(NEW YORK) — The super-rich are hiding at least $21 trillion in accounts outside their home countries, according to a report by an activist group called the Tax Justice Network.
The wealth hidden in these tax shelters is the equivalent of the United States and Japanese economies combined, according to the report titled “The Price of Offshore Revisited.”
“The hidden offshore sector is large enough to make a significant difference to all or conventional measures of inequality, ” wrote the lead author, James S. Henry, a former McKinsey & Co. chief economist.
“Since most of the missing financial wealth belongs to a tiny elite, the impact is staggering. For most countries, global financial inequality is not only much greater than we suspected, but it has been growing much faster,” he said.
Daniel N. Shaviro, a professor of taxation at New York University, told ABC News a lot of what’s happening is tax fraud. He said the report highlights that there are wealthy people who don’t want to pay taxes — and their home countries don’t have enforcement mechanisms in place, so they can get away with it.
In a list of the top 20 countries experiencing “global flight wealth,” China ranks as number one with $1.19 trillion. It is followed by Russia, Korea, Brazil, and Kuwait.
“Often these countries in general have not been rich for as long as the U.S. or England so they may not have both the rule of law and their enforcements may not be as well developed,” said Shaviro.
Using data from the World Bank, the IMF, the United Nations, central banks, the Bank for International Settlements and other sources, the report said 100,000 people worldwide were responsible for $9.8 trillion in wealth held offshore.
And who managed the money?
According to the study, UBS, Credit Suisse and Goldman Sachs are the top three private banks handling offshore accounts for the super-rich.
“It turns out that this offshore sector — which specializes in tax dodging — is basically designed and operated, not by shady no-name banks located in sultry islands, but by the world’s largest private banks, law firms, accounting firms, headquartered in First World capitals like London, New York and Geneva,” wrote Henry.
Copyright 2012 ABC News Radio
Aaron Smith, CNN Newswire
David Goldman, CNN
Tara Bench, KSL.com
Sam Turner, Deseret News