6 Things You Should Know About the $21 Trillion the World's Richest People Are Hiding In Tax Shelters
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It's also important, the report notes, to distinguish between the “intermediary havens”--the places most people think of when they think of tax havens, like Romney's Cayman Islands, Bermuda, or Switzerland—and the “destination havens,” which include the US, the UK, and even Germany. Those destinations are desirable because they provide “relatively efficient, regulated securities markets, banks backstopped by large populations of taxpayers, and insurance companies; well-developed legal codes, competent attorneys, independent judiciaries, and the rule of law.”
So the same folks avoiding paying taxes by shuffling their money around, in other words, are taking advantage of taxpayer-funded services to do so. And here in the US, certain states have begun, since the 1990s, to offer inexpensive legal entities “whose levels of secrecy, protection against creditors, and tax advantages rival those of the world's traditional secretive offshore havens.” Combine that with the declining share of US taxes paid by the rich and corporations, and we're starting to look awfully appealing to those looking to squirrel away money.
3. Big Bailed-Out Banks Run This Business
Just who is facilitating this process? Some familiar names surface quickly when you dig into the data: Goldman Sachs, UBS, and Credit Suisse are the top three, with Bank of America, Wells Fargo, and JP Morgan Chase all in the top ten. “We can now add this to their list of distinctions: they are key players in many havens around the globe, and key enablers of the global tax injustice system,” the report notes.
By the end of 2010, the top 50 private banks alone were managing some $12.1 trillion in “cross-border invested” assets for their clients. That's more than twice what it was in 2005, representing an average annual growth rate of over 16 percent.
“From banks to accountancy firms and corporate lawyers, some of the biggest businesses in the world are part of the fabric of global tax avoidance,” writes financial researcher (and former Goldman Sachs trader) Lydia Prieg in The Guardian . “These companies are not moral entities that we can shame into paying their fair share; they exist to maximize their profits and those of their clients.”
“Until the late 2000s,” Henry notes, “the conventional wisdom among flight capitalists was 'What cold be safer than 'too big to fail' US, Swiss and UK banks?'” Without the bailouts that came along with the 2008 financial crisis, he adds, many of the banks that are stashing cash for the ultra-rich wouldn't exist anymore. The assumption of government backing is the very reason why those uber-rich are banking with the big guys to begin with.
4. Inequality Is Worse Than We Thought
With all this wealth hidden around the world, impossible to count as well as to tax, the Tax Justice Network points out, it's certain that we're underestimating the amount of income and wealth inequality we have. Stewart Lansley, author of The Cost of Inequality, told Heather Stewart at the Guardian: "There is absolutely no doubt at all that the statistics on income and wealth at the top understate the problem."
When calculating the Gini coefficient, a measure of inequality in a society, he said, "You don't pick up the multimillionaires and billionaires, and even if you do, you can't pick it up properly."
This is such an important issue that the Tax Justice Network included a second report alongside Henry's, titled “ Inequality: You Don't Know the Half Of It.” The report details all the problems with the way we calculate inequality now, which often seem to boil down to the fact that we have no accurate measure of the true wealth of the super-rich. Income tax data is available, but if there are really trillions stashed around the world in tax havens, how do we calculate the true incomes of the world's wealthiest?