- The Paradise Papers reveal new accounts of offshore tax havens for the very wealthy that highlight the problem of wealth inequality. Offshore wealth is especially concentrated, Berkeley’s Gabriel Zucman tells Business Insider – 80% of it is owned by the top 0.1%. Offshore assets are hidden, so they make inequality look less severe than it really is.
Gabriel Zucman, a Berkeley economist who spends his time studying inequality, faces a big challenge in his research: Rich people hide their money, making it harder to asses the true state of wealth gaps both globally and within countries.
Zucman tells Business Insider the revelations contained in the Paradise Papers, the latest treasure trove of leaks of offshore tax accounts belonging to the world’s rich and powerful, shows “we’re only at the very beginning in the fight against tax havens.”
Following the release of the Panama Papers in early 2016, Zucman worked with two colleagues to estimate that a stunning 10% of global gross domestic product is tied up in tax havens. Now, he may have more adjustments to make.
“What we see in the data is that offshore wealth is super concentrated – the top 0.1% richest households own 80% of it,” he said.
“These Paradise Papers seem to confirm this insight from previous leaks. The main novelty in this new leak is that we see many more Americans in this Appleby file than in the Panama Papers. So it’s not only Russians or developing countries who use tax havens but basically the very rich from all over the world.”
The Paradise Papers leak, released Sunday, contained information obtained by the German newspaper Süddeutsche Zeitung that was shared with the International Consortium of Investigative Journalists, which also spearheaded last year’s release of the Panama Papers. Sunday’s release contained more than 13.4 million internal documents showing how major world players take advantage of offshore tax havens.
The reams of material reveal the inner workings of global companies, including the offshore law firm Appleby and the Singapore-based Asiaciti Trust, which administer offshore accounts for wealthy investors. There are also details from 19 corporate entities maintained by governments in tax-haven countries.
Zucman said reining in tax evasion by the super-wealthy was a matter of political will and not of bureaucratic capacity. But a lack of clear resolve by major countries, including the US, to clamp down on tax avoidance in the form of offshore or even domestic but opaque holdings (think Delaware or Nevada) marks a tortuous road to policy action.
“To make real progress we need sanctions on the countries and financial institutions that facilitate financial crimes,” Zucman said. Countries must also develop “registries to record the ownership of financial assets like equities, bonds, mutual fund shares, etcetera, just like we do for real estate – but trying to get at the beneficial owners.
“This is doable, but with the Trump administration, the US is backtracking and reverting to the pre-Obama era, where tax havens and financial opacity were just a good thing,” Zucman lamented.
Not to mention the president never even released his own tax returns.