The Paradise Papers : Show Me the Money!

One day, we may see the first trillionaire, and economists have previously estimated that in 2017, total offshore funding was between $ 30tn and $ 50tn, probably more than the annual GDP of China and the United States.

Conservative estimates of offshore funds are valued at $ 11.5 trillion, which is more than half of China’s national income. Tax Research and the Tax Justice Network published a report entitled “The Price of Offshore” in 2005. Based on data from Boston Consulting Group, McKinsey’s, Merrill Lynch / Cap Gemini and the Bank for International Settlements, the document estimates that World’s High Net Worth Individuals (HNWI) hold offshore assets worth nearly $ 11.5 trillion. ”

Where the Wealth and Riches Go

Most of the discovered HNWIs register foreign bank accounts in their own name. The real rich will not only do this, but also create nominated bank accounts or nominated companies that are completely anonymous or most of their offshore assets and money, but make these funds or assets visible only their lawyers and available to their families in the future.

The total foreign assets of the anonymous bank and asset holding companies are likely to be almost anywhere between $ 30 trillion and $ 50 trillion, which is estimated to be more than the total annual exports of China and the United States combined.

The relatively rich deposit money into foreign bank accounts in their own name. The real rich – the top 1% – do not identify their money by placing it in the equivalent of numbered bank accounts or in the names of foreign residents (eg John Smith’s account No. 23 in Luxembourg) in order to avoid current or future taxes and deaths.

If we were to calculate the total offshore funds of approximately $ 40 trillion plus or minus $10 trillion is based on the gross level of the “outflow” of the ongoing annual movement of offshore liquid assets at higher available rates. Therefore, this figure does not include real estate held in foreign bank accounts and other business assets, which are much larger and can now be valued more accurately.

The importance of the Paradise Papers

The Paradise Papers show that the wealthy rich have been doing this on an unimaginable scale and over a very long time. It’s estimated that the total foreign assets in the majority of the British Isles corresponds to only about twenty percent to 35% of world GDP. But if Oxfam’s estimate that the richest owns 1% owns the remaining 99% is correct, the foreign assets of the rich may be much larger than I previously thought. The more data now available, the better your estimate, even one with many error limitations.

World’s Worth and Value of Overseas Foreign Assets

The global value in 2017 was valued as Global Real Estate at $ 228 trillion (equivalent to 2.68 times annual revenue); Stocks, shares and liabilities – $ 170 trillion, total gold mined – $ 6.5 trillion (Source: Savills World Research: How much is the world?). McGuire estimates total real and financial assets – about $ 400 trillion in world GDP in 2016 (from the CIA World Factbook) – about $ 120 trillion in 2016 and about $ 124 trillion in 2017.

Information in Paradise Papers and other fund flow data obtained elsewhere seem to appear to suggest that total foreign assets held abroad may range between 80% and 140% of world GDP. But there is also the “mirror and money” problem, where money seems to be in one place but owned by a trust in another, which is again controlled by an anonymous company in third place. That is why some very rich people say that money “is not theirs”.

The very wealthy often transfer this money into a family trust, where it is not taxed and where its ownership is not taken over directly by the person. It is difficult to obtain these potential double and triple numbers. Unless there is double or triple counting, average total offshore assets will grow to the equivalent of 60% to 90% of the world’s total real and financial assets, and that would be too much to look at. serious possibility.

If the richest peak has 1% 50% of the world’s wealth, it’s $ 200 trillion, and if about two-thirds of that amount is saved abroad, it’s $ 133 trillion in foreign funding (110% of world GDP) and less than a third of their name in their home banks or other Western countries, then such a gross number would be more reasonable. And if the rich invest 75% of their money in foreign funds, it will be $ 175 trillion, or about 146% of world GDP.

Given all the evidence and the likely scale of the calculations, it seems likely that the total amount of offshore funds is in the range of 80% to 140% of world GDP, or anywhere between $ 100 to 168 trillion. It’s estimated that about 40% of these funds will be financial assets and about 60% are related to property ownership. Financial assets force you to leave, and real estate assets give a strong legal claim to the largest fixed assets in the world.

Analyzing 13.4 million documents will take a long time, because you see that the money on the coast is huge, but not who has it, and the annual flow is generally just as attractive. Here is an interesting but apparently incomplete map of offshore fund managers ‘customers’ locations.

Almost all high value assets are due to the high net worth value of individuals and not companies, although other companies have multiple assets that are likely to be listed in the table above. US companies declare overseas total assets of about $ 2.6 billion, with Apple having the largest financial assets of about a quarter of a billion and Microsoft an eighth of a billion dollars. This is a slight change in the scale of the above chart, although these amounts are higher than the declared personal wealth of the richest man in the world (Bill Gates, about $ 86 billion).

The Paradise Papers covers the period from 1950 to 2016, the last two thirds of the century. Paradise Papers may not be a complete description or detail of a general offshore fund. Maybe there are many more.

If the world’s $ 400 trillion in wealth is evenly distributed, the average wealth each person owns is the amount shared by 7.5 billion people in the world, or about $ 53,000 per person.

If Oxfam estimates that half of the wealth held by 1% of the world’s population is right, then 99% of the world has an average wealth of about $ 26,500 and the richest 1% has an average wealth of 100 times as much, or about $ 2.65 million each . Of course, these average numbers are not evenly distributed. Higher average assets per capita are in developed countries, and the individuals with the highest net worth are some of the oligarchs who are at the top of offshore funds. These oligarchs will become billionaires – at the moment it cannot be counted if they want to.

One percent of the world’s 7.5 billion people are 75 million. Based on a regular random distribution, I would expect that about 25 million of these very rich people will have a very high value of wealth abroad that most of them would not identify. The second third may have moved their wealth abroad, while the lowest third could keep most of their assets “at home” in their domestic economy.

There are 120,000 people in the United Kingdom who have foreign bank accounts in their name. The United Kingdom has a population of 64 million, less than one percent of the world’s population. As the British experience expands into the world, almost 14 million accounts can be expected. But most of the world is less financially sophisticated than British millionaires, and I estimate that there are probably around 7 million such accounts. More importantly, there are probably around 25 million high-value individuals with huge wealth and complex offshore assets. These calculations confirm my view that the 120,000 customers identified by Paradise Papers are simply the tip of the huge financial iceberg.

These calculations are rough and “Fermi’s estimates”, but in essence they can’t be too wrong. Of course, there are extremely large family businesses that are often not seen in all wealth estimates, so these calculations may be a little underestimated, but they are inevitable in the right order.

The pattern of income distribution among the rich.

If the BBC website is correct and I think distribution numbers could be an important aspect of Paradise Papers released so far, then 80% of offshore wealth belongs to the top – 0.1% in households and 50% in top0. 01% of households, then further calculations of the total wealth of these two groups seem possible.

Let’s say that on average, three people per household have 2.5 billion households in the world, and 0.1 percent of them are one in a thousand, so 25 million households own 80% of the value between $ 100 and $ 168, between $ 80 trillion, and $ 134 trillion, about $ 3.2 million per household. If half of the offshore wealth belongs to 0.01% of households, then 2.5 million households have between $ 50 trillion. and $ 67 trillion, or between $ 20 million and $ 27 million per household.

All this seems reliable and possible. From the distribution of offshore wealth, we can clearly see that the distribution is becoming more and more unequal as the richest are approached, at the top of offshore funds.

Bernie Sanders seemed very concerned about the revelations at Paradise Papers. Total offshore funds are likely to be larger than the money available to almost any government, as Bernie Sanders warned against the emergence of an “international oligarchy” after the fall of Paradise Papers.

His main remark was the warning that the world was moving towards an “international oligarchy,” “in which a few billionaires own and control a significant part of the world economy.” That the world may be a bit like the United Kingdom, where 84% of Conservative party funding comes from 14 millionaires. And Democratic protest groups are funded to act as safety valves to break the force and reduce the influence of the protesters.

The response in the US, UK and EU has been very interesting. Another problem is with the Trump administration, because “Donald Trump’s trade secretary, Wilbur Ross, deceived Congress after the newspaper revealed details of his interests in doing business in” Russian companies controlled by Vladimir Putin’s inner circle. He admitted. that the newspaper was not distorted. “

But there is a big problem: tax evasion is legal because no one is obliged to organize their activities in a way that maximizes the tax, but always achievable result of someone who for the tenth time rejected the register of prospective offshore trusts Theresa May refused to promise to register offshore trusts. It is very difficult for the Conservative Party to attack the running of the class on the islands of offshore tax havens, which are remnants of the British Empire and where some high-ranking British Conservatives are likely to live for tax purposes. Paradise Papers shows Lord Ashcroft has $ 450 million in foreign assets.

Mel Stride, finance secretary at the UK Treasury, said there were many “legitimate reasons” for using offshore trusts. For example, as Conservative Party funding from tax cuts?

It is likely that the biggest impact of the UK Government’s actions to date, when it has approached 120,000 UK residents with foreign bank accounts and applied for a tax return (10% each), is to make transfers. to the undisputed type.

Pierre Moscovici, the European commissioner responsible for taxes, said he was angry, but was not surprised by the revelation, and called for “swift action”, which the current British government apparently does not intend to take.

Green MEP Eva Joly, Vice-President of the Panama Papers European Parliamentary Inquiry, “called on the United Kingdom to ban access to the European single market in the Brexit negotiations until it is confronted with a tax haven.” This means that if Britain leaves the EU, British exports to the EU – 55% of current exports by value – could receive a 35% import tax if the UK does not fall into tax havens.

Whether it is a choice between protecting British industry or protecting the wealth of its adherents, there is no doubt as to where the priorities of today’s Conservative Party lie. How did this crisis happen?

The political forces of the Washington Consensus / Neoliberalism / Savings Macroeconomics have reached this position. Right-wing Western governments are caught in the wrong so-called “free markets” of the financial forces they prefer and create.

In the United States and the United Kingdom, governments have acted almost continuously in the interests of the wealthy and financial sectors since 1980, and have not acted in the interests of the masses of their people and the manufacturing sector. The benefits of economic growth in these countries go mainly to the already rich, who are more riotous of wealth abroad, rather than imposing it on the poor within these economies. This is the main reason for the relative decline of the Western economy.

It is a victory that politics has brought itself. Economic knowledge and the governments that support it deserve to be judged on the basis of the results they produce. This extreme result – created by the Western system of Washington Consensus Macroeconomics oligarchs, whose financial strength is greater than the power of governments – is a natural result of the political will of the rich in Western governments. Macroeconomics in the Tokyo Consensus Zone and in China – the Shimomuran macroeconomics – have performed better in a rapid rise in living standards, as practiced in the three countries in the zone and in China, which continues to pursue a Shimomuran macroeconomic policy. There are absolutely no financial “chips” and possible solutions

Experts say believe that the policy of citizens’ microchipping , which will give them easy and secure access to bank accounts and credit cards and partially stop illegal funds outside banks, is in the footsteps of billionaires who are losing access to their funds abroad through this process. The real solution for offshore funds is not Obama’s proposals, which are as beneficial as ever, but the creation of identity cards linked to local and foreign funds and used by all the bags under the bag. international law.

The role of computers in creating this crisis

The rich of the world clearly think that their tax evasion will succeed forever. It is the electronization of banking systems and the rapid transfer of large amounts of information that enable the detection of Paradise Papers. Those who thought they could win forever because of the anonymity given to computer use could now be defeated by the same computer use. But offshore funds generally appear to be much larger than those available to governments. Very small is impossible for the really rich and may not be recognizable due to the likely size of offshore funds. The big direct impact of Paradise Papers has been the increase in fees for international lawyers who rush to consult with High Net Worth Individuals (HNWI) on what to do.

Possible Response Reforms from the UK Government

But the rich must keep in mind that governments can demonetise external funds if they are forced to do so.. These funds are sometimes used to bet on the future value of the currency. In South Korea, such an act is punishable by death if it is proven that a South Korean citizen tried to destabilize its currency.

Governments have the power to create and destroy credit, as some high-value people in India have recently discovered when high-value rupee banknotes are demonetised.

Legal service provider

Paradise Papers shows that Appleby Services is probably the most active legal advisor to HNWI with a large amount of offshore funding. Paradise Papers says part of the company (the “trust” part that manages the trusts) has changed its name since taking over and is now re-listed as Esther. More than 6.8 million of Paradise Papers’ 13.4 million documents are related to Appleby transactions.

What do Paradise Papers reveal about the richest people in the world?

They show that the richest people in the world think that their money is safe and that the methods used for tax savings abroad are hidden, and that judgment is a disgrace and perhaps an incorrect and probably costly mistake, even for the United Kingdom. the government may try to postpone any real action that will allow the safe transfer of these funds to deeper and more secretive Internet locations.

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