According to the most detailed study of the so-called offshore
economy to date, conducted by James Henry, former chief economist with
the consultancy McKinsey, the world’s richest people have taken
advantage of cross-border tax laws in order to put away a shocking
$20.31 trillion in offshore banks.
While this likely isn’t all that crazy to those who are familiar with the massive conflicts of interest in the Federal Reserve and the fact that the Federal Reserve works with banks to put Americans on the line for the failures of banks, it might be surprising to those who have no clue how the international financial system works.
The astounding sum uncovered by the Henry is slightly less than the
2011 Gross Domestic Product (GDP) of Japan ($5.87 trillion) on top of
the 2011 United States GDP ($15.09 trillion).
The findings were published in the new report, “The Price of Offshore Revisited,”
which shows that money continues to leak out of major nations and into
infamous tax havens like Switzerland and the Cayman Islands.
These transactions are enabled by private banking institutions which all battle to get the accounts of what the Guardian calls the “global super-rich elite,” also known as high net-worth individuals.
Henry demonstrates that sums between £13 trillion ($20.3 trillion)
and £20 ($31.23 trillion) have made their way from countries around the
world into these secretive banking jurisdictions.
Thus, the wealth of these ultra-rich individuals is “protected by a
highly paid, industrious bevy of professional enablers in the private
banking, legal, accounting and investment industries taking advantage of
the increasingly borderless, frictionless global economy.”
Ah, such is the glory of globalization!
With liberalized trade and finance laws, what petty issues must the so-called global elite be concerned with? None! No more pesky regulations and legal issues to worry about when dealing with huge sums of money!
With liberalized trade and finance laws, what petty issues must the so-called global elite be concerned with? None! No more pesky regulations and legal issues to worry about when dealing with huge sums of money!
Henry’s research revealed that the world’s top 10 private banking
institutions managed over $6 trillion in 2010 alone. This is obviously a
major increase from $2.3 trillion in 2005.
Among others, these banking institutions include the U.S.-based Goldman Sachs and the Swiss UBS and Credit Suisse.
The research used a wide variety of sources including none other than
the Bank of International Settlements and the International Monetary
Fund and led to some quite astounding conclusions.
The analysis in the report revealed that in some developing
countries, the amount of money which has left the country since the
1970s would easily be able to pay the country’s debts.
Unsurprisingly, some of the worst hit by this practice have been the
oil-rich nations with an ultra-rich class which can easily take its
money out of the local economy.
For instance, the Guardian reports, “Once the returns on investing
the hidden assets is included, almost £500bn has left Russia since the
early 1990s when its economy was opened up.
“Saudi Arabia has seen £197bn flood out since the mid-1970s, and Nigeria £196bn,” they add.
“The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments,” states the report.
Unfortunately, the number of people holding a significant amount of
the assets of various nations is steadily shrinking and obviously the
supposedly “public” debt is placed on the shoulders of the everyday people who can’t hide away their riches in foreign banks.
One of the most troubling conclusions we find in this report is that
the massive amount of money held in jurisdictions outside of the reach
of various tax agencies indicates that the actual gap between the rich
and poor around the world is in fact much larger than previously
believed.
As evidence of this, Henry calculated that around $9.84 trillion is
in the hands of a mere 92,000 individuals. In other words, 0.001% of the
population holds more than the yearly GDP of every country except the EU and the US.
“These estimates reveal a staggering failure: inequality is much,
much worse than official statistics show, but politicians are still
relying on trickle-down to transfer wealth to poorer people,” said John
Christensen of the Tax Justice Network.
“People on the street have no illusions about how unfair the situation has become,” Christensen added.
“The very existence of the global offshore industry, and the tax-free
status of the enormous sums invested by their wealthy clients, is
predicated on secrecy,” explained Henry.
Indeed, if it was not for the secrecy – which has never been
questioned even after leaders of G20 nations claimed they would crack
down on such activities – there wouldn’t be such a thing as offshore tax havens.
Unfortunately they are real and they are constantly being used by the
ultra-wealthy to avoid the same taxes everyone who is too poor to
remove their money from the country is forced to pay.
Brendan Barber, the General Secretary of Trades Union Congress said,
“Countries around the world are under intense pressure to reduce their
deficits and governments cannot afford to let so much wealth slip past
into tax havens.”
“Closing down the tax loopholes exploited by multinationals and the
super-rich to avoid paying their fair share will reduce the deficit,”
Barber added. “This way the government can focus on stimulating the
economy, rather than squeezing the life out of it with cuts and tax
rises for the 99% of people who aren’t rich enough to avoid paying their
taxes.”
If nations were to go after these funds, the Guardian posits that huge sums of money would become available.
“Assuming the £13tn mountain of assets earned an average 3% a year
for its owners, and governments were able to tax that income at 30%, it
would generate a bumper £121bn in revenues – more than rich countries
spend on aid to the developing world each year,” they write.
Indeed, this would offset the national deficits of so many countries
considerably and create a great deal more money for much-needed causes.
Yet I seriously doubt this will ever happen as the people making
egregious use of these tax havens are the same ones bankrolling the
political campaigns.
Thus, I seriously doubt any smart politician is going to risk his or
her political future on going after the ultra-rich class of the world’s
wealthiest figures in the name of a couple votes. Sure, they might spew
some rhetoric but when it comes down to it, they know who pays for the
primetime television advertisements.
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