Lost tax haven cash enough to end extreme poverty - twice over

Posted by Sarah Dransfield Senior Press Officer

22nd May 2013

UK-linked tax havens are the biggest G8 culprits

People using tax havens are depriving the world of more than $150 billion (£100bn) in lost revenue, enough money to end extreme poverty twice over, according to new figures published today by Oxfam. 

A high proportion of this tax dodging is taking place on David Cameron and George Osborne's watch. Of the $18.47 trillion (£12tn) that Oxfam estimates is being held by individuals in tax havens around the globe, over a third - $7.18 trillion (£4.7tn) - is sitting in accounts in British Overseas Territories and Crown Dependencies. Despite the fact a deal was done earlier this month to get some of these tax havens to be more transparent and share tax information, and David Cameron's letter to Overseas Territories and Crown Dependencies this week, there is no tax deal on the table that will benefit poor countries who are struggling to reclaim the billions of pounds they are owed. 

The international agency said it is a moral outrage and a scandal that this is taking desperately needed cash from poor countries as well as from citizens who are being hit by austerity measures closer to home.

Emma Seery, Oxfam's Head of Development Finance and Public Services, said: "These figures put the UK at the centre of a global tax system that is a colossal betrayal of people here and in the poorest countries who are struggling to get by, and put the government on the side of the privileged few. If they want to get on the right side of this debate, now is the time to take action.
"Britain's credibility is on the line; talking tough on tax, whilst continuing to usher a third of the world's wealth into UK tax havens, risks making a mockery of David Cameron's leadership at the G8 Summit in June."

Today in Brussels, David Cameron will attend an EU Summit where European Heads of State and Government will turn their attention to the unfair global tax system. The EU also needs to take serious action because two thirds of offshore wealth - $12.29 trillion (over £8 trn) - is sitting untaxed in European linked tax havens (including those linked to the UK). Oxfam is calling for a blacklist of tax havens, and agreement that EU member states will impose countermeasures sanctions against tax havens and those using them. The EU looks set to fail on this simple task.

Emma Seery said: "David Cameron and George Osborne continue to tour the world making promises to clamp down on tax havens, but so far they've done absolutely nothing to make tax deals work for poor countries.

"The UK and Europe cannot stand by and watch more people fall victim to the bite of austerity whilst billions is lost from the public purse on their watch. Unless the EU agrees a tax havens black list and clear sanctions, we'll get little more than hot air from leaders."

The $156 billion (£102 bn) of lost tax revenue estimated by Oxfam is just a fraction of total tax loss, as it only reflects the amount of tax individuals are neglecting to pay and doesn't include the tax dodged by companies that costs poor countries more than $160 billion (£105 bn) a year. 

Oxfam is part of the Enough Food for Everyone IF campaign, which is calling on the G8 to make all tax havens join a multilateral agreement to share tax information, so that every country - especially the poorest - can tax companies and individuals fairly, and for an end to secrecy that hides the ultimate owner of assets held offshore so that they can avoid the taxman.

/Ends

For more information, or to arrange an interview with an Oxfam spokesperson, please contact: Sarah Dransfield, Oxfam Senior Press Officer, on 01865 472269, 07767 085636 or email: sdransfield@oxfam.org.uk

Notes to Editors

UK-linked tax havens account for the overwhelming majority of individuals' assets being held in G8 tax havens $7.18 trillion (£4.7 trn) of a total of $7.81 trillion (£5.1 trn) offshore wealth held in G8 tax havens. 
Poor countries lose $160bn-a-year to corporate tax dodging according to Christian Aid http://www.christianaid.org.uk/images/deathandtaxes.pdf 

To end extreme poverty would mean providing every person in the world with a minimum income of $1.25/day. This would cost $66 billion, according to the Brookings Institute in the US: http://www.brookings.edu/~/media/research/files/papers/2011/1/global%20poverty%20chandy/01_global_poverty_chandy.pdf

Enough Food for Everyone IF is a coalition of more than 200 organisations which have joined together to campaign for action by the G8 on the issue of global hunger. The last time we worked together at this scale was for Make Poverty History. Now that the G8 group of world leaders are returning to the UK, we are demanding they take action on hunger. 2013 won't be the end of hunger, but it could be the beginning of the end. Join us at www.enoughfoodif.org
Explanation of Oxfam's figures

To calculate total wealth held by individuals in tax havens:
· Oxfam estimated that 19.5 per cent of global deposits are held by foreigners in tax havens. The 19.5 per cent figure is based on evidence collected from the following  sources: the Bank  of  International Settlements (BIS) quarterly reviews (of the  external  holdings  of  banks  in  a  set  of tax havens) and the estimates of national  authorities  such  as  the Dutch Central Bank and IMF for  certain countries'  compliance with anti-money laundering standards.

· We then applied the 19.5% figure to all assets.  There is no credible data available for the ratio for other financial assets, and as tax rates are usually the same for different asset classes (as is the case with capital gains for instance) meaning there is no incentive to prioritise other assets over and above deposits, making this a fair assumption.

· The 19.5% is a conservative estimate in itself though, because in fact domestic depositors could also be foreign depositors set up as domestic 'fronts'.  It is impossible to differentiate between the two because of a lack of transparency. 

· The Credit Suisse Global Wealth Databook estimates that total net financial wealth was 2012 to US$94.7 trillion (excluding property). 

· Using the 19.5% proportion, we end up with a total of US$18.5 trillion held offshore.

How Oxfam calculated the US$156 billion tax loss figure:

· We only looked at assets offshore that are not reported to tax administrations (assuming that declared assets are being taxed).  Helvea estimates that declared assets represent only 16%, leaving us with an amount of US$15.54 trillion (84% of US$18.5 trillion).

· We then looked at the assets' return (the "interest") generated by having this money in offshore bank accounts. We use a 3.5% asset return as a conservative but appropriate yield, based on Credit Suisse Investment Yearbook 2013 (which says that balanced equity and bond funds would yield 2% real returns, then to get nominal returns we add US inflation of 1.5%).  This is a conservative estimate because the current inflation rate is low (it is a current low rate, rather than a higher average of recent rates), and it is lower than the average returns offered by private funds advertised by clients. 

· Finally, we looked at individual country tax rates on foreign assets, reported in the PWC World Wide Tax Summaries, and calculated each one individually and then totalled them to reach a global figure.  The total is US$156.31billion .


Who is considered as a tax haven: 
Oxfam used the list of 50 "offshore jurisdictions" established by the US Government Accountability Office and added two other major tax havens: Delaware and the Netherlands. Of these jurisdictions, 21 are EU-related jurisdictions and 10 are UK (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Montserrat and the Turks and Caicos Islands).


Blog post written by Sarah Dransfield

Senior Press Officer

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