‘Less than 100,000 people, 0.001% of the world’s population, now control over 30% of the world’s financial wealth.’ This astonishing and ridiculous figure is presented in the Tax Justice Network’s The Price of Offshore Revisited. Having revised earlier calculations they now estimate that ‘at least $21 to $32 trillion as of 2010 – has been invested virtually tax-free through the world’s still-expanding black hole of more than 80 “offshore” secrecy jurisdictions.’ They offer a caution, ‘Remember: this is just financial wealth. A big share of the real estate, yachts, racehorses, gold bricks – and many other things that count as non-financial wealth – are also owned via offshore structures where it is impossible to identify the owners.’
The steam engine, railways and electricity were celebrated, seized upon and developed by capitalists as means of enhancing profits. Today its genius for invention conjures up hedge funds and derivatives, transfer pricing and tax evasion; these are the wonders of the modern world. The authors of the report state that their purpose is to measure ‘long-term unrecorded cross-border private capital flows and stocks that have contributed significantly to the erosion of the domestic tax base, especially in the developing countries’. They reckon that 25-30% of the funds, at least $6.2 trillion, are owned by developing country residents. This far exceeds the $3.4 trillion foreign debt owed by all low and middle income countries in 2007. Between 1970 and 2007, at least $150-200 billion of private capital flowed out of the poorest countries each year. These developing countries ‘are not debtors at all: they are net lenders, to the tune of $10.1 to $13.1 trillion at the end of 2010’. The problem is that the assets of these countries are held by a small number of very wealthy people and the debts are ‘shouldered by the ordinary people of these countries through their government’. To repay the debts schools and hospitals are closed or never built, food and fuel subsidies are cut, people are starved, meanwhile the beneficiaries of the ‘unrecorded cross-border capital flows’ go shopping in London, Paris, Rome and New York.
In the aftermath of the 2008 global financial crisis, the G20 nations meeting in London announced, ‘The era of bank secrecy is over.’ Within five days the Organisation of Economic Co-operation and Development’s list of dodgy tax havens was empty and remains so. What a surprise!
So who channels their money through this digital underworld of ‘nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements that manage and control private wealth’? Multinational companies, of course, ‘Chinese real estate speculators and Silicon-Valley software tycoons to Dubai oil sheikhs, Russian Presidents, mineral-rich African dictators and Mexican drug lords’, ‘high net-worth individuals’ and ‘non-domiciled’ foreigners in, for example, Britain and Switzerland, who are allowed to reside while paying very low income and wealth taxes.
What do they need? Anonymity for themselves and their families, their businesses and political dealings; to minimise the taxes they pay; investment management; ability to access their money from anywhere on the planet; secure places to hang-out, hide-out and enjoy their money; and iron-clad security for themselves, their families and their loot.
And who provides these services, who are these magicians who disappear fortunes then pull them out from behind their backs? Here mingle politicians, diplomats, intelligence agents, organised crime, billionaires, banks, accountants and lawyers (many based in the City of London). Two of the world’s four biggest accounting firms are based in the City of London. The biggest City-based accountancy firm, PwC, employs 180,000 people, compared with Britain’s largest manufacturing firm’s, BAE Systems, 107,000 employees. Of the world’s ten biggest legal firms four are based in London, the other six are in the US. Both the accounting and legal firms operate internationally.
A ‘comparative handful of major private banking institutions now accounts for 62% to 74% of all offshore private wealth...’ with UBS, Credit Suisse, HSBC, Barclays, Goldman Sachs and Deutsche Bank among them. ‘Of the top ten players in global private banking – all ten received substantial injections of government loans and capital during the 2008-12 period. In effect, ordinary tax payers have been subsidising the world’s largest banks to keep them afloat, even as they help their wealthiest clients slash taxes.’
‘Non-compliance is contagious’, hiding money and avoiding taxes is profitable, ‘non-compliance by elites promotes non-compliance by everyone else except the poor, who end up footing the bill.’ Off-shoring is coming on-shore, as US states like Delaware and Nevada adopt the secrecy laws of Liechtenstein and the Cayman (we take no photos) Islands. Hundreds of billions are lost in taxes each year by these manipulations of high finance and yet we are told that benefits must be cut and that health services and state-funded higher education are no longer affordable.
After arriving in the Caribbean in 1492 Colombus said, ‘And I took great care to find out if there was any gold.’ Within a few years gold accumulated over a thousand years had been plundered by Spain and the indigenous Caribbean people were all but annihilated. Today, the world’s forests are being devoured, the seas poisoned, species – including humanity - eliminated and threatened with extinction, all in the pursuit of money. The chase for money has become destructive. Under capitalism that pursuit is compulsory, and it is out of control. King Midas asked the god Dionysus that everything he touched should be turned to gold. But when he found out that even his food turned to gold, he pleaded to lose his gift. The authors of the report conclude that we share a collective responsibility to bring this off-shore banking business under control. We share a collective responsibility to end once and for all the system of private ownership of wealth, capitalism, that is destroying our lives and the planet we live on.
(See also David Yaffe, The murky world of tax havens, FRFI 221, June/July 2011.