“This hidden offshore sector is large enough to make a significant difference to all of our conventional measures of inequality," says James Henry, former McKinsey & Co. chief economist and author of The Price of Offshore Revisited.
(27 July 2012) - According to a new report by the Tax Justice Network (TJN), at least $21 trillion of unreported private financial wealth was owned by wealthy individuals via tax havens at the end of 2010. The research, conducted by former McKinsey & Co. chief economist James Henry, was commissioned by the TJN to examine how much potential tax revenue is being sidelined from legitimate tax authorities, putting more pressure on middle class taxpayers. It comes as concerns continue to grow over the widening gulf between the rich and poor in countries around the world.
The report, The Price of Offshore Revisited, contends there may be as much as $32 trillion of hidden financial assets held offshore by high net worth individuals. The new research is thought to be one of the most detailed and rigours studies ever made of financial assets held in offshore financial centres and secrecy structures.
At the same time, the TJN has also issued an additional report entitled Inequality: You Don't Know the Half of it, which examines the fact that most recent studies on the issue of economic inequality have not taken into account this missing wealth. You Don't Know the Half of it means that the disparity between rich and poor is actually worse than we thought.
“This new report focuses our attention on a huge “black hole” in the world economy that has never before been measured – private offshore wealth, and the vast amounts of untaxed income that it produces," says Henry. "This at a time when governments around the world are starved for resources, and we are more conscious than ever of the costs of economic inequality.”
“This hidden offshore sector is large enough to make a significant difference to all of our conventional measures of inequality," Henry continues. And he points out who is complicit in hiding this wealth from being taxed. "It turns out that this offshore sector - which specializes in tax dodging ‐ is basically designed and operated, not by shady no-name banks located in sultry islands, but by the world’s largest private banks, law firms, and accounting firms, headquartered in First World capitals like London, New York, and Geneva."
In the end though, Henry points out that this study is good news for the economy. "The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems. We have an opportunity to think not only about how to prevent some of the abuses that have led to it, but also to think about how best to make use of the untaxed earnings that it generates.”
The Price of Offshore Revisited
Inequality: You Don't Know the Half of it
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