This paper reveals that economic inequality is significantly worse than any known study of inequality has ever indicated. Eight experts in economic inequality were asked whether current analyses understimated the problem, they all agreed with the theses: it is not and they do.
Tax havens spend a lot of time and legislation “deeming” income or assets to be located elsewhere; they are deemed not to fall into local tax net. The result of this widespread “elsewhere” problem is that these assets and income do not fall into any tax net anywhere. “elsewhere” becomes “nowhere”.
Moreover, there are several measurement problems regarding failure to capture information on unearned incomes such as rents, dividend payments and capital gains.
Inequality is a political choice about how much inequality in outcomes a society is willing to tolerate, according to its beliefs about how important that may be to provide incentives, and how much damage it may do to social cohesion, economic growth and so on.
However what if the extent of inequality has been hidden?; What would that mean about the political choices that have been taken or accepted, and about the possibility of reversal as the true state of affairs becomes increasingly clear?
Key findings
- Conservatively estimated there is between $21 and 32$ trillion of unrecorded offshore financial wealth in the world.
- In United States, incomes of the top 1% of the population more than doubled in 1980-2010, while the incomes of the top 0.1% more than trebled and the top 0.01% more than quadrupled. In the same period the bottom 90% fell by 5%.
- In Africa a cumulative $944bn in accumulated flight capital from 33 african countries compared to $177 bn in external debts make Africa a net creditor to the world.
- 8% of global wealth is held in tax havens and 6% is unrecorded.
Key recommendations
- Current inequality statistics need to change its methodology to include assets hidden in offshore bank accounts, trusts or companies.
- It is important to make sure the true state of affairs regarding inequality are clearer and to change the frame of reference in which societies create their policies and their systems for ensuring the prosperity of their citizens.