Perhaps the more comprehensive picture is laid out by Henry James of the Tax justice Network who in his study of 139 low middle income countries says that these countries contributed to capital flight of about $7.3 to $9.3 trillion in 2010 which ended up in Tax havens through the top private banks of the first world. These countries were saddled with an external debt of $4.8 trillion. But if one considers the total outflow of foreign exchange which had been invested in first world securities then the picture changes dramatically- these countries become net creditors from debtors to the tune of $10 to $13 trillion dollars as on 2010! [viii]
There are dire implications for even the developed economies of Europe, UK and US as well. In the US, the loss of taxes is estimated to be in the region of $345 billion to $500 billion annually. In Europe it is estimated to be in the region of 1 trillion euro. The UK is losing tax revenues to the tune of 35 to 150 billion pounds yearly.
All these countries are caught up with recession and austerity drives. This means the gutting of social spending on schools, health care, fire services and public libraries. In the UK there was a hike in Tuition fee which sparked student riots in the streets of London. There could be more social unrest as public utility services get degraded on account of an eroding tax base.
Leona Helmsley, a billionaire tax dodger, once said "we don't pay taxes. Only the little people do." And she is right. In the shadowy world of tax havens only the uber-wealthy and multinational businesses benefit. While the MNC's and the rich tycoons reduce their tax bill, the little people are saddled with distributional shifts of tax on their shoulders in the form of consumer taxes (VAT) and social security contribution. This is evident by the fact that a New York janitor earning slightly more than $33,000 has an effective tax rate of 25% while GE, with billions of dollars in revenue pays zero tax. The big losers are the salaried middle class who pay for the games the rich play in tax havens.
People like you and me.
C R Sridhar
[i] Tax Havens- How Globalization Really Works- Ronen Palan, Richard Murphy, Christian Chavagneux page 4-
[ii] The Price of Offshore Revisited (2012)TJN- James.S.Henry- page 5.
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