Leaked tax-haven data shows that the super rich are way, way richer than suspected

When Thomas Piketty and his team undertook their landmark study of wealth inequality in the world, they had to rely on the self-reported income of the super rich to see just how income was distributed — by definition, they couldn't directly measure the unreported income hidden in tax havens (though they did estimate it, with what was eventually shown to be pretty good precision).

Large-scale tax-haven breaches — Mossack-Foseca in Panama, the HSBC files from Switzerland — have provided researchers with a source of direct data on the scale of tax-evasion, and thus the true estimated wealth of the super-rich.

A team from Norway found that the richest people in the country were 30% richer than had been previously estimated — and since Norway is one of the least unequal countries in the region, the researchers believe the numbers would be even higher in other countries like the UK.

The researchers say that the best way to fight tax-evasion is to strengthen the penalties against bankers who are complicit in frauds against the tax-man. They point out that the banks that pleaded guilty to criminal tax evasion in the USA paid fines, but got to keep their banking licenses, and made much more in profits than they'd paid in fines. That amounts to a tax on tax-evasion, not a ban.

Since Scandinavians generally pay their taxes and hide little wealth in total, our results are likely to be even stronger in Great Britain and elsewhere. A more accurate measurement of tax evasion would likely increase inequality levels even more than in Scandinavia.

These results underscore a basic truth: in a world where wealth is globalised and where a big industry has specialised in helping the ultra-rich avoid and sometimes evade their taxes, our ability to track great fortunes – and to tax them appropriately – faces considerable challenges.

But does this mean nothing can be done? Not at all.

It is possible to collect much better information on wealth and its distribution. Progress has already started in this area, as a number of tax havens have agreed to automatically exchange bank information with foreign countries' tax authorities – a major evolution since the time of the HSBC leak.

Tax evaders exposed: why the super-rich are even richer than we thought
[Annette Alstadsæter, Niels Johannesen and Gabriel Zucman/The Guardian]

(via /r/latestagecapitalism)