A Piketty Protégé’s Theory on Tax Havens
Mr. Zucman estimates — conservatively, in his view — that $7.6 trillion — 8 percent of the world’s personal financial wealth — is stashed in tax havens. If all of this illegally hidden money were properly recorded and taxed, global tax revenues would grow by more than $200 billion a year, he believes.
.. According to Mr. Zucman’s calculations, 20 percent of all corporate profits in the United States are shifted offshore, and tax avoidance deprives the government of a third of corporate tax revenues. Corporate tax avoidance has become so widespread that from the late 1980s until now, the effective corporate tax rate in the United States has dropped from 30 percent to 15 percent, Mr. Zucman found, even though the tax rate hasn’t changed.
.. The idea of the rich world’s indebtedness is “an illusion caused by tax havens,” Mr. Zucman wrote in a paper published last year. In fact, if offshore assets were properly measured, Europe would be a net creditor, and American indebtedness would fall from 18 percent of gross domestic product to 9 percent.
.. He finds it “no coincidence” that the era of widespread tax evasion began in the Reagan era, with the rise of the idea that government is a beast that must be starved.
.. only an international approach has a chance of stopping tax evasion, he says. Its most important feature would be a global financial registry, which would track wealth ownership in the same way that Americans routinely record real estate holdings now.