(The
auther of this report, James Henry, will be on my radio show just after 5:40ET today. The
streaming audio can be found
here.)
Tax Justice Network
July 22, 2012
July 22, 2012
At least $21 trillion of unreported private
financial wealth was owned by wealthy individuals via tax havens at the end of
2010. This sum is equivalent to the size of the United States and
Japanese economies combined. The research comes amid growing
concerns about the enormous gulf between rich and poor in countries around the
globe.
There may be as much as $32 trillion of hidden
financial assets held offshore by high net worth individuals (HNWIs), according
to our report The Price of Offshore Revisited, which is thought to be the
most detailed and rigorous study ever made of financial assets held in offshore
financial centres and secrecy structures.
James S. Henry, TJN Senior
Adviser and main researcher for The
Price of Offshore Revisited, said:
“This new report focuses our attention on a huge 'black hole' in
the world economy that has never before been measured – private
offshore wealth, and the vast amounts of untaxed income that it
produces. This at a time when governments around the world are
starved for resources, and we are more conscious than ever of the costs of
economic inequality.”
Other Key
Findings:
·
At the end of 2010 the Top 50 private banks alone
collectively managed more than $12.1 trillion in cross-border invested assets
for private clients, including their trusts and foundations. This is up from
$5.4 trillion in 2005, representing an average annual growth rate
of more than 16%.
·
The three private banks receiving the most assets
offshore on behalf of the global super-rich are UBS, Credit Suisse and Goldman
Sachs. The top ten banks commanded more than half the top fifty’s asset total –
an increased share since 2005.
·
Fewer than 10 million members of the global
super-rich have
amassed a $21 trillion offshore fortune is. Of these, less than 100,000 people
worldwide own $9.8 trillion of wealth held offshore.
·
If this unreported $21-32 trillion, conservatively
estimated, earned a modest rate of return of just 3%, and that income was taxed
at just 30%, this would have generated income tax revenues of between $190-280
bn – roughly twice the amount OECD countries spend on all overseas
development assistance
around the world. Inheritance, capital gains and other taxes would boost this
figure considerably.
·
For our focus subgroup of 139 mostly low-middle
income countries, traditional data shows they had aggregate external debts of
$4.1 tn at the end of 2010. But take their foreign reserves and unrecorded
offshore private wealth into account, and the picture flips into reverse: they
have aggregate net debts of minus US$10.1-13.1 tn. In other words,
these countries are big net creditors, not debtors. Unfortunately, their
assets are held by a small number of wealthy individuals, while their debts are
shouldered by their ordinary people through their governments.
We consider these numbers to be conservative. This
is only financial wealth and excludes a welter of real estate, yachts and
other non-financial assets owned via offshore structures.
Nicole Tichon, director of Tax Justice Network USA,
said, "Recent investigations into the world's largest banks have shown that
financial secrecy is the means to bad ends. It protects criminals of all
stripes. And the loss of tax revenues to both developed and developing countries
has left widespread job loss, budget cuts and basic services in its
wake."
Henry draws on data from the World Bank, the IMF,
the United Nations, central banks, the Bank for International Settlements, and
national treasuries, and triangulates his results against data reflecting demand
for reserve currency and gold, and data on offshore private banking studies by
consulting firms and others.
Accompanying
this research is another study by TJN, entitled Inequality:
You Don’t Know the Half of It, which demonstrates that all studies of economic inequality to
date have failed to account properly for this missing wealth. It concludes that
inequality is far worse than we
think.
TJN interviewed eight of the world’s most respected
economists specializing in economic inequality. They all confirmed a huge
under-reporting problem in this area.
TJN’s
research explains that if an asset is hidden in an offshore bank account,
trust or company, and the ultimate owner or beneficiary of the income or capital
therefore cannot be identified, then this asset and the income it produces
cannot be counted in inequality statistics.
Nicholas Shaxson, author of the book Treasure Islands: Tax Havens
and the Men Who Stole The World, said, "A pinstripe infrastructure of
accountants, lawyers and financial institutions has painstakingly put together a
global offshore system for hiding a large chunk of the world’s wealth and income
from view. They have been spectacularly successful. Now that we can at last see
the true scale of this monster, we will have to get used to the idea that
inequality is much worse than we ever thought."
John Christensen, director of the Tax Justice
Network, said, "Inequality has reached epic proportions. It threatens economic
and social stability – but none of the big institutions such as the IMF, the
World Bank, the Bank of England or the Fed, with their many thousands of highly
paid economists – have ever taken useful and serious steps to measure all this
offshore wealth. Without this, we could never understand the true, gargantuan
scale of the inequality challenge we face. This is an astonishing
abdication of responsibility on their part."
Although some inequality studies try to compensate for
the missing offshore assets, all experts interviewed for this TJN paper, agreed
that no study comes even close to compensating sufficiently.
The Tax Justice Network promotes transparency
in international finance and opposes secrecy. We support a level playing field
on tax and we oppose loopholes and distortions in tax and regulation, and the
abuses that flow from them. We promote tax compliance and we oppose tax evasion,
tax avoidance, and all the mechanisms that enable owners and controllers of
wealth to escape their responsibilities to the societies on which they and their
wealth depend.
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