© David Doubilet/National Geographic/Getty ImagesThe Cayman Islands: a favourite haven from the taxman for the global elite.
- Private banks help wealthiest to move cash into havens
A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore - as much as the American and Japanese GDPs put together - according to research commissioned by the campaign group Tax Justice Network.
James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn - perhaps up to £20tn - has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, "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". According to Henry's research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
The detailed analysis in the report, compiled using data from a range of sources, including the Bank of International Settlements and the International Monetary Fund, suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.
Oil-rich states with an internationally mobile elite have been especially prone to watching their wealth disappear into offshore bank accounts instead of being invested at home, the research suggests. 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.
"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," the report says.
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry's calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world's population - a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
"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."
TUC general secretary Brendan Barber 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. 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."
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.
Groups such as UK Uncut have focused attention on the paltry tax bills of some highly wealthy individuals, such as Topshop owner Sir Philip Green, with campaigners at one recent protest shouting: "Where did all the money go? He took it off to Monaco!" Much of Green's retail empire is owned by his wife, Tina, who lives in the low-tax principality.
A spokeswoman for UK Uncut said: "People like Philip Green use public services - they need the streets to be cleaned, people need public transport to get to their shops - but they don't want to pay for it."
Leaders of G20 countries have repeatedly pledged to close down tax havens since the financial crisis of 2008, when the secrecy shrouding parts of the banking system was widely seen as exacerbating instability. But many countries still refuse to make details of individuals' financial worth available to the tax authorities in their home countries as a matter of course. Tax Justice Network would like to see this kind of exchange of information become standard practice, to prevent rich individuals playing off one jurisdiction against another.
"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," said Henry.
Does it matter how much they've got in their hiddie holes when the global 'bank holiday' is enacted and all those digital dollars disappear? If you can't take it with you, it has no worth, be that the 'afterlife' or here and now if you need to 'bug-out'. What good is such foreign digital accounts when all fund transfers are frozen? Seems they are falling into the same trap they've set for others. Prey is still prey no matter how much it pretends otherwise. Sure sounds like a lot of 'Little Red Riding Hoods' pretending to be wolves. Who will listen to their cries in such a disguise when the real wolves come for them? Can't say the cat and bird didn't warn them.
From Wikipedia: The lines quoted here from Jin-Roh are based on a traditional oral tale which was told by a 10 year old girl in Haute-Loire, France, and transcribed by Jean Baptiste Victor Smith in 1870. This interpretation predates that of Charles Perrault (considered the first written iteration of the 'Little Red Riding Hood' tale), and is the only one in which the protagonist visits her mother instead of her grandmother, and features the "clothing made completely out of metal" as found in the Jin-Roh version, below:
Once there was a little girl, called Little Red Riding Hood, for she wore always that red riding hood. Now her mother had made her a suit of clothing for her to wear, and this suit of clothing had been made completely out of metal. Her mother then went away to stay alone in a little cottage in the woods, and told the girl, "only when you have worn out this suit of clothing shall you come and visit me." So the girl, nodding solemnly, bade her mother goodbye and set to work to wearing out her suit of metal clothing.
Every day, she rubbed herself against the walls of her home, so that the clothing would be worn out sooner. Every day, day-by-day, without fail she would rub herself against the walls, till her clothes became thinner, and thinner till she completely wore it out. Elated, she made some bread with butter and wheat cakes for her mother, intending them as gifts, and left her house for her mother's cottage in the woods.
Along the way, just as she was about to enter the woods, she encountered a wolf, which asked for some of her cakes and bread. She refused, for it was to be a gift to her mother. Unfazed, the wolf asked if she would be traveling via the road of pins or the road of needles. The young girl replied that she would be using the road of pins. Thus, the wolf ran quickly down the road of needles and knocked upon the door to the girl's mother's cottage.
"Who is it?" the girl's mother asked.
"It is I, your daughter, come to bring you cakes and bread." And when the mother opened the door, the wolf killed her, eating most of her.
Sometime later, the young girl finally arrived at her mother's cottage. Knocking upon the door, she heard her mother call out in a strange voice, "who's at the door?"
"It is I, your daughter, come to bring you bread and cakes, for I have worn out my clothing of metal and now come to visit you."
"Come in my daughter, the door is not locked!" But the door was locked, and the little girl had to climb in through the little hole at the bottom of the door.
Once inside, she noticed that her mother was in bed. After the long walk through the woods the girl was hungry, and said thus to her mother. "Mother, I'm hungry, for I have traveled far and deep to this place."
And so the reply was, "there is meat in the cupboard, that you may consume to sate your hunger."
And as the little girl was about to eat the meat from the cupboard, suddenly a cat jumped onto the cupboard and told the girl, "do not eat this meat, for this is the meat of your mother, whom has been murdered most foul by the wolf that now sleeps in her bed!"
Thus the little girl told her mother, "Mother, this cat says that it is your meat that I am about to eat!"
And her mother told her, "Surely this cat is lying, for am I not alive and well, talking to you even now? So throw your stick at the cat and eat the meat to sate your hunger." So the girl obediently threw her stick at the cat, thus scaring it off before consuming the meat.
When she had eaten her fill, she felt thirsty, and told her mother so. "There is a bottle of wine above the fireplace child, drink it, and sate your thirst."
And as the girl went to the fireplace and picked up the bottle, a bird flew onto the fireplace and chirped, "little girl, do not drink this wine, for it is the blood of your mother that has been killed by the wolf whom now lies upon the bed."
And when the little girl said to her mother, "mother, there is a bird that says that this bottle of red wine that I am about to drink is your blood, and that you were killed by a wolf, whom now lies in your place!"
And thus came the reply, "child, am I not alive and well? So is the bird lying. Throw your cloak at it, that you may then drink of the wine in peace, and vanquish your thirst." Thus the girl did as she was told, and drank of the wine, till not a drop was left.
Now when she had eaten and drank her fill, till hungry and thirsty she was not, suddenly the girl felt sleepy. Thus her mother said to her, "come child, and rest by my side. I would have you by me once more." And the girl walked to her mother's side and undressed. Putting her clothes of cotton and wool neatly by the side, she climbed into the sheets with mother, so as to rest. There she saw her mother, looking very strange.
"Why mother," She exclaimed, "what big ears you have!"
"The better to hear you with, my child." Came the reply.
"Why mother," the girl continued, "what big eyes you have!"
"All the better to see you with, my child." Came the reply.
"But mother, what big paws you have!" The girl exclaimed.
"The better to hug you with." Came the reply.
"Oh mother, what big, sharp teeth and terrible mouth you have!" The girl cried out.
"The better to eat you with!" The wolf said.
And at that, the wolf pounced upon the girl and devoured her, rending apart her flesh and bone, eating her alive, ignoring her screams.
And thus, the wolf ate the girl, sating its hunger.