The European Union will declare war today on Liechtenstein, Monaco, Andorra and Switzerland. Weary of losing billions of tax euros, the EU's 27-strong high command of economics and finance ministers, Ecofin, is meeting in Brussels to agree a strategy aimed at bringing the continent's tax havens under control.
Their weapon of choice will be a strengthened version of the EU's 2005 savings tax directive, which has proved pathetically easy for armies of accountants, lawyers and specialist tax planners to outflank.
Urged on by Peer Steinbruck, the German Finance Minister, the new directive will seek to close the loopholes. Mr Steinbruck says tax evasion costs Germany about €30bn (£23bn) a year in lost revenue; the UK loses a similar sum; the EU may lose €100bn (£77bn) in all.
The stakes are high. But tax experts remain sceptical about the prospects for this new offensive. Mike Warburton, senior tax partner at Grant Thornton accountants, commented yesterday that, while he and his firm condemned tax evasion, which is illegal, "tax avoidance is the second oldest profession in the world, and just as difficult to control. The tax havens will survive. There are stacks of money out there. If they close down the ones in Europe, the money will move to Dubai and Singapore".
Such defeatism has not infected European governments and they are expanding their armouries. Berlin, in particular, has turned aggressive. The BND, the German intelligence service paid about €4m to a former employee of LGT, Liechtenstein's biggest bank, for a list of some 900 German tax avoiders, the most high profile being Klaus Zumwinkel, chief executive of Deutsche Post, who resigned after he was rumbled.
HM Revenue and Customs has paid for information relating to about 100 people who could collectively owe the UK as much as £100m. Reports over the weekend suggested that the Chancellor, Alistair Darling, was targeting Monaco with an almost personal zeal, threatening a levy on funds transferred there if the recalcitrant principality fails to capitulate. Other nations, from Ireland to the Czech Republic, are also intensifying their attempts to crack down on tax losses, chasing paper trails and threatening the banks to catch up with fraud.
By its nature, the extent of tax avoidance, evasion and plain fraud is what Donald Rumsfeld might term an "unknown known". Everyone knows the money is out there in mind-numbing quantities; it is tricky, however, to be definitive about how much, and where.
It goes where taxes are low or non-existent and secrecy is guaranteed. The Cayman Islands, a UK overseas territory with a tiny population mostly concerned with the tourist trade and fishing, is home to $1.4 trillion (£700bn) of offshore money including $300bn (£150bn) worth of hedge funds, a third of the world's total. Nauru, a Pacific micro-state best known for its guano, saw some $70bn (£35bn) of Russian money turn up over the past few years, for reasons easily guessed. The "home trio" of Jersey, Guernsey and the Isle of Man attract about $1trn (£500bn), much of it ex-UK.
Globally, estimates of the total funds parked by individuals in offshore havens vary from $7trn (£3.5trn) to $12trn (£6trn). Depending on assumptions about returns and tax rates, such sizeable funds could yield around $250bn (£125bn) for legitimate public spending. That ought to be enough, for example, to achieve many of the UN's Millennium Development Goals by 2015.
But how much more for corporate profits dispatched to tax havens? A multiple of 10? Or a hundred? Either way, such monumental achievements as an end to global hunger, routinely dismissed as a pipedream of lefties, suddenly become a realistic prospect. At the very least, it might relieve the tax burden on the rest of the world.
Hard-up finance ministries are one reason why tax havens are on the defensive; crime is another. Much of the money that winds up in them is tied into the illegal international trade in drugs, corruption and embezzlement – and terror. Tax havens launder money, much to the annoyance of other governments, and grant terrorists current account facilities.
Michel Camdessus, a former managing director of the IMF, put the amount of cash laundered globally at about 2 per cent of its GDP, or about $2.1trn (£1trn). Kleptomaniac dictators from Mobutu to Mugabe have known where to stash the cash, as does al-Qa'ida. Those involved in such activities would be unlikely to declare their earnings to their home tax authorities even if they were zero-rated.
Crime has pushed many governments against tax havens. In 2000, for example the Organisation for Economic Co-Operation and Development published its blacklist of 35 "uncooperative" tax regimes; action was taken.
Now the blacklist is down to three; Monaco. Liechtenstein and Andorra. The US, normally in favour of "tax competition" and home to its own mini tax haven of Delaware, has also seen a shift in mood since 9/11. Barack Obama has co-sponsored a "Tax Haven Abuse Act" in Congress, a sure sign of changing times.
"What are they going to do – send the tanks in?" asked one tax expert yesterday responding to the EU's plans. The answer to that, hopefully, is no; but official sanctions, levies and a general will to make life difficult for tax havens is defiantly there. Hostilities have begun.