# The Size of the Global Tax Evasion Problem



## BBCWatcher (Dec 28, 2012)

So why are the G20 economies focused on pursuing tax evasion with increased cooperation and renewed energy?

Economist and New York Times columnist Paul Krugman points to some recent research by Gabriel Zucman published in the Quarterly Journal of Economics. In that paper, Zucman persuasively estimates that in 2008 unrecorded household assets amounted to about 7.3% of world GDP, and that in turn is about 6% of total household financial assets. Most of this wealth is held by wealthy (top 0.1%) households living in developed economies, and the wealth is held directly or indirectly in tax havens.

These are _huge_ numbers, especially to governments and tax agencies. Revealing even a small fraction of this unreported wealth (plus interest and penalties) makes a big difference in national tax accounting. It's a target rich environment with big rewards.

If you're among those holding part of that 7.3%, the party may be coming to an end. This'd be a good year to choose rehab, so to speak. If you're not among those holding unreported wealth, now you know why you're getting more questions. This is a big, big deal.


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## FilingLate (Mar 18, 2014)

BBC laws are made by the Uber Rich. This 7.3% you talk about control politicians, army's Govt agency etc they make laws for the rest of society they are part of establishments. Nothing will happen to them, i am sure they have already found a way to counter this.
lets do this math in the past 2-3 years US recovered 7 billion$? Just 2 days ago it was informed that IRS has actually handed 4 billion$ in fraudulent return might i add they were able to stop much more then 4 billion but on one hand they made 7 billion in 2-3 years although lost 4 Billion $ in one.
Do the math


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## FilingLate (Mar 18, 2014)

By the way Paul krugman was one of those who actually was in favor of and favor in of a 2+ trillion $ bailout. His theory to fix economy is more on shifting the bubbles.


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## Nononymous (Jul 12, 2011)

FilingLate said:


> BBC laws are made by the Uber Rich. This 7.3% you talk about control politicians, army's Govt agency etc they make laws for the rest of society they are part of establishments. Nothing will happen to them, i am sure they have already found a way to counter this.
> lets do this math in the past 2-3 years US recovered 7 billion$? Just 2 days ago it was informed that IRS has actually handed 4 billion$ in fraudulent return might i add they were able to stop much more then 4 billion but on one hand they made 7 billion in 2-3 years although lost 4 Billion $ in one.
> Do the math


Really the only way to protect yourself against these monsters is to exercise your Second Amendment rights. Thank god they haven't managed to take those away yet.


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## FilingLate (Mar 18, 2014)

But they are trying.


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## maz57 (Apr 17, 2012)

FilingLate pretty well nailed it. The very wealthy not only have the best tax lawyers and tax accountants on staff, in a sense they also have the best politicians and governments "on staff" as well. By the time FATCA goes live in a few months, these folks will have executed their strategies to hide and protect their wealth in places and complicated structures the rest of us mortals are only dimly aware of. 

Meanwhile back at the ranch (IRS) there is a huge bureaucracy ill prepared to cope with the onslaught of incoming data FATCA will produce. It's inevitable that all this new information will be incomplete and rife with errors. The IRS by its own admission is not even able to deal with massive refund fraud and identity theft within the continental US. To expect this organization to suddenly expand to a worldwide reach is a total fantasy. Let the train wreck unfold.

I haven't read the report BBC is talking about, but my immediate reaction to this sort of report is:

1. Wealth does not necessarily equal taxable income.

2. To a high tax jurisdiction, any place with a lower rate appears to be a "tax haven".

3. Depending on one's personal philosophy, its easy to imagine such wealth may produce more benefit to society at large by leaving it in the hands of it's owners than being siphoned off by government. After all, this money is probably invested somewhere, not hidden in a cave on some desert island.

4. The US itself is perhaps the largest tax haven in the world. Many unsavory characters from the far flung countries have untold billions stashed in nebulous financial structures in Florida, Delaware, Nevada, etc. Although they lost the first round, the Texas and Florida bankers associations have ongoing litigation to prevent the USG releasing customer financial data to home governments elsewhere in the world. The US with it's CBT wants to keep the flow of information strictly one way. That conflicts directly with the concept of world-wide tax reporting and disclosure. The US talks the talk but its not likely it will walk the walk when it comes to global reporting.

5. The uber-rich have persuaded Congress over the years to manipulate the tax code to favor their interests over the general public. No one would accuse someone like Warren Buffet of being a tax cheat, but he does know how to arrange his affairs to legally minimize tax. He'd be foolish to do otherwise.

6. If you happen to have a lot of money there is a very good reason to invest offshore; its called diversification. Nothing sinister here.

7. At the end of the day, you have low wage 9 to 5 government employees up against highly paid, highly motivated, and very clever tax lawyers and accountants. Its a no-brainer who is going to come out on top. Rules are meant to be "interpreted".

8. Government cannot fix everything. I think it was Mark Twain who said that even if you gathered up all the money in the world, put it in a big pile, then redistributed it equally to every person, in six months you would have rich people and poor people all over again. Being rich is not a problem that needs to be fixed; poverty is what needs fixing.


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## FilingLate (Mar 18, 2014)

I find it fascinating when people say oh i like this guy he came to help us out or this leader will fix the economy or this leader will end corruption. It doesn't happen.
I was rooting for Ron Paul for a while and although he gained momentum but i knew that he will get no where, he made a ton of money but in the end money is just one part the media was the second part and corporation the 3rd of course none of the channel covered him and they called him crazy and he was out.
Its unfortunate their is no ground roots origination anymore. If you want to be a leader you need to keep the media, business, crooks an corporations happy if you pissed of one them you will be outed ....


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## maz57 (Apr 17, 2012)

Yeah, I liked Ron Paul as well. At least he told the truth instead of the drivel being spouted by the media and mainstream politcos. He had zero chance.

The US government exists in a fantasy world of its own construct. Sooner or later there will be a head-on collision with reality. FATCA may well be the catalyst. The notion that the US's financial problems can be fixed by hunting down Grandmas in Canada or anywhere else is ludicrous. But that is what the Kool-aid drinkers in Washington would have us believe.

Keep your head down!


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## Nononymous (Jul 12, 2011)

FilingLate said:


> But they are trying.


Curse you, black helicopters!


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## FilingLate (Mar 18, 2014)

Nonomous personally i am against guns weapons of all sort but if i have to vote i will vote for 2nd amendment if they repealed it then they will repeal everything


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## Nononymous (Jul 12, 2011)

Who's "they"?


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## FilingLate (Mar 18, 2014)

congress ofcourse you get 2/3rd and you can do wonders this happen from pressure from media, certain orginization, state actors etc
Their is a lot of pressure now a days.


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## BBCWatcher (Dec 28, 2012)

maz57 said:


> Wealth does not necessarily equal taxable income.


I never said it did, but the study persuasively demonstrates that this wealth is unreported, never appearing in national income accounting. Thus whatever taxes owed as this wealth grew (and continues to grow) hasn't been paid.



> To a high tax jurisdiction, any place with a lower rate appears to be a "tax haven".


No. "Tax haven" in this case has a very specific, narrow meaning not as broad as that. Even so, there is reported wealth held in the few tax haven countries. This isn't that.



> Depending on one's personal philosophy, its easy to imagine such wealth may produce more benefit to society at large by leaving it in the hands of it's owners than being siphoned off by government. After all, this money is probably invested somewhere, not hidden in a cave on some desert island.


There are many odd personal philosophies, but, regardless, that's a decision that ought to be made democratically. Every untaxed dollar (or euro or yen) that is not explicitly granted as agreed public policy is a tax dollar that somebody else has to pay, increasing tax rates for everyone else. And that's _really_ bad if one cares about truly benefitting society at large.



> The US talks the talk but its not likely it will walk the walk when it comes to global reporting.


No, or at least not lately. All FATCA intergovernmental agreements are reciprocal.



> The uber-rich have persuaded Congress over the years to manipulate the tax code to favor their interests over the general public. No one would accuse someone like Warren Buffet of being a tax cheat, but he does know how to arrange his affairs to legally minimize tax. He'd be foolish to do otherwise.


No, that's tax avoidance which is legal but often poor public policy. The study I mentioned helps to measure the likely size of tax evasion, i.e. completely illegal activities.



> If you happen to have a lot of money there is a very good reason to invest offshore; its called diversification. Nothing sinister here.


No, this is not simple, legal overseas investment with tax/financial reporting. This is completely unreported wealth that the study measured. It is by definition "sinister."



> Being rich is not a problem that needs to be fixed; poverty is what needs fixing.


This study only demonstrates that a lot of wealthy individuals are cheap (bleeps) and are not paying the (usually low) taxes they legally owe. That all the loopholes and deductions they've been able to lobby for still aren't enough for many. The study does not look at how to fix poverty, though one would hope we could all agree that people who can easily afford to pay the taxes they legally owe must pay those taxes. One would think that principle shouldn't be controversial.


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## maz57 (Apr 17, 2012)

BBCWatcher said:


> This study only demonstrates that a lot of wealthy individuals are cheap (bleeps) and are not paying the (usually low) taxes they legally owe. That all the loopholes and deductions they've been able to lobby for still aren't enough for many. The study does not look at how to fix poverty, though one would hope we could all agree that people who can easily afford to pay the taxes they legally owe must pay those taxes. One would think that principle shouldn't be controversial.


People who wind up with great wealth don't get there by accident. They presumably examine their options and conclude it will be less costly to make a few more political donations or hire a few more lawyers and accountants to invent ever more convoluted structures to avoid tax rather than simply paying the tax. The ideal tax rate would be that rate which is high enough to raise some serious revenue, but low enough that people just pay it rather than trying to figure out how to not pay it. Not saying I agree with the choices the wealthy make but that seems to be the way it works.  There will always a certain number of criminals whether its robbing liquor stores or national treasuries.

Wealth that is removed from one jurisdiction winds up invested in another jurisdiction along with the associated societal benefits. I've often thought that in an ideal world governments should have to compete for citizens (i.e. taxpayers). I believe that's why the US is so keen on CBT. It is attempting to protect what it views as its tax base with oppressive laws rather than simply admitting that for whatever reason these people have decided to live and pay tax somewhere else. These other countries consider their residents to be their own tax base and the US is trying to divert a portion of that wealth to the US Treasury. Not good for international relations. It took the threat of extortionate withholding to get other countries to sign on to FATCA.

To believe FATCA and enhanced global reporting is going to somehow fix this is unrealistic. Some small fish will undoubtedly be caught and pay a price but the big ones will get away; they're long gone.


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## FilingLate (Mar 18, 2014)

Some small fish will undoubtedly be caught and pay a price but the big ones will get away; they're long gone.


@MAZ Correct, some small fish and a very few token large fish so 4 years ago the most hated group were the banker so send 2-3 to in the slammer so you can go out and tell the masses you have been working for them


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## maz57 (Apr 17, 2012)

@BBC. This morning I reread your original post, did a little Googling and discovered a number of papers by Gabriel Zucman. Looks like there is some real economic red meat to digest. Why couldn't you have mentioned this last fall as winter was coming on instead of waiting until now when the weather is finally getting nice? 

The reason I Googled at all was because I was curious how someone could come up with an estimate for something which was "unreported". Now I'm unintentionally launched on a voyage into the murky world of international capital flows and tax reporting. That's the great thing about being retired; one has plenty of opportunity for "time well wasted"!


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