Wealth doesn’t trickle down – it just floods offshore, new research reveals [Guardian]

A far-reaching new study suggests a staggering $21tn in assets has been lost to global tax havens. If taxed, that could have been enough to put parts of Africa back on its feet – and even solve the euro crisis

by Heather Stewart

21 July 2012

[Excerpted]

The world’s super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy.

James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system.

…Despite the professed determination of the G20 group of leading economies to tackle tax secrecy, investors in scores of countries – including the US and the UK – are still able to hide some or all of their assets from the taxman…

…Using the BIS’s measure of "offshore deposits" – cash held outside the depositor’s home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn (£13tn) and $32tn (£20tn) in financial assets has been hidden from the world’s tax authorities.

"These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

In total, 10 million individuals around the world hold assets offshore, according to Henry’s analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world’s movers and shakers like to use as homes for their immense riches…

Full article link here

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