According to a recent report by the Tax Justice Network, a staggering $21 trillion is hidden in tax havens all across the globe. The super-rich, by virtue of their enormous wealth, can afford to better hide their money from the government. Of course we already knew this to be true, but the story’s most disturbing finding is that this money isn’t always hidden by Caribbean banks or banks in small principalities in Europe. In fact, the banks most eager to tap into this market are familiar to most Americans: Goldman Sachs, UBS and Credit Suisse.
By analyzing data from the World Bank, the IMF, the United Nations, and myriad other sources, James Henry estimates that as much as $32 trillion in assets is hidden outside of its country of origin ($21 trillion is the conservative estimate). As these assets appreciate outside of their “native” borders they, in theory, ought to be taxed. Of course, they aren’t — that’s why they’re offshore in the first place. According to the report, were these riches taxed at 30 percent it “would have generated income tax revenues of between $190-280 [billion].”
That’s a lot of missing money, to say the very least. What this means for nations that are not collecting this revenue, is that citizens of more modest means must pick up the tab. This helps exacerbate global inequality, as the rich pay less and less in taxes on their considerable wealth and those on rungs below them pay more and more. This is especially true in developing countries, says the report, where money is often concentrated in the hands of the few, and presumably civil society is less well developed.
And worst of all, this whole system isn’t perpetrated by a row of servers in a shack in the Caribbean — or whatever you picture when you picture offshore banking at its most tax-dodge-y — but rather by well-known and -respected financial institutions. UBS, Credit Suisse and Goldman Sachs, according to the paper, handle the most offshoring of assets. The world’s 50 biggest banks handled a staggering $12.1 trillion in offshore assets — in 2005, this figure was just $5.4 trillion according to the report.
Perhaps the only heartening part of the report is this: “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.”