The Alan Sondheim Mail Archive


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Date: Mon, 23 Jul 2012 01:50:08
From: Portside Moderator <moderator@PORTSIDE.ORG>
To: PORTSIDE@LISTS.PORTSIDE.ORG
Subject: $21 trillion: Hoard Hidden From Taxman By Global Elite

$21 trillion: Hoard Hidden From Taxman By Global Elite

* Study estimates staggering size of offshore economy
* Private banks help wealthiest to move cash into havens

Heather Stewart, business editor
guardian.co.uk
21 July 2012
http://www.guardian.co.uk/business/2012/jul/21/global-elite-tax-offshore-economy

A global super-rich elite has exploited gaps in cross-
border tax rules to hide an extraordinary ??13 trillion
($21tn) 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, released exclusively to the Observer.

He shows that at least ??13tn - perhaps up to ??20tn - 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 US investment bank Goldman Sachs, managed more than
??4tn in 2010, a sharp rise from ??1.5tn 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 ??500bn has left Russia since the early 1990s when
its economy was opened up. Saudi Arabia has seen ??197bn
flood out since the mid-1970s, and Nigeria ??196bn.

"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, ??6.3tn 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 ??13tn 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
??121bn 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.

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