As I have reported in this blog and the issue has been featured in a number of articles from the New York Times, the Financial Times and the Wall Street Journal, trillions of dollars have been taken out of the global economy or it is sitting “on the sidelines”, in addition to the ludicrous profits taken by the banksters. So where did our money go?
In two words, offshore banking. Offshore banking is an important part of the international financial system (read scheme here). Experts believe that as much as half the world’s capital flows through offshore centers. Tax havens have 1.2% of the world’s population and hold 26% of the world’s wealth, including 31% of the net profits of United States multinationals. According to Merrill Lynch and Gemini Consulting‘s “World Wealth Report” for 2000, one third of the wealth of the world’s “high net-worth individuals”—nearly $6 trillion out of $17.5 trillion—may now be held offshore. Some $3 trillion is in deposits in tax haven banks and the rest is in securities held by international business companies (IBCs) and trusts. These numbers have quadrupled since 2000.
The IMF has said that between $600 billion and $1.5 trillion of illicit money is laundered annually, equal to 2% to 5% of global economic output. Today, offshore is where most of the world’s drug money is allegedly laundered, estimated at up to $500 billion a year, more than the total income of the world’s poorest 20%. Add the proceeds of tax evasion and the figure skyrockets to $1 trillion. Another few hundred billion come from fraud and corruption. “These offshore centers awash in money are the hub of a colossal, underground network of crime, fraud, and corruption” commented Lucy Komisar quoting these statistics. Among offshore banks, Swiss banks hold an estimated 35% of the world’s private and institutional funds (or 3 trillion Swiss francs), and the Cayman Islands (1.9 trillion US dollars in deposits) are the fifth largest banking centre globally in terms of deposits. However, recent data by the Swiss National Bank show that the assets held by foreign persons in Swiss bank accounts declined by 28.1% between January 2008 and November 2009. This was a direct result of the US making demands that Swiss banks report US citizen deposits to the Fed.
Offshore financial centres include:
While there are a number of independent banks serving the offshore banking needs, several of the major banks and financial institutions have offshore branches providing the same services. HSBC, Bank of America, Lloyds, and Credit Suisse, just to name a few. All offering “Offshore Wealth Management” services.
You and I live in a totally different world than the ultra-rich and the international banking elite do. Many of them live in a world where they simply do not pay income taxes. Today, it is estimated that a third of all the wealth in the world is held in offshore banks. So why is so much of the wealth of the globe located in places such as Monaco, the Cayman Islands, Bermuda, the Bahamas, and the Isle of Man? It isn’t because those are fun places to visit. It is to avoid taxes, period. The super wealthy and the international banking elite think that it is really funny that our paychecks are constantly being drained by taxes, and retirement deposits while they literally pay nothing at all. These incredibly rich elitists make a ton of money doing business in wealthy western nations and then they transfer virtually all of their profits offshore where they don’t have to contribute any of it in taxes. It works out really great for them, but it sucks for the rest of us.
According to an article in Forbes magazine, there is a total of approximately 15 trillion to 20 trillion dollars in offshore bank accounts, brokerage accounts and hedge fund portfolios. A recent article in the Guardian stated that a third of all the wealth on the entire globe is held in offshore banks and that the vast majority of international banking transactions take place in these tax havens….
On a conservative estimate, a third of the world’s wealth is held offshore, with 80% of international banking transactions taking place there. More than half the capital in the world’s stock exchanges is “parked” offshore at some point.
Nobody knows for sure how much money big governments around the globe are missing out on from all this tax avoidance, but everyone agrees the number is huge. It is at least in the hundreds of billions of dollars every single year. When you compare this to the new money being printed as “bailout money, I think we would find the ledger in balance. That is, new money printed and money stolen.
It is a shadow banking system that most Americans and Europeans don’t know anything about. Most folks don’t have the resources to be able to set up shell companies in half a dozen different countries so that they can “filter” their profits. Most people don’t know a thing about complicated tax avoidance plans that tax lawyers use such as the “Double Irish” and the “Dutch Sandwich”. Most common working middle class folks or honest businessmen and women would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.
If common folks even attempted such things, we would be swarmed by state investigators, IRS agents and tax agents of all kinds, and likely we would face criminal charges. My question is two-fold. First, why isn’t our governments pursuing and changing these loop-holes and two, why aren’t we insisting they do. The answer is simple, like credit swaps and derivatives, these schemes are not understood, even by our legislators. Let’s all get informed and then begin to insist on the appropriate actions. We do not have to be lambs to the slaughter, well at least I won’t go willingly to financial slavedom.