At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing a loss of more than $156 billion in tax revenue, according to new figures published today by international agency Oxfam.
The missing money is twice that required for every person in the world to be living above the $1.25-a-day “extreme poverty” threshold.
Oxfam’s Kevin Roussel said: “It’s scandalous that so much money is allowed to sit untaxed, letting off the hook those individuals who can most afford to pay for public goods and services. Many governments claim to have no alternative but to cut public spending and development aid, but we’ve found there’s enough potential tax to be had on hidden “private” money to end extreme world poverty twice over.”
Oxfam has found that two-thirds of this global offshore wealth – more than $12 trillion – is hidden in EU related tax havens, such as Luxembourg, Andorra or Malta. These havens are facilitating the loss of over $100 billion in tax revenues worldwide. A third of offshore wealth is sitting in UK-linked tax havens where it is undeclared and untaxed.
A tax havens crackdown is on the agenda for discussion at the European Union leaders’ summit today. Oxfam is calling for a blacklist of tax havens, and an agreement from EU member states to impose sanctions against tax havens and those using them. The EU looks set to fail on this simple task.
Roussel said: “The UK and Europe cannot stand by while billions is lost from the global public purse on their watch.”
The $156 billion of lost tax revenue Oxfam estimates is just a fraction of the total tax loss, as it only reflects the amount of tax that individuals are neglecting to pay. It doesn’t include the tax dodged by companies and multinational corporations, whose swindling costs Africa alone an estimated $160 billion a year.
Notes to editors
Poor countries lose $160 billion per year to corporate tax dodging according to Christian Aid.
To end extreme poverty would mean providing every person in the world with a minimum income of $1.25/day. This would cost $66 billion, according to the Brookings Institute in the US.
Explanation of Oxfam’s figures
To calculate total wealth held by individuals in tax havens:
- Oxfam estimated that 19.5 per cent of global deposits are held by foreigners in tax havens. The 19.5% figure is based on evidence collected from the following sources: the Bank of International Settlements (BIS) quarterly reviews (of the external holdings of banks in a set of tax havens) and the estimates of national authorities such as the Dutch Central Bank and IMF for certain countries’ compliance with anti-money laundering standards.
- We then applied the 19.5% figure to all assets, because there is no credible data available for the ratio for other financial assets. Tax rates are usually the same for different asset classes (as is the case with capital gains for instance) meaning there is no incentive to prioritize other assets over and above deposits.
- The 19.5% is a conservative estimate in itself though, because in fact domestic depositors could also be foreign depositors set up as domestic ‘fronts’. It is impossible to differentiate between the two because of a lack of transparency.
- The Credit Suisse Global Wealth Databook estimates that total net financial wealth was 2012 to $94.7 trillion (excluding property). Using the 19.5% proportion, we end up with a total of $18.5 trillion held offshore.
How Oxfam calculated the $156 billion figure:
- We only looked at assets offshore that are not reported to tax administrations (assuming that declared assets are being taxed). Helvea estimates that declared assets represent only 16%, leaving us with an amount of $15.54 trillion (84% of $18.5 trillion).
- We then looked at the assets’ return (the “interest”) generated by having this money in offshore bank accounts. We use a 3.5% asset return as a conservative but appropriate yield, based on Credit Suisse Investment Yearbook 2013 (which says that balanced equity and bond funds would yield 2% real returns, then to get nominal returns we add US inflation of 1.5%). This is a conservative estimate because the current inflation rate is low (it is a current low rate, rather than a higher average of recent rates), and it is lower than the average returns offered by private funds advertised by clients.
- Finally, we looked at individual country tax rates on foreign assets, reported in the PWC World Wide Tax Summaries, and calculated each one individually and then added them up. The total is $156.31 billion.
Who is considered as a tax haven:
Oxfam used the list of 50 “offshore jurisdictions” established by the US Government Accountability Office and added two other major tax havens: Delaware and the Netherlands. Of these jurisdictions, 21 are EU-related jurisdictions and 10 are UK (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Montserrat and the Turks and Caicos Islands).
Contact information
For more information, please contact:
In Brussels: Angela Corbalan on + 32 (0) 473 56 22 60 or angela.corbalan@oxfaminternational.org
In Washington: Caroline Hooper-Box on +1 202 496 1173 or caroline.hooper-box@oxfaminternational.org
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Poor countries lose $160 billion per year to corporate tax dodging according to Christian Aid.
To end extreme poverty would mean providing every person in the world with a minimum income of $1.25/day. This would cost $66 billion, according to the Brookings Institute in the US.
Explanation of Oxfam’s figures
To calculate total wealth held by individuals in tax havens:
- Oxfam estimated that 19.5 per cent of global deposits are held by foreigners in tax havens. The 19.5% figure is based on evidence collected from the following sources: the Bank of International Settlements (BIS) quarterly reviews (of the external holdings of banks in a set of tax havens) and the estimates of national authorities such as the Dutch Central Bank and IMF for certain countries’ compliance with anti-money laundering standards.
- We then applied the 19.5% figure to all assets, because there is no credible data available for the ratio for other financial assets. Tax rates are usually the same for different asset classes (as is the case with capital gains for instance) meaning there is no incentive to prioritize other assets over and above deposits.
- The 19.5% is a conservative estimate in itself though, because in fact domestic depositors could also be foreign depositors set up as domestic ‘fronts’. It is impossible to differentiate between the two because of a lack of transparency.
- The Credit Suisse Global Wealth Databook estimates that total net financial wealth was 2012 to $94.7 trillion (excluding property). Using the 19.5% proportion, we end up with a total of $18.5 trillion held offshore.
How Oxfam calculated the $156 billion figure:
- We only looked at assets offshore that are not reported to tax administrations (assuming that declared assets are being taxed). Helvea estimates that declared assets represent only 16%, leaving us with an amount of $15.54 trillion (84% of $18.5 trillion).
- We then looked at the assets’ return (the “interest”) generated by having this money in offshore bank accounts. We use a 3.5% asset return as a conservative but appropriate yield, based on Credit Suisse Investment Yearbook 2013 (which says that balanced equity and bond funds would yield 2% real returns, then to get nominal returns we add US inflation of 1.5%). This is a conservative estimate because the current inflation rate is low (it is a current low rate, rather than a higher average of recent rates), and it is lower than the average returns offered by private funds advertised by clients.
- Finally, we looked at individual country tax rates on foreign assets, reported in the PWC World Wide Tax Summaries, and calculated each one individually and then added them up. The total is $156.31 billion.
Who is considered as a tax haven:
Oxfam used the list of 50 “offshore jurisdictions” established by the US Government Accountability Office and added two other major tax havens: Delaware and the Netherlands. Of these jurisdictions, 21 are EU-related jurisdictions and 10 are UK (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Montserrat and the Turks and Caicos Islands).
For more information, please contact:
In Brussels: Angela Corbalan on + 32 (0) 473 56 22 60 or angela.corbalan@oxfaminternational.org
In Washington: Caroline Hooper-Box on +1 202 496 1173 or caroline.hooper-box@oxfaminternational.org