Wednesday, May 22, 2013

Oxfam: Tax on $18.5 offshore trillions could end world poverty

From Oxfam International:
At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing a loss of more than $156 billion in tax revenue, according to new figures published today by international agency Oxfam.
. . .
Oxfam has found that two-thirds of this global offshore wealth – more than $12 trillion – is hidden in EU related tax havens, such as Luxembourg, Andorra or Malta. These havens are facilitating the loss of over $100 billion in tax revenues worldwide. A third of offshore wealth is sitting in UK-linked tax havens where it is undeclared and untaxed."
 This research, which we haven't yet analysed in any great detail (although the overview of their methodology is on this link, we can't find the full report), is compatible with our widely publicised research last year, estimating that there are between $21 and 32 trillion sitting offshore, out of reach of tax (and other) authorities. Oxfam, like TJN, call theirs a conservative estimate.

There are other reasons why their (and our) estimates of taxes lost are conservative. Their estimate appears not to include various taxes including inheritance taxes, which in our experience is often among the most important or the most important consideration for wealthy people structuring their offshore tax affairs.

Today's blogger isn't quite sure how one calculates potential inheritance tax revenues -- comments welcome -- but one would have to consider average inheritance tax rates, and death rates and so on. Let's imagine an average offshore stash exists for 25 years in the hands of one owner before they die, and assume an average inheritance tax rate of 40%. That would work out as the equivalent of a one percent annual wealth tax on the value of the assets.

So take Oxfam's $18.5 trillion, take one percent of that to get $185 billion - and we are looking at double Oxfam's estimates for the tax losses.  And then there are (in some countries) wealth taxes, and more.

The headline of the Oxfam's press release is: "Tax on the “private” billions now stashed away in havens enough to end extreme world poverty twice over." Add in inheritance taxes, and you would, on this hasty back of the envelope calculation, make that "four times over."


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