|
|
|
|
These figures exclude real estate, non-financial assets and privately owned businesses. There is a third way of estimating the value of liquid assets held offshore. Data published in a report5 by the research arm of the global consulting group McKinsey & Company, shows that the total global financial capital amounted to $118 trillion in 2003. This was split by asset type as follows: Whilst it might appear hard to reconcile the McKinsey figure for deposits with that of the BIS, it should be noted that McKinsey’s figure apparently includes the balances banks owe to each other which are not included in the BIS data quoted earlier. This means that the BIS data is a reflection of the sums held by individuals, nonbanking corporations and trusts and is therefore more accurate for these purposes. The ratio of cash to total financial assets has, according to McKinsey’s, ranged between 3.3 to 3.85 over the past 4 years. An average of 3.5 would seem reasonable. Applying this average to the BIS offshore holdings yields a figure for total financial assets held offshore amounting to $9.45 trillion. This provides a third estimate within the range $9 to $10 trillion. However, this estimate does not include real estate and other tangible assets, the ownership of private businesses held offshore, or other intangible assets such as the rights to receive royalties and licence fees. No one can be sure of the precise value of these assets, so use a modest estimate that they would add no more than $2 trillion to the value of offshore holdings (which in view of the value of real estate may well be very modest indeed). This provides the basis for Tax Justice's estimate that the value of assets held offshore lies in the range of $11 - $12 trillion. It considers this to be a conservative estimate. Income from offshore wealth According to the various wealth reports already referred to, wealth holders currently expect their assets to grow at between 7 and 8 percent annually. An average rate of return of 7.5 percent would therefore seem appropriate. US$11.5 trillion invested at 7.5 percent yields a return of about US$860 billion a year. This is a reasonable measure of the offshore investment income each year. Tax lost on offshore income The tax loss arising from $860 billion being held offshore is estimated as follows. In 2003 Cap Gemini stated that 7.7 million people around the world held more than US$1 million in financial-asset wealth. Normally these high net-worth individuals would be paying the highest rates of personal tax. Forbes magazine in 20046 stated that the average marginal tax rate for a person earning €100,000 that year was 37.5 percent. However, this figure would be too high an estimate of overall tax losses since some assets held offshore will have been invested in ways that involve taxes being withheld from payments made. We estimate that the average withholding on a portfolio of the type Cap Gemini refers to would be in the region of 7.5 percent. On this basis we use an average tax rate of 30 percent to calculate the overall tax loss. $860 billion at 30 percent yields an annual tax loss of approximately $255 billion resulting from wealthy individuals holding their assets offshore. This estimate does not include tax losses arising from:
1 http://www.bis.org/2 Data confirmed by BIS 1-3-05 3 http://www.bcg.com/publications/files/WealthJul03website.pdf4 These figures have been computed by the Tax Justice Network based on the mid points of the estimated ranges of assets held offshore5 http://www.mckinsey.com/mgi/publications/gcm/executive_summary.asp6 http://www.forbes.com/global/2004/0524/082.htmlRelated: US multinationals profit from tax havens © Copyright 2007 by Finfacts.com |
