A report published on Sunday claims that the global super-rich elite may be holding as much as $32 trillion in offshore tax havens, and may be depriving governments worldwide of as much as $250 billion in tax revenues every year.
The BBC reports that the figure is equivalent to the size of the US and Japanese economies combined.
The report titled, The Price of Offshore Revisited, was written for Tax Justice Network by James Henry, former chief economist at consultants McKinsey & Co. Tax Justice Network is a pressure group that campaigns against tax havens.
The reports lists Switzerland, Luxembourg and Hong Kong top on the list of secretive jurisdictions that have been enjoying a massive influx of funds in recent years.
Henry writes: "(The wealth of the world's super-rich is) protected by a highly-paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy." He continues: "The lost tax revenues implied by our estimates is huge. It is large enough to make a significant difference to the finances of many countries. From another angle, this study is really good news. The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems."
According to the BBC, the reports says three private banks handling the most assets offshore are UBS, Credit Suisse and Goldman Sachs. Private banks, including UBS and Goldman Sachs, were managing about $6.5 trillion in 2010, more than two times increase on figures for 2005 before the so-called global financial meltdown.The report says that less than 100,000 people worldwide own about $9.8 trillion of the wealth held offshore.
According to Reuters, the report also estimates that since the 1970s, the richest citizens of 139 countries have amassed $7.3 to $9.3 trillion of "unrecorded offshore wealth" by 2010. Some oil rich countries, including Russia and Nigeria, are losing vast sums to tax havens. The report estimates that about $800 billion has left Russian in the last two decades, while African countries, especially Nigeria, have lost about $320 billion since the 1970s.
A Financial Secrecy Index compiled by the Tax Justice Network, ranks the jurisdictions enjoying the global influx of funds. The top 10 private banks in the world, including UBS, are estimated to be managing $6.5 trillion in 2010. The ranking shows that Switzerland, Cayman Islands, Luxembourg and Hong Kong are among the nations receiving the highest influx of funds.
The study estimates that governments worldwide lose about $250 billion every year due to the super-rich holding their funds in offshore tax havens. According to the report, the total sum super-rich citizens of some nations are holding dwarfs their debts.
The report says, "Secrecy distorts trade and investment flows, and creates a criminogenic environment for a litany of evils that hurt the citizens of rich and poor countries alike. It's not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion."
The reports says that if the interest on the huge sums being lost to tax havens were taxed at a rate of around 30 percent, about $200 billion would be generated for the world's treasuries.
The report used data from the World Bank, International Monetary Fund, the United Nations and the world's central banks. Reuters reports the author says private wealth held offshore represents a "huge black hole in the world's economy."
BBC reports that tax expert and UK government adviser John Whiting, says he is sceptical that the amount hidden is that large. According to Whiting, director of Office of Tax Simplification, "There clearly are some significant amounts hidden away, but if it really is that size what is being done with it all?"
Whiting advises caution, saying: "I cannot disprove the figures at all, but they do seem staggering. If the suggestion is that such amounts are actively hidden and never accessed, that seems odd - not least in terms of what the tax authorities are doing. In fact, the US, UK and German authorities are doing a lot."
But according to BBC, Henry says that even a sum of $21 trillion is conservative and that the total figure could be as high as $32 trillion.
The report comes at a time of political controversy in the US about tax avoidance practices among the super-rich.