The True Cost of Hidden Money
A French economist Gabriel Zucman estimates — conservatively, in his view — that $7.6 trillion — 8 percent of the world’s personal financial wealth — is stashed in tax havens. If all of this illegally hidden money were properly recorded and taxed, global tax revenues would grow by more than $200 billion a year, he believes. According to Mr. Zucman’s calculations, 20 percent of all corporate profits in the United States are shifted offshore, and tax avoidance deprives the government of a third of corporate tax revenues.
Only multinational corporations and people with at least $50 million in financial assets usually have the resources to engage in offshore tax evasion. Since the less wealthy continue paying taxes, the practice deepens wealth inequality.
Because large-scale tax evasion skews key economics statistics, it hampers officials’ ability to manage the economy or make policy. It erodes respect for the law, preventing the government from carrying out one of its essential tasks. And it discourages job creation, since it rewards people and corporations for keeping money overseas, instead of investing it domestically.
Despite the obstacles that the tax compliance act faces, Mr. Zucman believes its passage marked a global turning point, starting an era of “remarkable progress” in reducing bank secrecy.
Original Story at The New York Times.