Monday, July 23, 2012

Elite's Hidden Wealth is Plunging Nations Into Poverty

The following is a brief summary of a provocative report by James S. Henry of the Tax Justice Network.

According to a study by the Tax Justice Network the world’s super rich have at least $21 trillion secretly  hidden away in tax shelters as of 2010.  This is equivalent to the size of the Japanese and United States economies combined, according to The Price of Offshore Revisited report.  Further, the amount of secretly hidden wealth may be as high as $32 trillion.  A second companion study, Inequality: You Don’t Know the Half of It, found that all studies of economic inequality so far have failed to account for this missing wealth and therefore have under estimated the degree of inequality in the world. 

The study’s author, James Henry, collected data from the World Bank, the International Monetary Fund (IMF), the United Nations, the Bank for International Settlements, central banks and national treasuries and cross tabulated this against other available economic data and prior studies regarding offshore investments and private banking.  He found that the top 50 private banks alone managed more than $12.1 trillion in private, offshore investments.  This is a 124% increase over the 2005 estimate of $5.4 trillion held by private banks. 

The three private banks holding the most in offshore assets are UBS, Credit Suisse and Goldman Sachs.  Fewer than 100,000 individuals own $9.8 trillion of this hidden wealth.  If this hidden wealth earned just 3% annually and was taxed at 30% it would yield an extra $190 to $280 billion in public revenues.  When the economies of a subgroup of 139 low-middle income countries was examined it was found that their status as mostly debtor nations would be reversed and they would be creditor nations after accounting for their reserve and offshore private wealth.  However, the wealthy assets are owned by private individuals while the national debts are shouldered by ordinary citizens, according to the report.  

The report finds that hidden offshore investments are large enough to significantly alter all conventional measures of wealth inequality.  Because the missing wealth belongs to only a tiny fraction of the population, the impact is staggering and growing faster than anyone suspected.  The lost tax revenue from this vast pile of wealth is great enough to have a significantly negative effect on the fortunes of many countries, especially in the developing world.  

Surprisingly, the offshore tax dodging sector is operated primarily by the world’s largest private banks, law firms and accounting firms headquartered in places like London, New York and Geneva.  The banking giants that figure prominently in government bailouts are the same banks that are sheltering hidden wealth which is starving government treasuries around the world. 

For more information about this report contact:James S. Henry, TJN Senior Adviser/ Main for this report, United States.Email:jhenry@sagharbor.comOffice:(001) 631-725-5202   US Mobile: (001) 516- 721-1452

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