By Jacques Leslie
Tax avoidance is immoral and aids inequality
Published on Jun 17, 2014 12:49 PM
Gabriel Zucman is a 27-year-old French economist who decided to solve a puzzle: Why do international balance sheets each year show more liabilities than assets, as if the world is in debt to itself?
Over the last couple of decades, the few international economists who have addressed this question have offered a simple explanation: tax evasion.
Money that, say, leaves the US for an offshore tax shelter is recorded as a liability in the country, but it is listed nowhere as an asset - its mission, after all, is disappearance. But until now, the economists lacked hard numbers to confirm their suspicions.
By analysing data from by central banks in Switzerland and Luxembourg on foreigners' bank holdings, then extrapolating to other tax havens, Professor Zucman has put creditable numbers on tax evasion, showing that it's rampant - and a major driver of wealth inequality. He estimates - conservatively, he says - that US$7.6 trillion (S$9.5 trillion) - 8 per cent of the world's personal financial wealth - is stashed in tax havens.
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