tax lost in havens costs $255 billion a year

Wealth held in tax havens is costing governments around the world US $255 billion each year in lost tax revenue says new research

According to new research published by the Tax Justice Network, on Thursday 31 March 2005, wealth held in tax havens is costing governments around the world up to US$255 billion annually in lost tax revenues.

If collected globally US $255 billion in tax revenues could:

•  Fund Gordon Brown’s request for an additional US $50 billion a year in aid to the developing world over the next decade, in just two years
•  At US $30-40 per head, cover what the World Health Organisation classifies minimum financing needs for health services for every single person on the planet.
•  If US $255 billion had been given in aid every year from 2002, by the end of 2015, global poverty would be permanently eradicated, way beyond the goals of the international targets on halving global poverty by 2015, known as the Millennium Development Goals.

Overall, the cost of tax havens to the global economy is likely to be considerably higher than US$ 255 billion because the figure does not include tax losses caused by corporate profits hidden in tax havens and the downwards pressure on tax revenues caused by countries engaging in tax competition to attract or retain investment.

"Gordon Brown and the Commission for Africa are ideally placed to act on offshore tax avoidance since so many of the banks and tax havens that facilitate these processes have British links,” said John Christensen, international coordinator of the Tax Justice Network, based at nef.

"For decades governments have failed to act against the system of offshore trusts and banking secrecy, which encourages tax avoidance. If Gordon Brown is serious about wanting to tackle global poverty, he should take a lead in pushing for an end to all aspects of offshore secrecy that makes this possible." added Christensen

 The Tax Justice Network is calling for action to

•   eliminate cross-border tax evasion and limit the scope for tax avoidance, so that large corporations and wealthy individuals pay tax in line with their ability to do so;
•   remove the tax and secrecy incentives that encourage the outward flow of investment capital from countries most in need of economic development;

“The issues of tax havens and tax competition are symptomatic of a much wider malaise at the heart of the international financial system. This is a critical time for development, and particularly for the achievement of the Millennium Development Goals. If we are serious about reducing poverty, one of the first things we need to tackle is an international financial system run by the rich, for the rich, at the expense of the poor. It is time to rethink what the system is for – and dealing with tax havens and tax competition could be an important first step. US $ 255bn of lost public revenues is just one part of the price we pay for our failure" said David Woodward, Director of the Global Economy Programme at nef (the new economics foundation)

According to Tax Research Limited who prepared the figure, the estimated value of assets held offshore can be considered as conservative since it does not include corporate profits hidden in tax havens. In addition, Tax Research calculated the final figure on the basis of their assessment of assets held off shore of US $11.5 trillion. This figure is based solely on the offshore holdings of people falling into the 'high net-worth individual' category (HNWIs). This category only includes people with liquid financial assets exceeding US $1 million. The assets of smaller net-worth individuals are not included in the wealth estimate, though it is probable that the sums held offshore by people falling into this category are considerable.

“No one has tried to calculate a number like this before. To ensure the credibility of our data we have only used information already in the public domain and produced by some of the most authoritative sources in the world. In addition, we tested our conclusions against three independent sources of information, and all seem to substantially agree, giving us a high degree of confidence in the conclusions we have reached.” said Richard Murphy, Director of Tax Research Limited, the independent body commissioned to calculate the figure by the Tax Justice Network.

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	related
	Publications The Observer The Observer Guardian Leader: The tax iceberg tjn briefing: The price of Offshore What could be achieved with $255 billion

	resources
	Tax Justice Network

	contacts
	David Woodward