By investigating data from HSBC and the Panama Papers we were able to study how wealthy the typical users of tax havens are. The extent to which offshore wealth is concentrated in just a few hands is staggering. About 50% of the wealth held in tax havens belongs to households with more than $50m in net wealth, a group that private bankers call “ultra-high-net-worth individuals”. These ultra-rich represent about 0.01% of the population of advanced economies.
The implications are dramatic in a country such as Russia, where most of the wealth at the top is held outside the country. In the UK, Spain, Germany and France, about 30-40% of the wealth of the richest 0.01% of households is held abroad. In the US, accounting for offshore wealth also increases inequality, but the effect is more muted than in Europe, because US wealth is already very concentrated even disregarding tax havens. In all cases, it is clear that our standard statistical toolkit to measure inequality is not adapted to the realities of 21st-century capitalism. And the problem is getting worse by the hour.
As global inequality rises, the companies located in offshore financial centres refocus their activity on a smaller but wealthier clientele. Wealth concealment thus deprives governments of about €155bn a year in revenue. In Britain alone, annual revenue losses are €6bn, to which must be added almost €12.7bn dodged by multinationals.
Here is that Zucman Leap. Tot up assets held offshore. OK. Well, maybe the number’s right, maybe it isn’t, but, still. Assume a rate of return – hmm, maybe, but OK. The assume, and this is the leap, that no tax is being paid on that return.
But that’s not true, is it? We have multiple pieces of evidence that tax is being paid on much of the returns from these offshore assets.
David Cameron’s father and those offshore trusts. Sure, they didn’t pay tax, that’s why they were set up that way. But David Cameron, for one, did pay the due tax on all income from one of them. Zucman’s Leap is to assume that offshore means those domestic taxes weren’t paid – but, at least as far as we know, they were.
Similarly, the Swiss Banks. Osborne did the deal, investigations were done, the £5 billion (or whatever) in tax revenue didn’t happen. Why? Because the vast majority of the Brits with Swiss accounts were in one of three categories. Brit non-residents who didn’t owe UK tax on Swiss income. Brit non-doms who didn’t owe UK tax on Swiss income as long as it stayed in foreign. And Brits who had a Swiss account and paid tax to the UK on their Swiss income. The portion of accounts held by Brits not in one of those three groups was trivial.
Or multinationals. e-Bay stashed foreign profits offshore, just as Google and Apple do. Then they brought them back into the US and paid US corporation tax. Zucman’s Leap is to gaily assume that no such foreign profits are ever brought back to pay US tax. He’s deliberately ignoring that such tropical islands do not extinguish a US tax bill, they delay it only.
My assumption is that he’s not acting in good faith. Unkind of my I know but there we are.