x Abu Dhabi, UAEThursday 20 July 2017

It's time for international cooperation on regulating tax havens

The world's super-rich have placed up to $32 trillion out of reach of the tax man in havens the world over - it's time for it to stop.

The growing perception of a widening gap between the rich and poor will no doubt be bolstered by revelations this week that the global elite have hidden more wealth from the taxman than previously thought.

The world's über-privileged have siphoned off between $21 trillion (Dh71tr) and $32tr - a sum larger than the entire US GDP - from their home countries and, with the help of private banks, secreted it away in some of the world's most financially unsavoury jurisdictions, a report commissioned by the Tax Justice Network found. And that's just their cash - the estimate does not include gold, yachts, race horses, aircraft, property and other non-financial assets.

Tax haven expert James Henry, author of The Price of Offshore Revisited, reported that super-rich investors in dozens of countries have created a "huge black hole in the world economy", adding that their wealth 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".

John Christensen, a development economist who heads the Tax Justice Network, said: "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. This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

Arguably the poster boy for this nefarious trend is the US presidential candidate Mitt Romney. The secretive Republican has amassed a fortune of nearly $250 million, much of which he keeps in a complex and opaque web of offshore accounts, according to a report in Vanity Fair magazine.

Much to the delight of the Democrats, he has fuelled public suspicion by belligerently refusing to submit his tax returns from before 2010 for scrutiny.

Also drawing fire recently was the comedian Jimmy Carr. The British entertainer, who, funnily enough, once referred to an audience member from the tax haven of Jersey as "tax dodging scum", was forced to publicly apologise after it was revealed that he took advantage of a Jersey-based scheme called K2, which is designed to reduce taxation to as little as one per cent. David Cameron, Britain's Conservative prime minister, said he was not amused, describing the comedian's actions as "morally wrong".

Tax havenry was pioneered by the likes of American gangster Meyer Lansky, who in the early 1960s was, along with a corrupt local business elite, instrumental in making the Bahamas an attractive hiding place for organised crime earnings. Today it poses a serious threat to public welfare.

The ability of governments to provide education, health care and other vital services is undermined by this massive loss of revenue, a problem exacerbated in recent years by taxpayer subsidies to the very banks that are involved in facilitating offshore tax avoidance.

Fewer than 100,000 people now control more than 30 per cent of the world's wealth, according to the report, and since the offshore industry took off in the late 1960s, it has been growing at the same pace as the global economy.

Perhaps it is time to launch a concerted international effort to reverse this trend through aggressive, multilateral regulatory action.