Gimme Shelter

Author:Lijun Li - Chris Wellisz
Pages:46-47
SUMMARY

Counting wealth in offshore tax havens boosts estimates of inequality

 
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THE AMOUNT OF WEALTH
stashed in oshore ta x havens
has big implications for inequalit y. Why? Unless you
can account for hidden riches, it’s dicult to know
how wide the disparities in wea lth really are. So econ-
omists led by Berkeley’s Gabriel Zucman decided to
nd out who owns the wealth in ta x havens.
ey estimated total o shore wealth at about
10 percent of world GDP in 2007, or $5.6 trillion.
About half was kept in Switz erland, the world’s
premier oshore banking center since the 1920s.
Conveniently, the central bank of Switzerland
publishes c ountry-by-cou ntry brea kdowns of
oshore wealth in the nation’s banks.
But what about other tax havens? In 2016,
the Bank for International Set tlements started
to release data on the origin of bank deposits
held in oshore banking centers li ke Jersey and
Luxembourg. at made it possible to see how
much money residents of Germany, for example,
held in accounts in Hong Kong SAR . Zucman
and his collaborators used t he two data sources
to estimate the ratio of oshore wea lth to GDP
by cou ntr y.
e gures var y dramatica lly, from just a small
percentage of GDP in Scandinav ia to as much as
60 percent in Russia, the Gul f states, and Latin
America. Interesting ly, they found connections
between oshore wealth a nd the presence of natural
resources, a history of politica l instability, and prox-
imity to Switzerla nd.
Other data—including a leak of condential
records from the Swiss subsidiar y of HSBC in
2007—suggest that the distribution of oshore
wealth is heavily ske wed toward the rich: about 80
percent belongs to the top 0.1 percent of house-
holds. e conclu sion: accounting for oshore
assets substa ntially bo osts the wealth share of the
very richest people. In other words, inequalit y may
be far greater tha n other studies have found.
Prepared by F&D’s
LIJUN LI
and
CHRIS WELLISZ
, based on
“Who Owns the Wealth in Tax Havens? Macro Evidence and
Implications for Global Inequality,” by Annette Altstadsaeter, Niels
Johannesen, and Gabriel Zucman, published in September 2017
by the National Bureau of Economic Research. See https://www.
nber.org/papers/w23805.pdf
Counting wealth in offshore tax havens boosts estimates of inequality
GIMME SHELTER
Switzerland
Asian tax
havens
Other European tax havens
2001 03 05 07 09 11 13 15
American tax havens
Note: American oshore centers = Cayman Islands, Panama, United States;
Asian oshore centers = Bahrain, Hong Kong SAR, Macao SAR, Malaysia,
Singapore as well as The Bahamas, Bermuda, and Netherland Antilles; other
European centers = Austria, Belgium, Cyprus, Guernsey, Jersey, Isle of Man,
Luxembourg, United Kingdom.
0
10
20
30
40
50
Shifting shares
Switzerland’s share of offshore bank deposits has been declining since the global
financial crisis of 2008–09, while those of Asian offshore centers have been rising.
(percent of the wealth held in all tax havens)
Time warp
In Scandinavia and Europe, the wealth of the top 0.01 percent has returned to the levels
of the 1950s. In contrast, wealth is much more concentrated in the United States, where
the share of the top 0.01 percent has surpassed levels of the early 20th century.
(top 0.01 percent wealth share, including offshore wealth)
United States
Europe
1910 30 50 70 90 2010
Scandinavia
Note: Europe is the arithmetic average of France, Spain, and the United
Kingdom; Scandinavia is the average of Denmark, Norway, and Sweden. Each
square represents a decennial average: 1910 denotes the average of 1900, 1901,
. . . , 1909; 2000 denotes the average of 2000, 2001, . . . , 2009.
0
3
6
9
12
15
46 FINANCE & DEVELOPMENT | September 2019

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