# How Big Are Tax Havens? Gabriel Zucman's Estimate: "Very Big"



## BBCWatcher (Dec 28, 2012)

U.C. Berkeley economist Gabriel Zucman has published a new book entitled "The Hidden Wealth of Nations: The Scourge of Tax Havens." Fellow economist J. Bradford Delong reviewed his new book.

In the book's key new finding, Zucman estimates that about 8% of the world's financial wealth, or about US$7.6 trillion, is hidden in tax havens such as Switzerland, Bermuda, the Cayman Islands, Singapore, and Luxembourg. For perspective, that's more wealth than that held by the bottom half of the world's 7.4 billion population. "Very big," in other words. A lot of it (but not all of it) comes from Russia, China, the Middle East, India, and other emerging (and submerged) economies. Most of the tax havens are somewhat less haven-ly nowadays -- it's no longer "polite" to show up with suitcases full of cash in Singapore, for example -- but at that hidden wealth is still growing and still sloshing around.

The book contains some interesting ideas for how governments can reduce and eliminate tax fraud and other financial crimes that are currently rampant -- and in many cases preventing poorer countries from developing and prospering. There's one idea just might be popular in this forum: introducing a _single_, global, publicly accessible registry/database detailing the ownership of every financial instrument. I interpret that as something like a "Global Standardized FATCA" regime, albeit one chiefly administered by financial institutions coupled with government and international oversight. The OECD has been pressing for something similar, and many governments have signed bilateral data sharing agreements, so there's some movement in this direction.

My assumption is that the "public" part of the database would not include valuations, but that institutions obviously would continue to know what the balances are (as they do today), and governments presumably would have private access to the same information (as they do today, typically). But I wouldn't have to fill out a form (much less two forms) for each and every financial holding for each and every country. Interesting idea! That'd make life for U.S. citizens overseas (among others) much easier if fully adopted, and it'd also be something most banks could support since they fear patchwork/piecemeal regulatory approaches, with good reason.

Zucman also advocates shifting the corporate tax base from in-country "profits," which can be easily manipulated, to in-country sales made and wages paid. It's a lot tougher to move employees and especially customers across borders, so it's at least harder to evade and avoid corporate taxes based on sales and wage figures. In principle such a shift sounds like a good idea, but I'd have to think it through a bit more.

Anyway, from time to time I like to see what the "thinkers" are coming up with, what ideas they have about possible future tax and financial regulatory policies. This book includes some new and newly modified ideas, and it also appears to be an excellent effort to estimate the size of global, hidden, tax evading wealth.

No, I don't know and have never met either economist.


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