Group Admins
The superrich are hiding a ton of money offshore
Public Group active 8 years, 10 months ago agoYacht Harbour
New research based on the Panama Papers highlights the extent of offshore wealth.
About 10% of global gross domestic product is hidden in tax havens, making inequality worse than it looks.
US inequality is the worst among rich nations, but Europe has also gotten more unequal.
The Panama Papers and other major leaks from offshore tax havens have helped shed light on just how much money the world’s wealthiest people are parking in untaxed obscurity, away from the authorities and, importantly, economic researchers.
This new evidence has helped economists gain greater insight into just how steep disparities between the rich and the poor have become, because having actual data on offshore holdings tends to widen wealth gaps considerably.
Three of these researchers have teamed up on two important papers that offer a more in-depth look at what the world’s worst tax-evading and -avoiding nations are, and they find that the existence of tax havens makes inequality much worse than it appears with standard, publicly available economic data.
“The equivalent of 10% of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity—from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies,” Annette Alstadsæter at the Norwegian University of Life Sciences, Niels Johannesen of the University of Copenhagen, and Gabriel Zucman of the University of California at Berkeley write in the first of the two articles
. Global gross domestic product is about $75.6 trillion, according to World Bank figures
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About 3% of personal taxes are evaded in Scandinavia on average, but the figure soars to nearly 30% in the top 0.01% of the wealth distribution — households with more than $45 million in net wealth.
“Because most Latin American, and many Asian and European economies own much more wealth offshore than Norway, the results found in Norway are likely to be lower bound for most of the world’s countries,” the economists argue.
They also identify a solution that works: “After reducing tax evasion—by using tax amnesties—tax evaders do not legally avoid taxes more. This result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the very wealthy.”
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