The super rich are hiding a ton of money offshore


  • New research based on the Panama Papers highlights the
    extent of offshore wealth.
  • About 10% of global GDP is hidden in tax havens, making
    inequality worse than it looks.
  • US inequality is the worst among rich nations, but
    Europe has also gotten more unequal.

The Panama Papers and other major leaks from offshore tax havens
have helped shed light on just how much money the world’s
wealthiest individuals are parking in untaxed obscurity, away
from the authorities and, importantly, economic researchers.

This new evidence has helped economists gain greater insight into
just how steep disparities between the rich and poor have
become, because having actual data on offshore holdings
tends to widen wealth gaps considerably.

Three of these researchers have teamed up on two important papers
that offer a more in-depth look at what the world’s worst
tax-evading and -avoiding nations are, and find that the
existence of tax havens makes inequality much worse than it
appears with standard, publicly-available economic data.

“The equivalent of 10% of world GDP is held in tax havens
globally, but this average masks a great deal of
heterogeneity—from a few percent of GDP in Scandinavia, to about
15% in Continental Europe, and 60% in Gulf countries and some
Latin American economies,” Annette Alstadsæter at the Norwegian
University of Life Sciences, Niels Johannesen of the University
of Copenhagen and Gabriel Zucman of Berkeley write in the first
of the two articles.
Global GDP is around $75.6 trillion,
to World Bank figures.

Panama PapersAlstadsæter, Johannesen &

They then apply these estimates to build revised series of
top wealth shares in ten countries accounting for nearly half of
world GDP.

“Because offshore wealth is very concentrated at the top,
accounting for it increases the top 0.01% wealth share
substantially in Europe, even in countries that do not use tax
havens extensively. It has considerable effects in Russia, where
the vast majority of wealth at the top is held offshore,” the
authors write. 

Around 60% of the wealth of Russia’s richest households is
held offshore, the economists estimate.

Tax evasion 1Alstadsæter, Johannesen &

More broadly, offshore wealth is likely to have major
implications for the concentration of wealth in many of the
world’s developing countries, hence for the
world distribution of income and wealth.”

“These results highlight the importance of looking beyond
tax and survey data to study wealth accumulation among the very
rich in a globalized world,” they continue.

They say that despite lip service to transparency, “very
little has been achieved” in recent years.

“With the exception of Switzerland, no major financial
center publishes 18 comprehensive statistics on the amount of
foreign wealth managed by its banks.”

Offshore wealth v GDPAlstadsæter, Johannesen &

Inequality is worse than you think

All the hidden cash means the problem of global income
inequality within nations, already seen at critical and
historical levels, is actually significantly more acute.


“Wealth concentration at the very top appears to have
returned to its level of the 1950s, with a U-shaped evolution
from the 1950s to today,” the authors write in
the second new paper.

“Despite the more prevalent use of tax havens by
continental European countries, we find that wealth is much more
concentrated in the United States. In fact, the top 0.01% wealth
share in the U.S. is as high as in early 20th century Europe.”
(For the history fans, that’s before most of the continent was
democratic, and right before two world wars.
US inequality is now around the same levels where it stood during
the Great Depression.


USA inequality vs. EuropeAlstadsæter, Johannesen &

But European inequality has worsened substantially as well,
despite more ample social safety nets and worker-friendly
regulations. That’s true even in countries seen as bastions of
equality and generous social policy, like Sweden and

“When including offshore assets, we find that Scandinavia
and other European countries have experienced very similar trends
in wealth concentration at the top over the twentieth century,”
the authors say. 
“We find that tax evasion rises
sharply with wealth, a phenomenon random audits fail to capture.”
Norway InequalityAlstadsæter, Johannesen &

Around 3% of personal taxes are evaded in Scandinavia on average,
but the figure soars to nearly 30% in the top 0.01% of the
wealth distribution — households with more than $45 million in
net wealth.

“Because most Latin American, and many Asian and European
economies own much more wealth offshore than Norway, the results
found in Norway are likely to be lower bound for most of the
world’s countries,” the economists argue.

They also identify a solution that works: “After reducing
tax evasion—by using tax amnesties—tax evaders do not legally
avoid taxes more. This result suggests that fighting tax evasion
can be an effective way to collect more tax revenue from the very

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