One-Tenth Of Global GDP Is Now Held In Offshore Tax Havens

Tyler Durden's picture

Accurately measuring the scope of global wealth inequality is a notoriously difficult undertaking – a fact that was brought to light last year when the International Consortium of Investigative Journalists published the Panama Papers, exposing clients of Panamanian law firm Mossack Fonseca. As the papers revealed, Mossack Fonseca, which is only the world’s fourth-largest provider of offshore financial services, boasted a client roster stacked with some of the world’s wealthiest and most politically connected individuals. The former prime minister of Iceland (who was forced from office because of the revelations), associates of Russian President Vladimir Putin, and the father of former UK Prime Minister David Cameron.

In a first-of-its kind study from the National Bureau of Economic Research, a team of economists has broken down rates of offshore wealth holdings as a percentage of GDP to identify countries with the largest, and smallest, percentages of wealth held offshore. The study’s conclusion suggests a reality that many readers probably suspected: the true scope of wealth inequality is far larger than the official statistics would suggest.

The study found that as much as one-tenth of the world’s GDP is held in tax havens, though that percentage can vary widely from country to country.

Here's Bloomberg:

“One-tenth of the world’s GDP is held in offshore tax havens, but that share jumps to as much of 15 percent for Europe and as much as 60 percent for Gulf and some Latin American countries, new research shows.

 

When it comes to total offshore wealth as a share of GDP, the United Arab Emirates, Venezuela, Saudi Arabia, Russia and Argentina lead the pack, while Germany, the U.K. and France all have above-average holdings. The U.S. is slightly below average.”

Unsurprisingly, the countries with the largest offshore wealth holdings as a percentage of GDP are oil rich, with much of that wealth flowing through state-run companies. But some G-10 economies – notably in Europe – also have a larger than average percentage of wealth tied up offshore.

“When it comes to total offshore wealth as a share of GDP, the United Arab Emirates, Venezuela, Saudi Arabia, Russia and Argentina lead the pack, while Germany, the U.K. and France all have above-average holdings. The U.S. is slightly below average.”

According to the study, the US has a below-average percentage of wealth offshore. There are a handful of reasons for this. First, the study’s authors have found that countries where the rich hold a large chunk of their wealth offshore share three common characteristics: Proximity to Switzerland, the presence of national resources,  and political and economic instability. That could be why the U.S. is slightly below the average, according to economist Gabriel Zucman, one of the study's authors.

Because of the widespread tax avoidance associated with the practice, the sheer volume of wealth stashed away in offshore tax havens distorts social scientists efforts to measure the breadth of economic inequality in modern society. So much of that research, as it turns out, is based on tax data. Given that the distortion would be to obscure the true value of wealth in the hands of the 0.01% wealthiest, one can assume that wealth inequality has, in reality, returned to levels last seen during the gilded age.

“Offshore wealth boosts inequality when it’s factored into tax data, because it belongs mostly to the richest households.  In the U.K., Spain, and France, about 30 percent to 40 percent of the wealth of the richest 0.01 percent of households is held abroad. Russia’s richest hold as much as 60 percent of their wealth overseas. “The way that we measure inequality in economics, and the social sciences, is that we rely a lot on tax data,” Zucman said. “There’s the obvious problem that there is tax avoidance: if you only look at tax data there is risk that you’re going to underestimate the true concentration of wealth.”

As pressure on Switzerland, long the world’s most recognized tax haven, has intensified in recent years, Hong Kong has risen in popularity as a destination for overseas wealth, propelled in part by the super-rich in China.

The Panama Papers leaks prompted international outcry and lead to a flurry of tax-evasion investigations in the UK and elsewhere. Earlier this year, the firm’s founders were arrested in Panama City for alleged connections with Brazil’s sprawling Lava Jato corruption scandal.

But aside from a handful of prosecutions, little has been done to change the system. Even as Mossack Fonseca falters, other members of the offshore magic circle operate in relative anonymity.

Though, in an age where the theft of sensitive information is increasingly common, their clients are at least being forced to confront the question of whether the monetary benefits would outweigh any public-relations repercussions should their offshore holdings be exposed.

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Chart Man's picture

Don't act surprised the rich have been doing this for years.  Where else are you going to hide all the profits made from the trades like this call to buy gold on July 11th from Goldman?

https://www.facebook.com/permalink.php?story_fbid=10155108125820326&id=166578775325

 

 

JRobby's picture

Untaxed for the most part. The serfs can pick up the slack.

Don't worry, this shouldn't distort the economy.

Singelguy's picture

Can you really blame them? With a "progressive" income tax system becoming more widespread in the world, where the more you earn, the higher your rate of tax, the rich are alreadypaying the lion's share of the taxes. The serfs pay nothing in comparison. Hollande took that to a whole new level in France recently, which forced the rich as well as their wealth out of the country. What the idiot bureaucrats fail to appreciate is that higher tax rates do not result in higher tax revenue. Usually, the opposite occurs.

The other important point they fail to appreciate is that setting up and maintaining offshore tax havens is not cheap. A specific minimum income is necessary before it makes sense but as you raise the tax rates, that minimum income declines, making it attractive for even more people and even more capital flees the country.

venturen's picture

Hypocrites like Buffet, Soros, Blankfein, Bloomberg, etc....design it...that you pay they don't. Should be a 1% tax to move money in and out of the country!

Troy Ounce's picture

 

Tell me more about Asian tax havens

CPL's picture

Agreed, need something to wash away in typhoon season.

dark fiber's picture

They all caved in to FATCA and OECD.  Unless it is one of those countries that you wouldn't want to go near anyway.

Deep In Vocal Euphoria's picture

ha ha ha.......

 

it's a free for all....

 

everybody fucking everybody....

 

everybody looting everybody...

 

everybody stealing from everybody...

 

everybody cheating on everybody....

 

the human soceity in decline........every corner...from usa to germany,,,,

 

zombie nation...the rotten human will get what he deserves.

JRobby's picture

Yup

Monkey killing monkey killing monkey 

HillaryOdor's picture

Keeping your own money is not stealing.  It's preventing theft.

shovelhead's picture

Why don't you just go and kill yourself in your safe space.

Oh, boo hoo ...Rotten humans. Lol. What a clown.

Shropshire Lad's picture

Well, it's obvious where all the pension funding has gone to -- the owners of these funds operate by hook and by crook.  Either they go and live in their tax havens permenently or they pay the back taxes on their migrating funds.

DontWorry's picture

So much for the trickle down theory

LostandFound's picture

One of the biggest Tax Havens on Earth is the City of London, many people are not aware that this City is not even part of the UK, even the Queen cannot enter at her will. http://www.newstatesman.com/economy/2011/02/london-corporation-city 

Sandmann's picture

City of London is part of UK and is not a tax haven. It is a square mile of ofice blocks and lawyers who shuffle paper relating to an Offshore Shadow Banking System OUTSIDE the UK

man of Wool's picture

It depends whether you consider the likes of cayman islands, Bermuda, bahama's, virgin islands outside the UK. 

BritBob's picture

The Spanish complain that Gibraltar is a tax haven...

Gibraltar will not be able to get the Ford Motor Company, create a production line in the Gibraltar, Ceuta and Melilla, as well as the Canary Islands have reduced tax rates. You not hear the Germans and the French complain about Liechtenstein being a tax haven?

 

They need to move on a drop the illegitimate sovereignty aspirations.

Gibraltar – Some Relevant International Law (1 page) :

 

https://www.academia.edu/10575180/Gibraltar_-_Some_Relevant_International_Law

Sandmann's picture

Germany paid for a CD-ROM of Liechtenstein bank accounts and is currently putting people on trial such as Herr Mauss

ZIRPdiggler's picture

Living in the red USSA it comes as no surprise that capital control and the flows thereof by the gubmint, put our collective offshore holdings near the bottom of the list.

Praeda2's picture

Nothing but Commie Jews looking for money to steal. Every country is corrupt and as a result debt ridden. The taxes and now the cost of regulations... it's amazing anyone has anything. The last thing these fuckers care about is 'equality'. That bullshit, 'fair share' buzzword they love to toss around is their excuse for stealing. If that were the case, flat tax or better yet, eliminate income taxes completely and go with a VAT. But these cunts want a cut of everything even after you're dead. They don't want you to be able to pass anything along to your children because then, they might be independent and in that case, the State would have no control over them. This is all about making slaves they control. It's not the '0.01%'. That's just bullshit to get jealous poor fags to support it. This is a guy who owns a chain of car washes, a couple with three restaurants, a guy who builds homes. Wealth inquality is expanding because we keep allowing third world animals to come here. When you have Syrians with IQ's in the 80's and Pablo and Tryone living off of handouts yeah, it makes a difference with the kid who becomes a lawyer and the other one that's a doctor.

TheNuclearGenie's picture

Why would anyone cry about this? I consider myself rich, but not rich enough yet to implement all the tax havens that are available at the upper levels. Whenever I get there, I will instantly hide my money as best I can. This is just business as usual, not some conspiracy by the elite. It is every mans duty to make sure he keeps as much of his money and investments as he possibly can.

Arnold's picture

Mine's offshore, on the lake bottom.
Someone has to speak for the little guy..

shovelhead's picture

Hint.

Even a tiny charitable organization reaps many benefits for it's officers.

Doing well by doing good. Why unecessarily risk offshore money when you can keep it right in front of you?

Clintons may be many things, but stupid isn't one of them, although there's only so much you can stretch the legal limits. That's where they might get hung up.

ChaoKrungThep's picture

Seems the newest, if not the biggest, cash stashery is right in the USA. Rothschild, in  their wisdom, allow you to stash your untaxed pennies close to home. The strenuous new diligence of the Treasury Dept in hunting offshore tax dodgers suddenly makes sense. Like native beaters driving game toward the hunters' Purdeys. Ah, sweet justice.

https://www.bloomberg.com/news/articles/2016-01-27/the-world-s-favorite-...

 

Grandad Grumps's picture

I suggest that the current economic system is dependent on not having too much "so called" wealth flowing through the population at any one time. The money must collect in "dead pools" where it is not used.

There was a time when I thought that money and economy were important. Now, I think it is insignificant when compared to other issues relating to the human condition. Fiat wealth does not add anything of significance to the human experience. It may actually detract ... and yet there must be some who bear the the burden as Satan's servants, no?

Omega_Man's picture

break down the gates and take their money

overmedicatedundersexed's picture

all this wealth is held in FRN's ..that is why the "dollar " cannot be killed off as the world reserve money..if the FRN goes so does the wealth of the elite. and the bank debt becomes worthless as well..PM's will never reach fair value as long as Yellen has a printer

Last of the Middle Class's picture

Big fucking deal, close to 40% is held on central banking ledgers. . . and the printing continues. What does that tell you.

idontcare's picture

I thought that the off shore tax havens were decimated during Hurricane Irma.  Who knew?!

Sandmann's picture

Switzerland is old hat compared to Delaware or even Liechtenstein. Currently the USA is the world's No1 tax haven especially when laundering through real-estate as Sr. Trump is well aware since the US does not seem to do any investigation of where funds come from. No doubt Mueller will go silent when he finds out just how many US cities could implode if anyone identified Jewish or Chinese Mafia Money run over shells and fronts with fancy CMOs backed by CDS.

Cook Islands, BVI, Cayman, Cyprus, Luxembourg are all brass plates for title transfers - the physicals are inside the USA

HRClinton's picture

The reason that RE is used for laundering ill-gotten or untaxed gains, is that it provides a big enough pipeline for serious cash to stash.

Nockian's picture

...and ?

Good luck to them, if I could avoid paying the Government a penny I would do it. Unfortunately for many of these people I suspect that their paper money won't buy them much in a world in which producers will require trade in currencies that don't include paper.

venturen's picture

100% of liberal billionaires do this...we need a tax to move money in and out of the country! I pay my taxes...and I want these hypocrites to as well. Capital Gains should be paid yearly and at the rate of income....one tax for all!

JelloBeyonce's picture

What's It Like To Be Rich? Ask The People Who Manage Billionaires' Money

 

"When The New York Times showed that Donald Trump may have used a legal
loophole to avoid paying federal income taxes for years, many people expected the
self-described billionaire to be embarrassed. Instead, in a debate with Hillary
Clinton, Donald Trump said...
(SOUNDBITE OF ARCHIVED RECORDING)
HILLARY CLINTON: He didn't pay any federal income tax. So if he's paid zero...
DONALD TRUMP: That makes me smart."

 

"Brooke Harrington, a sociologist at the Copenhagen Business School in Denmark. She
decided several years ago to explore the secret lives of billionaires. She took an
unusual path to enter this world. She herself trained to become a wealth manager."

"BROOKE HARRINGTON: The lives of the richest people in the world are so different
from those of the rest of us, it's almost literally unimaginable. National borders are
nothing to them. They might as well not exist. The laws are nothing to them. They
might as well not exist."

"But at one level, the fact that they are so
rich gives them these very important things in common, which is to say, for them,
national boundaries and laws are all optional. Taxes are optional. All forms of law are
essentially optional at that level of wealth."

"They [the ultra wealthy] - they're very committed to neo-liberal ideology and very committed to the idea
that these elite clients are doing the world a favor as wealth creators. And that their
initiative should be protected against the government and what they regard as theft
by taxation by incompetent governments that would just waste any money they
collected anyways. They also, by the way, regard redistribution of collected tax as
immoral because it creates dependency on the part of the poor."

"HARRINGTON: Yeah. I think that seems to be a common story. It's wealthy people
and their servants. It almost comes to the point where you can - if you're a wealthy
person, you are more trusting of the people you pay to be in your service than the
people you don't pay. Because with your family, you might have sort of a King Lear
problem."

"Then usually we get into whatever real reason is bringing you to me. Maybe you want
to avoid your taxes. Maybe you really don't like your family. That's surprisingly
common among wealthy people. For example, if you have a relative or if you yourself
are engaging in some activity that might get you extorted - it may not be illegal but it
might be socially shameful - that's a financial risk that your wealth manager needs to
know about. If you have a son or daughter with a drug problem, that's a financial risk
that your wealth manager needs to know about.

There can also be issues like, I think I'm headed for a divorce but I don't want my
spouse to get half my assets. How do I hide those assets, preferably offshore so that
whatever is legally provable as mine is such a small amount that it's not worth
fighting about?"