Magnitudes: dirty money, lost taxes and offshore
July 22, 2012 - This is a historical page. It has been superseded by a major new web page entitled "Estimating the Price of Offshore". We will combine these two pages shortly.
For global and regional estimates, see Estimating the Price of Offshore. Below is some data for individual countries, which may be out of date.
INDIVIDUAL COUNTRY DATA
A May 2008 study by Léo-Paul Lauzon of the Université du Québec à Montréal (UQAM) estimated, conservatively, that Canadian banks avoided $16 billion in taxes between 1993 and 2007. The research can be found here. He estimated that the five biggest Canadian banks had at least 89 official subsidiaries in tax havens - though the real number is undoubtedly much higher. Data for wider Canadian tax losses are not yet available.
According a report by France's Syndicat Unifié des Impôts (the Union of Tax Civil Servants,) tax evasion (which is, by definition, illegal), ran at approximately 45 billion Euros in 2006. It estimated average tax evasion in Europe at 2-2.5% of European GDP. Another official document contains some breakdowns of estimates, but much of the data is rather old.
GermanyJune 6, 2013 - How big is Germany's corporate tax gap? Original here.
Media reports quote a figure of tax losses to Germany of the order of 30 billion Euros per year, just from (illegal) tax evasion. We do not currently have data for tax avoidance, though since Germany has a larger population (and economy) it seems likely that the figure will be higher than Britain's (see above).
According to officials from the Deutsche Steuer-Gewerkschaft (the tax union), German individuals hold an estimated €300 billion in foreign tax havens, and tax evasion (of all kinds) is approximately €50 billion annually. (Source: TJN-Germany's Germany representative Nicola Liebert's book "Wie sich der Staat selbst das Wasser abgräbt – und was dagegen zu tun wäre. Die deutsche Steuerpolitik auf dem Prüfstand.") Schriftenreihe kritische Wissenschaften, Berlin 2007.) More details (in German) can be found here. A more recent study, cited in Der Spiegel in May 2008, reports higher figures: "close to €500 billion ($775 billion) in untaxed German assets are in foreign tax shelters, with fully one-third of that amount on deposit in accounts in banks in Swiss cities like Geneva, Zürich and Lugano."
A leaked internal memo from the finance ministry estimates how much federal corporate taxes German companies don't pay in Germany: the discrepancy between the amount of federal taxes theoretically due and the taxes actually paid was €17bn in 2005. [The memo is quoted by the tax expert Lorenz in the book Unternehmenssteuerreform 2008: Kosten und Nutzen der Reformvorschläge, Jarrass Jarrass, Lorenz; Obermair, Gustav (2006).] This figure is calculated by taking the difference between the earnings of German-incorporated tax companies, deduct losses brought forward and dividends from foreign equity holdings, and comparing this to the earnings reported to the German tax authorities. However, this is only part of the picture: most companies in Germany are neither limited companies nor joint-stock companies and therefore don't pay corporate taxes, but income taxes - and these are not included in the above figure. These company taxes cannot be separated out from household income taxes. Data about the taxation of companies in Germany therefore should be taken with a pinch of salt, and it's German data is not easily comparable with that of other countries.
Several Indian media articles have reported that Indian nationals hold 1.456 trillion US dollars in Swiss banks. TJN believes this is greatly exaggerated, and according to the Indian government, it originates with a chain letter. (It is possible that this number may result from a 2008 analysis by the Berne Declaration estimating that Switzerland hosts 362-1,467 billion Swiss Francs' worth of tax-evading money sourced from all developing countries.) Global Financial Integrity estimated in 2010 that from 2000 to 2008 India had lost more than US$125 billion in cumulative illicit capital flight. In March 2010 GFI estimated that India had lost a total of US $213 billion in illicit financial flows, with a present value of at least US $462 billion, conservatively estimated. The Indian government issued a White Paper on this in 2012, which is reported here (original here, also in Hindi.)
In Nigeria, the National Economic and Financial Crimes Commission (EFCC) estimated in 2005 that around $400 billion had been stolen or misused by past rulers – a figure that is similar to the entire amount of foreign aid for the entire continent; much of that money has moved offshore. This is probably an exaggeration: the IMF estimated in 2003 that Nigeria's cumulative oil revenues from 1965-2000 (after deducting payments to the oil companies) was "only" $350 billion in 1995 prices.
TaxAnalysts: Jersey, Guernsey, Isle of Man, Switzerland, Caribbean
This high-level tax research organisation is running a project called Offshore Explorations. It is investigating assets ripe for tax evasion (illegal,) so it is not directly comparable with TJN's own figures, which include (legal and questionably legal) tax avoidance money too.
TaxAnalysts published reports
in October 2007 showing the impact of three tax havens, linked closely
to the City of London: Jersey, Guernsey and the Isle of Man. One report
contained this paragraph:
At the end of 2006, there were $491.6 billion of assets in the Jersey financial sector beneficially owned by non-Jersey individuals who were likely to be illegally avoiding tax on those assets in their home jurisdictions. We estimated the comparable figure for Guernsey to be $293.1 billion.
In November 2007 another report, on the Isle of Man, put the comparable figure at $150.5bn. These three jurisdictions therefore held $935.2bn of such assets. Earning 7%, that much money would generate annual income of $65.5bn. Taxing that at a modest 30% rate would yield $19.6bn. That is more than a third of the sum that the World Bank estimated in 2002 would be needed to tackle the Millennium Development Goals to "reverse the grinding poverty, hunger and disease affecting billions of people." These are just three tax havens. The Tax Justice Network has identified at least 80 of them.
In December 2007 TaxAnalysts added Switzerland to their analysis, concluding that at the end of 2006, there were $607.4 billion of assets in Switzerland's financial sector beneficially owned by non-Swiss individuals who could easily be illegally avoiding tax on those assets in their home jurisdictions; to this should be added a further $356.1 billion in fiduciary deposits.
Then, in January 2008, they concluded a separate analysis of Hedge Funds in the Caribbean,
which estimated that $262.8 billion has been invested by individuals in
hedge funds domiciled in the Cayman Islands, the British Virgin
Islands, the Bahamas, and Bermuda, with good reason to believe that much
of this involves tax evasion.
In addition to the TaxAnalysts data linked to above, the Berne Declaration has produced its own analysis here. Key paragraphs:
"We estimated foreign private wealth, managed in Switzerland, to amount to between 2500 and 4000 billion Swiss francs. A few weeks after we had published that figures, the Swiss Bankers Association came forward with a figure (without naming sources) of 2150 billion Swiss francs. . . . using a range of estimates that between 30 and 90 percent of this is undeclared, (this) results in a plausible range of 645 to 3600 billion francs for the amount of tax evaded black money placed in Switzerland.
In February 2010 the Geneva-based research group Helvea produced estimates of approximately €500 billion in "black money" from Europe alone. Read more here.
In February 2009 TJN's Richard Murphy produced research for the BBC's Panorama programme estimating conservatively that the UK loses about £18.5 per year to tax havens, including avoidance and evasion. This, if fully tackled, would be enough to take 4.5p off the basic rate of UK income tax.
In February 2008 Britain's Trades Union Congress published a report prepared by TJN's Richard Murphy estimating that £25 billion annually is lost to the UK from tax avoidance. This is made up of £13 billion p.a. from tax avoidance by individuals and £12 billion p.a. from the 700 largest corporations. In March 2008 HMRC (the UK's Revenue and Customs department) published a report estimating of the UK tax gap - the result of both avoidance and evasion - at between £11bn and £41bn, compared with total 2003-04 revenues from direct tax and national insurance of £246bn. For a summary of the findings by Tax Research UK, click here. For the full HMRC report, click here.
< Update: May 2011: new study estimates U.S. tax evasion at US$ 500bn >
The U.S. IRS estimated in 2001 that the total tax gap stands at $345 billion, which Senator Carl Levin said in 2007 represented unpaid taxes each year owed by individuals, corporations and other organisations who "offload their tax burden onto the backs of honest taxpayers." The IRS has not produced estimates of the international tax gap ("all revenue losses resulting from noncompliance with the U.S. tax laws due to international transactions") but Levin cited a figure of around $100 billion." However, a January 2009 report by the US Treasury said that because the IRS did not measure the international tax gap, it was unlikely that the international tax gap is comprehensively included in the IRS' $345bn figure. Other specific estimates exist:
- July 2009. US Congressional Research Service provides new estimates here
- Estimates from Professor Reuven Avi-Yonah and tax expert Joe Guttentag that offshore tax haven abuses by individuals alone cost the U.S. Treasury $40-$70 billion a year in unpaid taxes.
- Professors Simon J. Pak and John Zdanowicz found that transfer pricing abuses by corporations cost the U.S. Treasury about $53 billion per year in lost tax revenue. See the executive summary of their original short research report, studying 2001 data, here.
- The combined totals of these two has been quoted by the US Treasury in 2009 as providing a range of $40-123 billion annually, though the $40bn figure assumes zero transfer pricing loss.
- A 2004 study by the journal Tax Notes which found that American companies shifted $149 billion of profits to 18 tax haven countries in 2002, up 68 percent from 1999.
- An estimate by Professor Kimberly Clausing of Wellesley College in 2009 that the U.S. Treasury lost over $60 billion in tax revenues in 2004 from profit-shifting by corporations to low-tax countries; a preliminary update in 2011 suggested that estimate would be raised to $90 billion.
The Bank of Italy estimates that Italians hold some €500bn in undeclared funds outside the country.
July 2009. US Congressional Research Service provides new estimates here >
July 2009. Oxford report challenges TJN data: TJN replies here >
March 2009. Christian Aid's False Profits: robbing the poor to keep the rich tax-free estimates conservatively more than US$1.1tn (£581.4bn, €850.1bn) in capital flow from bilateral trade mispricing into the EU and the US alone from non-EU countries from 2005 to 2007 >
March 2009. Oxfam estimates that developing countries miss out on up to $124 billion every year in lost income from offshore assets held in tax havens. >