Market for secret bank accounts spreads
Secret bank accounts hold more money than the economies of the United States and Japan combined. They are growing rapidly and pose devastating effects around the world, a new report obtained by the Tribune-Review found.
The total stash of hidden money equals at least $21 trillion — as the Trib reported this month — and might be as much as $32 trillion, the London-based Tax Justice Network found. The British Parliament founded the group in 2003 to examine tax issues worldwide.
The secret bounty has increased as small groups of wealthy people in developing countries amass huge amounts of money, and as more people with $1 million to $5 million in financial assets look for ways to evade taxes and hide those assets, the report says.
“This market is spreading,” said John Christensen, the group's director. “It's contagious, because they're marketing it all over down the pecking order. … That's part of the reason why doctors and dentists are going down this route: ‘Everyone above us is doing this, so why shouldn't we?' ”
The Tax Justice Network report , titled “ The Price of Offshore Revisited,” found that:
• The 50 largest private banks managed $12 trillion in offshore assets for individual clients at the end of 2010, up from $5.4 trillion a half-decade earlier.
• The richest 0.001 percent of all people hold $9.8 trillion in offshore accounts.
• Hidden wealth would generate $190 billion to $280 billion in annual tax revenue for governments.
The lost tax revenue affects everyone, said James Henry, a New York-based economist and lawyer who wrote the report and serves as a senior adviser to the Tax Justice Network.
“We can argue about how much government spending should be, but at the end of the day, you're going to have firefighters, police, military, national parks, health care and public sanitation,” Henry said. “Somebody's got to pay for all that. It's really not right that the world economy is moving toward a situation in which the wealthiest people of the world are citizens of nowhere for tax purposes.”
The Trib reported earlier this month that as much as $25 trillion might be hidden in 70 or more international jurisdictions around the world.
Of course, no one knows how much money has been hidden because it remains secret, said Branko Milanovic, lead economist at the World Bank research group. If the wealthiest people have hidden assets, however, the gap between the haves and have-nots might be even wider than anyone has suspected, he said.
“This has an impact on the total amount of taxes received by government,” Milanovic said. “It also underestimates the overall inequality both in the United States and globally.”
A bipartisan Senate hearing last week found fault with London-based HSBC Holdings, one of the world's largest banks, for giving safe harbor to criminals for potentially moving illicit gains.
Tax Justice Network based its findings on data from the World Bank, the International Monetary Fund and other sources, and estimated the missing amounts by looking at demands for currency and gold.
The cumulative impact of so much hidden money — and all the lost tax revenue — is undermining governments' ability to function and honest citizens' confidence in democratic systems, Christensen said.
In Europe, lost tax revenue contributed to financial deficits in countries such as Greece, Spain and Italy, threatening to drag down the entire eurozone. Tax evasion and avoidance in the United States costs the government an estimated $100 billion a year.
“There are no illusions: Everyone knows this is going on,” Christensen said. “They're losing confidence in the political classes. People resent paying taxes because they see better-off people aren't doing this.”
Staff writer Andrew Conte can be reached at 412-320-7835 or email@example.com.