This kind of financial activity represents an increasingly sizable portion of the entire global financial system. Current estimates are that as much as one-half of all capital finds its ways to these offshore institutions at some point. The Cayman Islands, as an example, serve as a tax haven for the exceedingly wealthy. In total, tax havens around the globe may hold over one-quarter of the world’s wealth within the accounts of only approximately 1% of the world's total population. In addition, some 30% of profits held by US multi-nationals are deposited in offshore accounts. There may be 3 trillion dollars in deposits in these banking institutions with large sums held in securities by so-called “international business companies” (IBCs). The Cayman island-based institutions are believed to hold 1.9 trillion dollars in deposits and are considered to be fifth largest of such centers. The tax advantages provided by such accounts are supported by the fact that some 25% of US corporations pay no federal income taxes.
Furthermore, according to the “World’s Wealth Report,” generated by Merrill Lynch, approximately one-third of the entire wealth held by the super-rich may be held in offshore accounts. A substantial portion of this wealth resides within the accounts of an estimated 90,000 individuals - .001% of the world population.
There are many disturbing consequences of this global-based trend –
- These vast sums of money remove much needed financial resources from national economies and from appropriate taxation in many countries, including the so-called “developed” world
- With a diminished tax base, this puts additional burdens on the middle-class. An example of this is the current pressure in the United States to balance the federal budget by cutting back substantially on the government services provided to the middle-class and to the those in need
- The net result of the removal of a substantial portion of the world’s wealth is to exacerbate the endemic problem of unemployment and the growing unavailability of work paying a living wage. It also takes money away from the essential human institutions that make up the Commons and delays or aborts important societal infrastructure projects and innovations including those related to the global threat inherent in climate change.
In my mind, this problem is a fundamental issue that has serious and unprecedented consequences for the vast majority of people around the globe. It is also representative of a thoroughly corrupt mentality that places the interests of a very few individuals and institutions above the good of humanity. The fact that this reality is widely accepted by political systems on a worldwide basis is sufficient cause for alarm, for it demonstrates the corrupting influence of money and power. It is a sad testimonial to the failure of human institutions - represented by governments - to serve the public good. Without access to a large portion of the world’s real financial assets, billions of the world’s people suffer unnecessarily.