A new report by tax researchers estimates that the amount of black money deposited by a ‘global super-rich elite’ in offshore accounts is as much as $20 trillion — equivalent of the combined GDPs of the U.S. and Japan.
The report by Tax Justice Network released to The Observer is said to be the “most detailed estimates yet of the size of the offshore economy”.
In an appendix, the report says that “[it] first became evident in the late 1980s that a vast amount of flight capital was pouring out of the developing world”.
The report 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.
In the report, James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, shows that at least $20 trillion — perhaps up to $31 trillion — has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks.
Their wealth is, as Mr. 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 Mr. Henry’s research, the top 10 private banks — which include UBS and Credit Suisse in Switzerland, as well as the U.S. investment bank Goldman Sachs — managed more than $6 trillion in 2010. This is a sharp rise from $2 trillion five years earlier, The Observer reported.
According to Mr. Henry’s calculations, $10 trillion of assets is owned by only 92,000 people, or 0.001 per cent 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.