Estimating the Price of Offshore
Measuring the size of the offshore economy is hard, as a result of its fragmented nature, difficulties involved in defining it, and a pervasive culture of secrecy. Official international efforts to measure the phenomenon have been woefully inadequate.
It is important to note that the different estimates provided below mostly do not take into account the impact on domestic tax laws of tax competition, whose effects are probably impossible to measure, but which are likely to have impacts at least as large as the impacts and losses described below.
TJN is concerned about harmful abusive and financial flows and tax losses, whether illicit or licit, or in the large grey area in between.
The first part of this page outlines global and regional estimates; the second section identifies some data for individual countries.
- *** July 2012 The Price of Offshore Revisited. TJN's in-depth and unprecedented study into the size of the offshore system. Main report here. Also seeAppendix 1: The pre-history of offshore estimates; Appendix 2: Explaining Capital Flight ; Appendix 3: Part 1 (large file); Part 2 (large file) ***
- May 22, 2013 - Oxfam: At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide. Original here.
- Gabriel Zucman: the Missing Wealth of Nations Estimates that 8% of the global financial wealth of households is in tax havens, 75% of which is unrecorded. (This 'unrecorded' relates to information available to cross-border statistical analysis, rather than to tax authorities.)
- July 2012 - Inequality: You don't know the half of it: TJN's assessment of why inequality is much worse than we think, because of offshore secrecy
- Nov 2011 - A briefing paper on the $3.1 trillion annual costs of tax evasion worldwide. With country by country breakdown. Original here.
- March 2010. New IMF research
showing huge discrepancies between portfolio assets and liabilities in
selected offshore centres. E.g. Luxembourg reports portfolio assets of
US$1.5 trillion at end-2008 versus portfolio investment liabilities at
US$2.5 trillion. The Cayman Islands reports a $750 billion: $2.2
trillion assets-liability split. Click here for more.
- February 2010 - GFI estimate that developing countries lose $98 - $106 billion each year due solely to re-invoicing.
- May 29, 2013 - Illicit Financial Flows from Africa, 1980-2009. Original here.
- May 24, 2013 - Actionaid: Almost half of all investment into developing countries goes through tax havens. Original here.
- Oct 2012 - Over $800 billion drained from Sub Saharan Africa. Original here.
- March 2009 - False Profits: robbing the poor to keep the rich tax-free, Christian Aid. Between 2005 and 2007, total capital flow
from bilateral trade mispricing into the EU and the US alone from
non-EU countries is more than US$1.1tn (£581.4bn, €850.1bn.)
- May 2008 - Death and Taxes: the true toll of tax dodging,
Christian Aid. Estimates corporate tax losses to the developing world
at US$160bn a year (£80bn), more than one-and-a-half times the combined
aid budgets of the whole rich world.
- Oct 2012 - Over $450 billion drained from North Africa. Original here.
Country by country estimatesSee "Magnitudes"
Archive: old reports
- July 2009 the Oxford Centre for Business Taxation
challenged research by TJN and allies: that report, and TJN's response, is here.
- January 2009 - Global Financial Integrity
(GFI) in Washington estimated that in 2006, developing countries lost an estimated $858.6
billion – 1.06 trillion in illicit financial outflows."
- April 2008 - James Boyce and Léonce Ndikumana of the University of Massachusets, Amherst, published new research estimated capital flight from 40 sub-Saharan African countries from 1970-2004 stood at $607 billion in 2004 dollars (including interest earnings), compared to a total $227 billion external debt owed by those countries in 2004. See the April 2008 edition of Tax Justice Focus (p5) for more details.
- March 2005 - Tax Justice Network: The Price of Offshore (now overtaken by The Price of Offshore Revisited.) This 2005 study estimated conservatively that the
world’s High Net Worth Individuals (HNWIs) held around $11.5 trillion of
assets offshore, and a consequent tax loss of $255 billion
- Sept 2005 - Research by Alex Cobham at the Oxford Council on Good Governance estimated conservatively that poorer countries forego $385 billion annually, due to tax avoidance and tax evasion.
- 2004 - Capitalism’s Achilles Heel. Author Raymond Baker estimates cross-border flows of global dirty money at $1.1-1.6 trillion annually, about half from developing and transitional economies, and two thirds of which is commercial dirty money. His data broke down like this:
| Cross-border flows of global dirty money, US$ billion, annual
| Commercial, of which:
|Abusive transfer pricing||300||500|
| Fake transactions
- 2002 - Boyce and Ndikumana investigated capital flight from 30 sub-Saharan African countries, and estimated that to a large extent capital flight is debt-fueled: for every dollar of external borrowing in the region, roughly 80 cents flowed back as capital flight in the same year.
- OECD - Media reports sometimes quote OECD data estimating the total size of
offshore wealth held by HNWIs at a much lower $5-7 trillion. The reason
for the lower figures seems to be that the reports are quoting very old OECD data; the OECD has cited
this number figures since 1998. The OECD uses a narrow
definition of offshore.
"Developing countries are estimated to lose to tax havens almost three times what they get from developed countries in aid." - Angel Gurría, OECD Secretary-General, November 2008