, the Caymans, the Turks and Caicos Islands, Gibraltar and so on, plus Ireland and Hong Kong. Second are the long-established Ruritanian Europeans – Switzerland, Luxembourg, Lichtenstein and Monaco. Third are "the rest" – Panama, Gabon and new entrants such as the Netherlands and Ghana. So, basically, we have a stamp collection of places handy for those eager to make the least of their obligations to society.

Yet Shaxson also reminds us that offshore can be very onshore. Much of the City of London's status as an international financial centre derives from the way the UK authorities in the 1950s almost casually decided that the dollars US citizens and companies decided to park in London to avoid taxation (and occasional prosecution) were nothing to do with us, guv. They also turned a blind eye to what became the Eurodollar and Eurobond markets, running into trillions and often domiciled via complex trust structures in multiple tax havens. The Americans couldn't protest too much when their own little state of Delaware had become the internal haven of choice for US corporations keen to promote the interest of managers at the expense of shareholders and, again, the taxpayer.

People are offshore, too, as with the UK's special status of the "non-dom": a foreigner or a British (depending on links elsewhere) UK resident who doesn't pay tax on their global income, in return for an annual £30,000 fee.

The ultimate example of such individuals are the "nomads", who spend so little time in one place that they are liable for tax nowhere. They feel no obligation to the rest of us but I always wonder, especially as I struggle with my own modest tax affairs, how many of us would voluntarily write a cheque to HM Revenue and Customs for more tax than we owe?

Where Shaxson suffers is in shading into a strange sort of resentful paranoia about these places, though some of it is justified. The Swiss, for example, will have to live forever with the disgrace of Nazi gold, unresolved to this day. Tellingly, much of Hosni Mubarak's wealth is ensconced in Zurich (it amounts to $70bn, they say, including the son's house in Belgravia).

Apart from their collusion in illegal tax evasion and drug-running, the havens are also guilty of crimes from architectural despoliation to petty corruption. Shaxson reserves special hatred for Jersey, where a gin-swigging, homophobic, racist oligarchic elite has sold out a beleaguered population to finance capital: a sort of Bergerac meets Pinochet world. Shaxson admits that the libel laws constrain him from more specific charges.

Yet apart from new potatoes, gold-top milk and some tourism, Jersey has little going for it economically. Nor do most of the British overseas territories fingered by Shaxson - which are only nominally under UK jurisdiction, a point he neglects or misunderstands. Most are too small and poor to be independent states, even with their financial income. As a second-best they have been granted self-government and they are, uncomfortably for the rest of us, entitled to levy tax as they wish as of democratic, sovereign right - though their self-government sometimes leaves much to be desired. Why should the UK bully them?

Besides, it is an ugly but unavoidable truth that if Jersey or the Caymans didn't do it, then someone else would. At least in "our" havens, we have a chance of keeping an eye on things. In tax, the one great wearisome certainty is that someone, somewhere, in some other obscure treasure island with an even more relaxed attitude to dirty money, will always undercut you in the great race to the bottom.

Sean O'Grady is Economics Editor of 'The Independent'