A new report estimates that the amount of wealth tucked away in offshore accounts is far larger than previously imagined.
While the report by the liberal Tax Justice Network focuses on the problem of unreported wealth for developing countries, it also could become part of the heated political debate going on in the U.S. over purported tax avoidance by the wealthy.
The Tax Justice Network’s report estimates that unreported offshore wealth held in tax havens has reached at least $21 trillion, and possibly as much as $32 trillion. That wealth means that the problem of inequality in wealth and income is actually worse than suspected, the group says.
It also means that many countries are losing out on tax revenue that could go a long way toward alleviating their national fiscal problems, the report’s authors suggest. The largest previous estimate of the problem – also by Tax Justice Network, in 2005 – was about $11.5 trillion, the report says.
The report considers the impacts of a range of offshore protections used, including unreported capital flows and under-taxed corporate profits. It places considerable blame on big multinational banks and other financial institutions that are integral to the process of shifting money to offshore tax havens.
But some tax experts – particularly conservatives – expressed skepticism at the size of the new estimate. Dan Mitchell, a senior fellow at the libertarian Cato Institute, compared the report’s findings to some estimates of climate change.
Regardless, this is a situation that deserves attention and that can have a serious impact on the financial system as we know it.
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