A recent study by the International Monetary Fund (IMF) has found that corporations and the wealthy have hidden $15 trillion in offshore shell companies for the purpose of avoiding taxes. At the newly reduced US corporate tax rate of 21 percent, that represents a loss of $3.15 trillion in revenue. And at Germany’s 29.79 percent tax rate, it would create more than $4.46 in revenue – revenue that could be used to improve infrastructure, to help millions out of poverty or to reduce the tax burden of ordinary people.
To put this monumental sum into perspective, it is roughly equivalent to China’s 2019 GDP of $15.5 trillion – the world’s second-largest economy. It’s more than 70 percent of the US economy of $21.4 trillion. And, by most estimates, the number of hidden dollars has increased by at least 10 percent over the last decade.
Given the impact of this lost revenue, one has to ask: Why have governments done so little to recapture the revenue and to penalize the perpetrators? It’s not as if they don’t know where the money is hidden. The study notes that 10 nations host 85 percent of the money – countries that include Luxembourg, the Cayman Islands, Isle of Man, Jersey, Ireland, Mauritius, Bermuda, Monaco, Switzerland and the Bahamas.
What’s more, recent leaks have given governments the names of people and institutions that have engaged in such tax shelters. The leaks known as the Panama Papers and the Paradise Papers have revealed millions of names and documents. Those named include numerous world leaders and celebrities. For example, the Trump name appears in the Panama Papers 3,540 times.
Maybe the answer for the inaction is the fact that most of the people who have the means and the opportunity to hide their money are those who control our government like Moscow Mitch; those who buy their way into office; those who use their money to lobby and influence office-holders. Or maybe it relates to the death of a journalist investigating the Panama Papers. Daphne Caruana Galizia, a reporter who was killed with a car bomb while following a lead in Malta. Her murder is not entirely surprising, since those hiding their assets include Vladimir Putin, Russian oligarchs and many individuals who are involved in organized crime. After all, these mobsters are likely using shell companies as a way to disguise their ill-begotten funds and to launder them.
Of course, that should give governments even more reason to halt the practice of hiding money. Doing so, would create obstacles for international crime syndicates and make it more difficult to finance operations such as drug trafficking and human trafficking. These and other heinous crimes annually cost governments and societies hundreds of millions of dollars to address.
If that’s not enough to motivate you to demand the action of your government, consider this: It almost certainly would cut your tax bill.