An interview on Real News Network with James Henry of the Tax Justice Network covers his newly released report “The Price of Offshore Revisited” in which he estimates the size of the “offshore” market as somewhere between $21 and $32 trillion as of December 2010. Note that this total includes only financial assets, and thus omits real assets (real estate, gold, artwork, yachts) that are held via trusts or corporate entities in tax havens.
If you are in finance, the broad outlines of this story are familiar. Much of “private banking”, particularly the Swiss variety, is to serve as a bolthole for money that the wealthy are trying to keep out of the hands of the taxman (or have looted from their country’s treasury). Henry estimates that 90% the total funds in “offshore” accounts is not reported to tax authorities. But US firms have become fierce competitors in this business. In the 1980s, Citibank became a major player in the Latin American market. And the current ranking of private banking operations puts Goldman as number three, behind UBS and Credit Suisse. And the results are perverse. Developing countries, which in theory should be the targets for investments by advanced economies, are instead often capital exporters as the wealthiest locals move their funds into tax havens.
Henry points out that while the US has started trying to crack down on the Swiss, it’s refused to help in making US banks engage in similar reporting to countries that, like the US, tax their citizens on global income. And that’s because, as Nicholas Shaxson discussed in his book Treasure Island, the US is now the leader in “offshore,” having displaced the UK.
The underlying report is very readable and also highlights how little has been done to shed light on this topic. It’s not hard to imagine why.