Opinion: Bailed-out banks facilitate $21tn offshore cash hoard

July 23rd, 2012 | by  | Published in All Stories, Views from the Bureau of Investigative Journalism (+ another  jfreos pic)

Investigative economist James Henry exhaustively trawled through financial information held by the IMF, World Bank, Bank for International Settlements, central banks and national treasuries to come up with the most definitive report ever written on the super-rich and offshore wealth.

Henry’s Price of Offshore Revisted report, commissioned by Tax Justice Network, shows:

– between $21 trillion and $32 trillion of financial assets is owned by High Net Worth Individuals in tax havens. This does not include real estate, art or jewels.

– a conservative 3% return on that $21tn taxed at 30% would generate $189bn – a figure easily eclipsing what OECD industrialised nations spend on overseas development aid.

– the top 50 private banks collectively managed more than $12.1tn in cross-border invested assets for private clients, including their trusts. This is up from $5.4tn in 2005.

– fewer than 10 million members of the global super-rich have amassed a $21tn offshore fortune. Of these, less than 100,000 people worldwide own $9.8tn of wealth held offshore.

Accompanying the Price of Offshore Revisited is a separate paper (which I co-wrote). It reveals that data used by individual countries to assess the gap between rich and poor is inaccurate. And as a result, inequality is far more extreme than policymakers realise. This is because economists calculating inequality fail to include the vast majority of offshore cash in their findings. So the wealthy are far better off than the studies suggest.

In Inequality: you don’t know the half of it, eight of the world’s leading economists were asked whether offshore wealth was largely excluded from inequality studies. Ranging from the World Bank’s acting chief economist to academics at the Paris School of Economics and the Brookings Institute in the US, they all confirmed this was the case.