Further speculation on amount of money held in offshore banks

23 July 2012

A new study for the lobbying group Tax Justice Network (TJN) claims that wealthy individuals worldwide are holding between USD21 trillion and USD32 trillion in bank accounts in low-tax international financial centres.

The research was compiled by James Henry, formerly chief economist at the management consultancy McKinsey. He used data published by the Bank of International Settlements, International Monetary Fund, World Bank, and various national governments, including their tax authorities, to estimate the world’s stock of undeclared wealth.

Henry alleges that the ‘missing’ trillions have been invested ‘virtually tax-free through the world's still expanding black hole of more than 80 offshore secrecy jurisdictions’. This ‘offshore economy’ as Henry calls it, is large enough to have ‘very significant negative impacts on the domestic tax bases of source countries’.

Some USD9.8 trillion of the total is owned by 92,000 individuals, Henry estimates. This total only includes deposit and investment accounts, not material assets such as property and the inevitable yachts and private jets.

According to TJN, the report, called The Price of Offshore Revisited, demonstrates that the problem of economic inequality is far worse than previously understood.

‘All studies exploring economic inequality have systematically underestimated the wealth and income enjoyed by the world’s wealthiest individuals,’ said TJN’s John Christensen. According to TJN, the use of discretionary trusts is an important method of preventing assets being counted in national statistics. So is the alleged practice of some offshore finance centres of deeming certain income or assets to be located in other jurisdictions.

‘A private global infrastructure of lawyers, accountants, bankers and company and trust formation agents are dedicated to hiding the assets of the world’s wealthiest individuals’, says TJN. ‘And they have been spectacularly successful.’

 

Sources

 

Tax Justice Network (Henry report, PDF file)

Tax Justice Network (gloss on report, PDF)

Observer (1)

Observer (2)

BBC

CBS News

Scotsman

 


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© 2012 Society of Trust & Estate Practitioners