6 Things You Should Know About the $21 Trillion the World's Richest People Are Hiding In Tax Shelters
Photo Credit: Shutterstock.com
Stay up to date with the latest headlines via email.
$21 trillion. That's how much the world's richest people are hiding in offshore tax havens worldwide. Or it may be more, as much as $32 trillion—the real amount is, of course, almost impossible to track.
While governments slash spending and lay off workers, citing a need for “austerity” because of the slow economy, the ultra-rich—fewer than 10 million people—have stashed an amount equal to the US and Japanese economies combined away from the tax man. This is according to a new report by the Tax Justice Network, and their findings are shocking. The lost tax revenue from offshore tax shelters, they note, “is large enough to make a significant difference to all of our conventional measures of inequality. Since most of the missing financial wealth belongs to a tiny elite, the impact is staggering.”
James S. Henry, who was former Chief Economist for McKinsey & Co. and is the author of the book The Blood Bankers as well as articles for publications including The Nation and The New York Times , dug into information from the Bank for International Settlements, the International Monetary Fund, the World Bank, the United Nations, central banks, and private sector analysts and found the outlines of the giant pool of cash floating in that nebulous location known as “offshore”. (And this is just money—the report leaves out things like real estate, yachts, art, and other forms of wealth the super-rich are hiding, untaxed, in offshore tax havens.) Henry refers to it as a “black hole” in the world economy and notes that, “despite taking pains to err on the conservative side, the results are astonishing.”
There's a lot of information to wade through in this report, so we've broken out 6 things you should know about the money the world's richest are keeping from the rest of us.
1. Meet The Top .001%
“By our estimates, at least a third of all private financial wealth, and nearly half of all offshore wealth, is now owned by world’s richest 91,000 people– just 0.001% of the world’s population,” the report says. Those top 91,000 have about $9.8 trillion of the total estimated in this report—and fewer than ten million people account for the whole pile of cash.
Who are those people? We know they're the richest, but what else do we know about them? The report mentions “30-year-old Chinese real estate speculators and Silicon Valley software tycoons,” and those whose wealth comes from oil and the drug trade. It doesn't mention, but could, US presidential candidates—Mitt Romney's famously taken flak for having money stashed in a Swiss bank account and in investments located in the Cayman Islands. ( Politifact rated these statements in a recent Obama ad “true.”)
Drug lords, of course, need to hide their ill-gotten gains, but plenty of the other ultra-rich are simply avoiding paying taxes, constructing complicated trusts and other investments just to shave a few more points off the bill they pay to their home country. And it's all adding up.
2. Where's the Cash? It's Complicated
“Offshore,” according to Henry, isn't a physical location anymore—though plenty of places like Singapore and Switzerland, he notes, still specialize in providing “secure, low-tax physical residences” to the world's rich.
But these days, “offshore” wealth is virtual—Henry describes “nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements.” A company may be located in one jurisdiction, but it is owned by a trust located elsewhere, and administered by trustees in a third location. “Ultimately, then, the term 'offshore' refers to a set of capabilities,” rather than to a place or multiple places.