Sigrún Davíðsdóttir's Icelog

Tax evasion: flowing out, not trickling down

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Today, Tax Justice Network published its report on how the super-rich might have $21tn (yes, trillions) – and possibly up to $32tn – stashed away in tax havens.

After the Icelandic banks collapsed in October 2008 the first thing I happened to investigate were their Luxembourg operations. I only learnt much later that their dodgy loans mostly went through Luxembourg but it was their offshore operations, out of Luxembourg, that I did start with. All of the banks offered offshore services from Luxembourg but Kaupthing, in particular, did this very systematically, by offering not only their large clients but also many smaller clients private banking service there.

I’ve spoken to some of these smaller clients – and what is clear to me is that if people both paid the cost – and – duly paid tax on the profits arising from these investments this was a loss-making entreprise. The offshore service is a costly one so the question was whom to pay – the bank or the Inland Revenue. And this isn’t money trickling down in the economy – this is money flowing out of it.

As the Tax Justice report brings out, the money tunneled out of the economy into tax havens are no trivial sums, ranging from $21tn to possibly $32tn, depending on the methods used to establish the numbers.

If the politicians don’t start taking this into account – and political parties cut short their dependence on financing from those who thrive on the offshore wealth – voters are bound to revolt. No society can bear that the wealthiest choose to pay their due to banks, lawyers and accountants and not to society. The inequality arising from this is scarily destabilising.

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Written by Sigrún Davídsdóttir

July 22nd, 2012 at 10:39 pm

Posted in Iceland

One Response to 'Tax evasion: flowing out, not trickling down'

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  1. Should you pay your plumber £50 cash for work done. Probably not but then when you see the scale of abuse by large corporations, leading politicians, even tax inspectors then why not ?

    Stan

    25 Jul 12 at 2:34 pm

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