More Cash Flows Offshore Despite Tax Crackdown

More Cash Flows Offshore Despite Tax Crackdown

The super-rich are keeping more of their cash and assets in safe havens around the world despite moves to crackdown on tax management schemes.

With the tax burden increasingly falling on the low and middle paid, there are increasing demands for action to be taken against offshore tax havens.

America’s Foreign Account Tax Compliance Act (FACTA) which comes into force next year – and the unconfirmed UK FACTCA – will force many tax havens to reveal who is holding bank accounts there and what is in them.

But the Tax Justice Network (TJN) says money is increasingly pouring into 80 tax havens around the world as high net worth (HNW) individuals continue to hide their assets.

They say that by 2010 there was around £8 trillion hiding in offshore accounts – a rise of 65% since 2005.

Super rich hold 40% of global wealth

But an update from TJN says that figure has now rocketed to between £15 trillion and £21 trillion.

Which, considering the world’s GDP figure is around £50 trillion, that means that the super-rich are holding around 40% of the world’s annual output.

Even when the money and assets held in offshore financial centres are excluded from the figures, around £1.6 trillion in cash is missing – and assumed to be kept by the wealthy.

The increase in funds being squirreled away is despite the G20 nations, the world’s leading economies, signing 300 tax treaties in 2009 to ease the process of obtaining financial data from banking centres.

Two years later, when the G20 met in Cannes, France, they entered into 700 information treaties.

Ángel Gurría, secretary-general of the OECD, boasted that the era of bank secrecy was ‘over’.

He added: “It’s not possible any longer to hide assets without them being found.”

Bid to uncover tax secrets

On top of this there have been many other ventures to clampdown on tax avoidance – including in November the UK and German governments agreeing to crackdown on multinational companies avoiding tax.

John Christensen, director of TJN, said it was important to find access to the money being held offshore.

He said: “Governments are being deprived not just of income tax but also capital gains and inheritance tax, among others.

“And this is at a time when the tax burden for governments piling on debt is falling on the middle and lower income citizens – who are also seeing spending cuts to resources to boost their economies.”

The OECD, say critics, could do more to end bank secrecy and say the 800 new agreements currently in place are not effective enough and that more action is needed.