A new report by tax researchers estimates the amount of black money deposited by a ‘global super-rich elite’ in offshore accounts at £13 trillion – equivalent of the combined GDP of the US and Japan.

The report by Tax Justice Network released to The Observer is said to be the ‘most detailed estimates yet of the size of the offshore economy’.

In an appendix, the report says that “(it) first became evident in the late 1980s that a vast amount of flight capital was pouring out of the developing world”. The report suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.

In the report, Mr James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, shows that at least £13 trillion — perhaps up to £20 trillion — has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks.

Their wealth is, as Mr Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”.

According to Mr Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4 trillion in 2010, a sharp rise from £1.5 trillion five years earlier, The Observer reported.

According to Mr Henry’s calculations, £6.3 trillion of assets is owned by only 92,000 people, or 0.001 per cent of the world’s population — a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.

“These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people,” said Mr John Christensen of the Tax Justice Network.

The report states that oil-rich states with an internationally mobile elite are especially prone to keeping their wealth in offshore bank accounts instead of investing it at home.

“The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments,” the report says.

(This article was published on July 22, 2012)
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