Read

Search form

$21 Trillion Hidden Offshore by Global Elite

$21 Trillion Hidden Offshore by Global Elite
Mon, 7/23/2012
This article originally appeared on The Guardian

A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary $21 trillion of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.

James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited.

He shows that at least $21 trillion – perhaps up to $31 trillion – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy". According to Henry's research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the U.S. investment bank Goldman Sachs, managed more than $6.2 trillion in 2010, a sharp rise from $2.32 trillion five years earlier.

The detailed analysis in the report, compiled using data from a range of sources, including the Bank of International Settlements and the International Monetary Fund, suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.

Oil-rich states with an internationally mobile elite have been especially prone to watching their wealth disappear into offshore bank accounts instead of being invested at home, the research suggests. Once the returns on investing the hidden assets is included, almost $775 billion has left Russia since the early 1990s when its economy was opened up. Saudi Arabia has seen $305 billion flood out since the mid-1970s, and Nigeria $304 billion.

"The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments," the report says.

The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry's calculations, $9.77 trillion of assets is owned by only 92,000 people, or 0.001% of the world's population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.

"These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people," said John Christensen of the Tax Justice Network. "People on the street have no illusions about how unfair the situation has become."

TUC general secretary Brendan Barber said: "Countries around the world are under intense pressure to reduce their deficits and governments cannot afford to let so much wealth slip past into tax havens.

"Closing down the tax loopholes exploited by multinationals and the super-rich to avoid paying their fair share will reduce the deficit. This way the government can focus on stimulating the economy, rather than squeezing the life out of it with cuts and tax rises for the 99% of people who aren't rich enough to avoid paying their taxes."

Assuming the $20 trillion mountain of assets earned an average 3% a year for its owners, and governments were able to tax that income at 30%, it would generate a bumper $187 billion in revenues – more than rich countries spend on aid to the developing world each year.

Groups such as UK Uncut have focused attention on the paltry tax bills of some highly wealthy individuals, such as Topshop owner Sir Philip Green, with campaigners at one recent protest shouting: "Where did all the money go? He took it off to Monaco!" Much of Green's retail empire is owned by his wife, Tina, who lives in the low-tax principality.

A spokeswoman for UK Uncut said: "People like Philip Green use public services – they need the streets to be cleaned, people need public transport to get to their shops – but they don't want to pay for it."

Leaders of G20 countries have repeatedly pledged to close down tax havens since the financial crisis of 2008, when the secrecy shrouding parts of the banking system was widely seen as exacerbating instability. But many countries still refuse to make details of individuals' financial worth available to the tax authorities in their home countries as a matter of course. Tax Justice Network would like to see this kind of exchange of information become standard practice, to prevent rich individuals playing off one jurisdiction against another.

"The very existence of the global offshore industry, and the tax-free status of the enormous sums invested by their wealthy clients, is predicated on secrecy," said Henry.

Add new comment

Sign Up

Article Tabs

gun violence, gun lobby, mass killings, National Rifle Association

Powerful almost by default, and handled with a clear mission at hand and an eye for empathy, "91%" is a call to activist arms.

Oaxaca teacher strikes, Educational Reform, National Coordinator of Education Workers, National Union of Education Workers, Enrique Peña Nieto, student deaths, student disappearances, Nochixtlán blockade, Nochixtlán violence, Popular Assembly of the Peopl

Teachers in southern Mexico are back on the barricades, and once again the state has responded with brute force.

tax avoidance, corporate tax evasion, corporate taxes, job creation

While candidates bicker and Congress stagnates and the rest of us dwell on the latest shooting tragedy, the super-rich enjoy the absence of attention paid to one of our nation’s most destructive issues: tax avoidance.

Abby Martin, Monsanto, World Health Organization, carcinogens

Few corporations in the world are as loathed – and as sinister – as Monsanto, but the threat posed to people and planet could be reaching new heights.

Brexit, Jo Cox, E.U. referendum, Britain Stronger in Europe, Electoral Reform Society, Left Leave, rightwing movements, U.K. xenophobia

Many are calling the U.K.’s European Union referendum vote on Thursday, the most important vote in every British person’s lifetime.

Jo Cox, white supremacy, racism, anti-immigrant, Brexit, Tommy Mair, political killings, E.U. referendum

The murder of Jo Cox has shocked British society, sparking renewed discussions about how to deal with racism, hatred, xenophobia and white supremacy just days before the Brexit vote.

Posted 3 days 9 hours ago
Abby Martin, Monsanto, World Health Organization, carcinogens

Few corporations in the world are as loathed – and as sinister – as Monsanto, but the threat posed to people and planet could be reaching new heights.

Posted 1 day 9 hours ago
Brexit, Jo Cox, E.U. referendum, Britain Stronger in Europe, Electoral Reform Society, Left Leave, rightwing movements, U.K. xenophobia

Many are calling the U.K.’s European Union referendum vote on Thursday, the most important vote in every British person’s lifetime.

Posted 2 days 8 hours ago
Hawaii GMOs, anti-GMO movement, genetically engineered crops, Syngenta, Monsanto, Earthjustice

Most people know Hawaii for its beautiful beaches, world-class surfing and delicious Kona coffee, but the islands are also ground zero for GE crops – and last week various counties were in court to defend themselves against them.

Posted 3 days 9 hours ago
Bernie Sanders, political revolution, National Nurses Union, racial inequality, economic inequality, Hillary Clinton, Democratic Party, Democratic Socialists of America, Kshama Sawant, Socialist Alternative, People and Planet First Budget

Last weekend's People's Summit concentrated on domestic policy and economic inequality, featuring spirited debates, discussions and workshops that tried to chart the path ahead for America's new left.

Posted 3 days 9 hours ago
Hawaii GMOs, anti-GMO movement, genetically engineered crops, Syngenta, Monsanto, Earthjustice

Most people know Hawaii for its beautiful beaches, world-class surfing and delicious Kona coffee, but the islands are also ground zero for GE crops – and last week various counties were in court to defend themselves against them.

climate change, art,

Climate change is such a big problem, we need artists to mobilize on a huge scale to render it comprehensible.

crude by rail, Citizens Acting for Rail Safety, crude rail explosions, BNSF, rain transit, rail revolution

We used to own our farms. We used to ride the rails. We used to have localized economies.

prison-industrial complex, jail leasing, high incarceration rates, Prison Policy Initiative, prison privatization, criminal justice reform

A recent report on “jail leasing” exposes the extent of a practice that harms prisoners and raises ethical questions about public institutions profiting off incarceration.

Jo Cox, white supremacy, racism, anti-immigrant, Brexit, Tommy Mair, political killings, E.U. referendum

The murder of Jo Cox has shocked British society, sparking renewed discussions about how to deal with racism, hatred, xenophobia and white supremacy just days before the Brexit vote.