The Tax Justice Network, an organization I frankly had never heard of until this weekend, came out with a study over the weekend alleging that between $21 and $32 trillion in global wealth is being hidden away in tax havens. This represents a sum equal to the GDP of the US and Japanese economces combined. Former McKinsey and Co. chief economist James Henry oversaw the TJN study.
These are assets and not earnings, but the study estimates that if the assets generated even a modest 3% rate of return, the tax revenue off of it would equal between $190-$280 billion worldwide. Instead of going toward productive purposes, that annual take remains in the hands of high net-worth individuals using tax shelters.
A good deal of this wealth, between $7.3 and $9.3 trillion, comes from rich individuals in the developing world. They have sheltered their wealth and denied their largely impoverished countries the ability to raise themselves out of debt and provide for their citizens, through simple tax evasion. Well over $1 trillion of that sheltered wealth comes from China.
As Marcy Wheeler highlights, mega-banks have facilitated this tax abuse in increasing numbers.
…the amount in tax havens grew by 67% between 2002 and 2004, then grew by 40% in the following two years, then by another 23% in the last year of the bubble. Then it crashed, basically losing that 23% and plateauing for a year. And then it started growing again, 18% between 2009 and 2010. And who knows how much in the last year?
What I find particularly interesting–though I’m not sure what to make of it–is the changing share of looter service the big banks are doing. While UBS’ tax shelter dollars continued to grow, they lost market share among tax cheats. Meanwhile Goldman Sachs’ tax shelter dollars almost quadrupled in that time. Bank of America and Wells Fargo made big gains too (though Morgan Stanley’s tax cheat business shrank and JP Morgan’s was somewhat flat.
Like I said, I don’t know what to make of it. But it sure seems like since the crash at least some of the banks have decided to recover by catering to tax cheats.
UBS, Credit Suisse and Goldman Sachs handle the most offshore assets, even after the celebrated 2009 tax amnesty at UBS. But the US mega-banks have increased their share dramatically. And this ends up facilitating a host of other potential abuses, like we saw in the Senate Permanent Subcommittee on Investigations investigation into HSBC.
If you’re wondering how global inequality can continue to rise despite advances in productivity and the promotion of democracy worldwide, it’s due to the ability for the richest people in the world to stash away their money with relative ease. And the global financial system, the executives of which have the net wealth and lifestyle of the richest of the rich, enable this behavior.
James Henry, the chief researcher on the report, said in a statement, “From another angle, this study is really good news. The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems. We have an opportunity to think not only about how to prevent some of the abuses that have led to it, but also to think about how best to make use of the untaxed earnings that it generates.” I’m skeptical that we’ll have that conversation, but we at least have a set of numbers from which to draw.