The world’s wealthiest people are harbouring £13trillion ($21trillion) in offshore tax havens, according to a campaign group. Tax Justice Network estimate that the huge sum – which may even be as high as £20trillion – has been squirreled away overseas. The report’s author James Henry, who is a specialist in tax havens, says that secretive jurisdictions including Switzerland, Luxembourg and Hong Kong are being used to keep trillions of pounds from out-of-the reach of the taxman.
The report says secretive jurisdictions including Hong Kong are receiving huge influxes of funds from a global super elite. Mr Henry said that private banks – who are desperate to woo the super-rich – are helping the global elite to keep hold of their huge assets.
‘(Their wealth is) 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,’ he was reported as saying in The Observer.
And according to the research conducted by the economist, private banks including UBS and Goldman Sachs were managing around £4trillion in 2010, which is more than a two-fold increase on the figures for 2005 before the financial downturn happened. The analysis in the report shows that oil-rich countries such as Russia and Nigeria are leaking money to tax havens at a colossal rate.
The Cayman Islands ranked highly in a list of nations where a large quantity of the huge sums are heading annually. Almost £500bn has left Russia in the past two decades. And around £200bn has flooded out of the African nation since the mid-1970s. A previous Financial Secrecy Index compiled by the Tax Justice Network ranks the jurisdictions enjoying an influx of capital in a Financial Secrecy Index. The top 10 private banks in the world including UBS were estimated to be managing around £4trillion in funds in 2010
In the table for 2011, it suggests that Switzerland, the Cayman Islands, Luxembourg and Hong Kong are amongst the nations where a large amount of the huge sums are heading. And despite the popular perception of tax havens as being small isolated islands, the campaign group says that the biggest players in ‘the supply of financial secrecy’ are almost all wealthy nations.
The group also estimates that around $250bn is lost in taxes each year by governments worldwide as a result of the wealthiest individuals holding their assets offshore. The total value of the money being leaked from some nations even dwarfs the debts they often owe to the rest of the world. According to the Tax Justice Network, the consequences of this tax avoidance are severe.
‘Secrecy distorts trade and investment flows, and creates a criminogenic environment for a litany of evils that hurt the citizens of rich and poor countries alike. ‘It’s not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion.’
Estimates suggest that if the interest on the huge sums being lost were taxed at a rate of around 30%, around £121bn would be generated for the treasuries around the world.