World’s wealth is growing offshore
Gabriel Zucman
(CNS Business): A French economist has estimated that the amount of wealth held offshore has increased by 25% in the last five years and currently stands at around US$7.6 trillion, or 8% of the world’s assets. In a new book, The Hidden Wealth of Nations, which is already grabbing headlines, Gabriel Zucman says that there has never been as much money held offshore in places like Switzerland, Luxembourg and the Cayman Islands as there is today.
Zucman has tracked financial liabilities and assets in the world from central bank data and found they did not balance as they should. The world’s banks have reported liabilities that are around $6 trillion higher than the reported assets in the world, leading to the conclusion that at least $6 trillion of assets are hidden.
In the book, which pundits are suggesting could be the next economics best seller, the assistant professor from the University of California, Berkeley suggests that as much as 40% of the world’s foreign direct investments are routed through tax havens. Pointing a finger at the Cayman Islands and many other offshore and onshore financial centres, including the US, the author acknowledges some legitimate activities happen offshore but he raises concerns about the impact of hidden cash on the global economy.
Zucman states on his website that he wrote the book because there was no reliable data available regarding tax havens to support the current worldwide debate about their use.
Despite claims by onshore governments that they are tackling the worst impacts of tax havens, Zucman, using the most up to date information, has found that since the G20 held a summit in London in April 2009 and decreed the “end of banking secrecy”, the amount of money in Switzerland has increased by 18%, and in all the tax havens in the world the money has increased by almost 25%. He said that 55% of all the foreign profits from US firms are now kept in tax havens.
Zucman said there needs to be a central global register of the owners of the world’s wealth, similar to various registries for real estate holdings. Such a database doesn’t have to be public, he writes, but it must be available to regulators.
Explaining why the world needs to address where the wealth is, he said that tax avoidance and evasion goes beyond the revenue lost in each particular case.
“If a significant fraction of rich people can evade taxes and if the rest of the population feels taxes are not fairly enforced, then the willingness to pay taxes will disappear,” he said.
From a presentation by Gabriel Zucman
