Tax havens are a black hole in the global economy, a cache of $32 trillion

The British Tax Authority has announced plans to publish its estimates of the amount of tax evasion by UK residents who keep their money abroad.
This decision comes after preliminary information revealed that UK residents have £850 billion in offshore financial accounts, of which £570 billion are in safe tax havens, according to 2019 estimates.
These developments brought back talk about the issue of safe havens to the forefront of events in the United Kingdom, especially with the exacerbation of the economic crisis in Britain and the economic downturn that it is currently suffering from, and the British opposition began to urge Rishi Sunak, the Prime Minister, to move immediately to eliminate companies based in the United Kingdom. It stashes its profits in offshore tax havens, in a move the opposition claims could add £7bn a year to the British treasury.
But the issue of safe havens does not appear in any way as a challenge faced by the British authorities, on the other side of the Atlantic and in the United States of America in particular, and after a year-long investigation by the US authorities regarding “abusive” safe havens, a US Senate committee decided Examine how lawyers, accountants and bankers work together to hide money held in safe havens by wealthy individuals and companies headquartered in the United States from the eyes of the tax authorities.
In fact, for decades, the world has made unremitting efforts to strengthen policies aimed at eliminating tax evasion through the use of safe havens. However, it does not seem that the measures and measures taken have succeeded in eliminating this phenomenon, and some even doubt that the measures taken have It succeeded even in reducing it, and the question becomes: Why this failure?
Professor William Aston, a former professor of banking systems at the University of Oxford, sums up the answer in simple words, “the procedures are not sufficient”, and there is no real desire in the global system to eliminate tax havens. There are interests of many international companies and international wealthy people in maintaining those havens. Tax rates It is low and financial secrecy is very high, and regulations and laws make it easy to hide wealth, in addition to that it is very difficult to track what happens to money the moment you leave your economy and go to a safe haven.
But before proceeding to discuss this issue and its repercussions on the global economy, particularly emerging countries and economies, the interesting question to know its answer relates to the amount of money hidden in safe havens? Perhaps the really interesting answer is that no one has a real, realistic and confirmed estimate about the size of those funds, as banking secrecy prevents that, but the “tax justice network” that was officially launched in the British Parliament in March 2003 is characterized by a lot of international appreciation and confidence in addition to having experience Long-term research and investigation regarding tax evasion, anti-money laundering, and safe havens.
According to its latest estimates, between $21 and $32 trillion in financial assets are in safe havens, and despite the “tax evasion network” acknowledging that it is difficult to obtain accurate figures in this regard, which makes international estimates very different, its estimates indicate that taxes The money stashed in safe havens is lost to the international community, estimated at $427 billion each year.
Estimates of the World Bank in this regard confirm that there is no accurate knowledge of the size of personal wealth in safe havens, as it is estimated between $8.7 trillion and $36 trillion.
Stott Cullen, a tax expert, attributes a large part of the international failure to know the size of the wealth deposited abroad to the fact that people do not keep external accounts for their wealth in their own names, but through shell companies.
He told Al-Eqtisadiah, “The systems for establishing companies, especially in European countries, the United Kingdom and the United States, need to be reconsidered, not with the aim of obstructing the process of establishing new companies, but to impose conditions that ensure that these companies are real. Most of those who deposit their money in safe havens This is done through fictitious companies that have no financial basis and do not participate in the production process.
He added, “This creates a problem that goes beyond safe havens, which is that it gives miscalculations about the real amount of wealth in society, and makes us exaggerate the size of the state’s economic capacity, and at the same time the excessive banking secrecy in safe havens and our inability to know the true size of the wealth deposited in These havens do not make us able to judge, and the most dangerous thing is to predict their role in global financial finance.
In short, opponents of safe havens see it as a network designed to hide financial irregularities and evade taxes, so they may be happy with it shrinking or disappearing. But proponents have a different view.
In contrast, J.D. Morgan, the international accounting expert, that there is an exaggerated attack on the danger of safe havens.
He told Al-Eqtisadiah, “The safe havens are legal and operate within the framework of the law, and it is completely legitimate for some countries to reduce taxes to attract capital, and this is what these havens do, and they work to protect assets from the risks of political instability in some countries, As for the process of wealthy people hiding their names when opening bank accounts, this guarantees their protection from criminal operations, extortion or kidnapping for ransom.”
However, he added, “The current international attack on legal, reputable and globally recognized safe havens means reducing their capacity in favor of notorious safe havens and will make them more popular.”
The Tax Justice Network’s Corporate Tax Havens Index ranks the British Virgin Islands, Bermuda and the Cayman Islands as the top three in the index, while the Tax Justice Network’s Financial Secrecy Index also ranks Switzerland, the United States and the Cayman Islands as the top three regions for hiding personal wealth.
In turn, Victoria Arbet, an activist in the field of combating tax evasion and an advocate for the abolition of safe havens, believes that all those allegations defending safe havens are unfounded and that the international efforts aimed at pruning the forest of safe havens and not uprooting it from its roots.
And she stated to Al-Eqtisadiah that “the British Virgin Islands is one of the largest and most important safe havens in the world, and also one of the last remnants of the British Empire, and it is governed by a complex power-sharing arrangement between a ruler sent by the British Foreign Office and a locally elected prime minister, although its name is Islands.” British Virgin, the evidence that it is subordinate to British rule is weak, as the prevailing aspects of life on the island are American and the currency in circulation is the dollar.
And she added, “Many powerful players who can put an end to these safe havens benefit from them. A historic leak of Swiss bank records revealed that criminals, fraudsters and corrupt politicians use the Swiss banking system to store more than eight billion dollars in assets, and despite that, the European Union’s special rules were not affected.” safe tax havens.
Many experts doubt that including the Bahamas, the British Virgin Islands and other safe havens in the European Union’s gray lists and placing them under the magnifying glass will not achieve much results as long as the criteria under which these havens operate are not reviewed, as they will be able to continue to do what they do. without any repercussions and may be removed from those lists in subsequent revisions.
Certainly, until the financial crisis of 2008, safe havens were seen as “huge safes” in which celebrities and wealthy people put their money, but the global financial crisis revealed that the matter is much greater than that and that these safe havens are not huge safes, but rather play a large and central role. in the global economy.
According to estimates by the International Monetary Fund, the annual tax revenues that are lost to all governments as a result of these havens range between 500 and 600 billion dollars, and of this amount, about 200 billion dollars are wasted on low-income economies.
Professor William Aston, former professor of banking systems at the University of Oxford, explained to Al-Eqtisadiah, that “to understand the danger of these safe havens to emerging economies, think carefully about most of the safe havens belonging to advanced economies, and therefore a large number of wealthy people in a stable or unstable African country Or a country in Latin America who might stash their financial assets and wealth in Geneva or the Cayman Islands, while it is doubtful that wealthy British or Swiss stash their money in Africa or Latin America.
He added, “In short, safe havens are a black hole that absorbs the money of emerging economies, but it does not stop there, but rather reinforces economic inequality internationally, as it benefits from its advantages, most notably low taxes on large multinational companies, most of which, if not all, are headquartered in rich economies.” While small or medium companies in emerging economies are unable to tax competition with those companies.


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