Monday, August 18, 2008

Offshore: is it growing, or shrinking?

Recent news from Liechtenstein and Switzerland, where bank secrecy has been coming under serious fire and seems to be prompting some changes, have led some to wonder whether the world of tax havens is shrinking. It's a problem, some would love to conclude, that no longer needs tackling.

If you think that, think again. Look at this recent report from a tax haven website, lowtax.net (no friend of TJN's; see the longer version of their report here.) Here are a couple of excerpts:

"According to the 12th annual World Wealth Report, released in June 2008 by Merrill Lynch and Capgemini, the wealth of the world's high-net-worth individuals (HNWIs1) increased 9.4 percent to US $40.7 trillion in 2007. The number of HNWIs in the world increased 6 percent in 2007 to 10.1 million, the number of ultra-high-net-worth individuals (Ultra-HNWIs2) increased by 8.8 percent, and for the first time in the history of the Report, the average assets held by HNWIs exceeded US $4 million."

Since civil society campaigners like the Tax Justice Network began using data from McKinsey's, Boston Consulting Group, and others estimating the scale of global offshore assets, and the resulting tax losses, this kind of information appears to have rather dried up. Perhaps they're embarrassed about it. Perhaps there are other reasons for not disclosing. But we, like Raymond Baker (who canvassed thousands of top people for his book Capitalism's Achilles Heel) think the trend remains firmly upwards. The report continues:

"There are no consolidated figures for the growth in offshore assets - many jurisdictions simply don't release figures. But for those that do, it is clear that the rate of increase in banking, trust and fund assets dramatically outpaces McKinsey's global figure. In Jersey, for instance, banking and investment fund assets were approaching GBP500 billion at mid-year, up 40% in the last two years. In Guernsey, bank deposits rose 14% last year to GBP92 billion, and fund assets rose 45% to GBP210 billion in the year to June, 2008."

Lowtax.net says this too:

"So where does it all come from? From rich people, stupid! They are the new kids on the block, the new rulers of our world. They are going to get richer, and there are going to be more of them. There are already more than 10 million dollar millionaires in the world, and that number has seen more than 10% annual growth in the last few years. It is estimated that the assets of these 10 million rich people top US$50 trillion. And beneath them are tens of millions of 'mass affluent' people with free, investible assets in excess of US$100,000. And beneath them . . ."

The report then dives off into a celebratory romp through the strategies that wealthy people can use to deprive governments of their tax revenues. We prefer other analyses which express concern about this phenomenon, such as from David Rothkopf, whose recent book Superclass was written very much from an insiders' perspective.

"the combined net worth of the world’s richest thousand or so people -the world’s billionaires – is almost twice that of the poorest 2.5 billion . . . setting aside both the fanciful and the insidious theories of puppet masters and their cabals, we must recognise that there is something new afoot, a huge imbalance in the global distribution ofpower"

TJN is one of the first civil society groups to address these challenges head-on. Slowly, people are starting to wake up.

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