Monday, July 23, 2012

Super-rich 'hiding' at least $21tn in Tax havens

A new study for the lobbying group Tax Justice Network (TJN) claims that wealthy individuals worldwide are holding between USD21 trillion and USD32 trillion in bank accounts in low-tax international financial centres.

The research was compiled by James Henry, formerly chief economist at the management consultancy McKinsey. He used data published by the Bank of International Settlements, International Monetary Fund, World Bank, and various national governments, including their tax authorities, to estimate the world’s stock of undeclared wealth.

Henry alleges that the ‘missing’ trillions have been invested ‘virtually tax-free through the world's still expanding black hole of more than 80 offshore secrecy jurisdictions’. This ‘offshore economy’ as Henry calls it, is large enough to have ‘very significant negative impacts on the domestic tax bases of source countries’.

Some USD9.8 trillion of the total is owned by 92,000 individuals, Henry estimates. This total only includes deposit and investment accounts, not material assets such as property and the inevitable yachts and private jets.

According to TJN, the report, called The Price of Offshore Revisited, demonstrates that the problem of economic inequality is far worse than previously understood.

‘All studies exploring economic inequality have systematically underestimated the wealth and income enjoyed by the world’s wealthiest individuals,’ said TJN’s John Christensen. According to TJN, the use of discretionary trusts is an important method of preventing assets being counted in national statistics. So is the alleged practice of some offshore finance centres of deeming certain income or assets to be located in other jurisdictions.

Mr Whiting, though, urged caution. "I cannot disprove the figures at all, but they do seem staggering. If the suggestion is that such amounts are actively hidden and never accessed, that seems odd - not least in terms of what the tax authorities are doing. In fact, the US, UK and German authorities are doing a lot."

He also pointed out that if tax havens were stuffed with such sizeable amounts, "you would expect the havens to be more conspicuously wealthy than they are".

Other findings in Mr Henry's report include:

· At the end of 2010, the 50 leading private banks alone collectively managed more than $12.1tn in cross-border invested assets for private clients

· The three private banks handling the most assets offshore are UBS, Credit Suisse and Goldman Sachs

· Less than 100,000 people worldwide own about $9.8tn of the wealth held offshore.

Mr Henry told the BBC that it was difficult to detail hidden assets in some individual countries, including the UK, because of restrictions on getting access to data.

A spokesman for the Treasury said great strides were being made in cracking down on people hiding assets.



  1. China tax authorities have intensified their supervision on this questions.
    Posted by Tony Kan

  2. Thank you Ronald. The publicity around this is being regurgitated by the media ad nauseam and will have an overall negative impact on the international tax management profession. That is unfortunate. More especially because of where the study has come from. My academic friends describe studies of this type as Junk Science principally because because the researcher sets out to prove his/her own conclusions and that is patently obvious in the subject case. Look at the nature of the sponsoring/funding source; the Tax Justice Network is underwritten by OECD member states.

    The second reason is that the conclusions reached in the study have already been demonstrated to be based on flawed figures and/or assumptions. I expect the sensationalist media will ignore that last point.

    Posted by Neville Dodd CA, BCom, DBA, MNZIM