London: The amount of black money deposited by a ‘global super-rich elite’ (rich individuals and their families) in offshore accounts is as much as USD 20 trillion, according to research published on Sunday.
This money is equivalent to the size of the combined GDPs of the US and Japan.
The study estimating the extent of global private financial wealth held in offshore accounts - excluding non-financial assets such as real estate, gold, yachts and racehorses - puts the sum at between USD 21 and USD 32 trillion.
The research was carried out for pressure group Tax Justice Network, which campaigns against tax havens, by James Henry, former chief economist at consultants McKinsey & Co.
He used data from the World Bank, International Monetary Fund, United Nations and central banks.
The report by Tax Justice Network released to The Observer is said to be the “most detailed estimates yet of the size of the offshore economy”.
In an appendix, the report says that “[it] first became evident in the late 1980s that a vast amount of flight capital was pouring out of the developing world”.
The report suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.
In the report, James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, shows that at least USD 20 trillion — perhaps up to USD 31 trillion — has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks.
Their wealth is, as Mr. Henry puts it, “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“.
According to Mr. Henry’s research, the top 10 private banks — which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs — managed more than USD 6 trillion in 2010. This is a sharp rise from USD 2 trillion five years earlier, The Observer reported.
According to Mr. Henry’s calculations, USD 10 trillion of assets is owned by only 92,000 people, or 0.001 per cent of the world’s population — a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
“These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people,” said John Christensen of the Tax Justice Network.
With Agency Inputs
First Published: Monday, July 23, 2012, 09:38