New research published yesterday shows “up to £20 trillion” is being stashed offshore by the world’s richest individuals – with the UK government today set to ‘name and shame’ tax dodgers.
“The Price of Offshore Revisited” (pdf) by the Tax Justice Network (TJN) reveals the extraordinary amounts leaking out of countries into tax havens like Switzerland and the Cayman Islands, with the help of private banks like UBS, Credit Suisse and Goldman Sachs.
The top 10 private banks, the report found, handled more than £4tn in 2010, up 167% since 2005.
Report author John Henry says:
“[The wealth of the super-rich 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.”
As Tax Research UK’s Richard Murphy blogged, the report, using data from the World Bank, IMF, UN, central banks, the Bank for International Settlements, and national treasuries, found:
• At the end of 2010, the top 50 private banks managed more than $12.1tn in cross-border invested assets for private clients, including their trusts and foundations – this is up from $5.4tn seven years ago, an average annual growth rate of more than 16%;
• The three private banks receiving the most assets offshore on behalf of the global super-rich are UBS, Credit Suisse and Goldman Sachs – the top ten banks commanded more than half the top 50’s asset total, an increased share since 2005;
• The number of the global super-rich who have amassed a $21tn offshore fortune is fewer than 10 million people – of these, less than 100,000 people worldwide own $9.8tn of wealth held offshore;
• If this unreported $21-32 trillion, conservatively estimated, earned a modest rate of return of just 3%, and that income was taxed at just 30%, this would have generated income tax revenues of between $190-280bn – roughly twice the amount OECD countries spend on all overseas development assistance around the world – with inheritance, capital gains and other taxes greatly boosting this figure.
Looking ahead, the government will today announce plans for HMRC to “name and shame” tax avoiders, The Times (£) reporting:
Plans to embarrass businesses running “crude” tax avoidance schemes that are unlikely to meet legal requirements are also part of a package of reforms outlined in a consultation document published today. The reforms could be included in the forthcoming Finance Bill, leading to a change in the law by the end of next year.
The move comes after an investigation by The Times. David Gauke, the Treasury Minister in charge of tax, will praise the newspaper today for publicising schemes such as the one used by Jimmy Carr, the comedian who sheltered millions from tax with a Jersey-based scheme known as K2.
“We face a problem with a minority – the ‘cowboy tax advisers’. Small, niche firms peddling crude schemes that are unlikely to be successful once they are brought to HMRC’s attention,” he will say in a speech today. “There has been some excellent coverage in The Times of the sort of thing I am talking about; the so called K2 scheme, for example, in which a shell company gives out payments described as loans in lieu of salaries.”
Mr Gauke will say that a small number of disreputable tax accountants, about 20 according to HMRC, are no better than rogue builders: “These firms behave differently to the well-established, reputable advisory firms. They change name frequently to avoid detection; they include ‘fighting funds’ in their fees, pre-empting an inevitable clash with the authorities, and often do not comply in full with HMRC’s disclosure rules.”
The minister will add that public awareness needs to be raised about such organisations. “If I find out my builder has changed trade names three times, avoids informing the planning authorities, and includes in his fee a ‘litigation fund’, I might be tempted to find another builder.”
He is to say that the consultation will look at “how we can make people aware where a company has previously peddled schemes that have been successfully challenged, so that they know there is a strong chance that no good will come of it”. The Government will concede that its flagship scheme to monitor tax avoidance by forcing tax advisers to register products with HMRC is no longer working properly.
As the TJN report concludes, however, much, much more is needed from the government, at national, European and worldwide level, if the scandal of rampant tax dodging by a greedy global super-elite is to be dealt with:
“We already know that the ‘black hole’ represented by offshore financial wealth is much larger than anyone has previously determined.
“We already know that it has grown large enough to have a powerful impact on inequality, the distribution of the tax burden, public finances, and political influence across the globe.
“We already know that this sector has been designed, operated, and politically defended by an influential, well-organized global ‘pirate banking’ industry.
“We already know that this industry now operates, for all intents and purposes, off the books, and beyond the effective reach of today’s public regulators and tax authorities.
“In short, this huge, secretive offshore industry has truly become the dark side of globalization.
“We all share a collective responsibility now to redouble our efforts to get it under control.”