SUMMARY - The Hidden Wealth of Nations_ The Scourge of Tax Havens - Gabriel Zucman & Teresa Lavender Fagan (Translator) & Thomas Piketty (Foreword)

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Here is a summary of the key points from the passage:

  • Tax havens have grown significantly in scale over the past century, undermining tax systems and facilitating tax evasion. They may be responsible for hiding 8% or more of global wealth offshore.

  • Zucman uses statistical anomalies in global financial data to estimate the minimum scale of offshore wealth, which could be substantially higher especially in developing countries.

  • Tax havens threaten democracy by allowing some to opt out of paying taxes, undermining the social contract and contributing to inequality.

  • While some actions have been taken, more coordinated global action is still needed as tax havens continue growing in importance.

  • Zucman proposes creating a worldwide public registry of financial ownership to identify true ownership and combat tax evasion on a global scale. This could significantly curb the power of tax havens and boost tax revenues.

  • The author argues for a common minimum global wealth tax supplemented by domestic progressive taxes. Historic registration systems did not account for modern financial assets, making income hard to properly tax without asset registration.

  • The proposal includes a worldwide registry, automatic information exchange, and sanctions proportionate to costs imposed by tax havens on other countries. Corporate tax reform is also needed based on consolidated global profits.

  • Strong coordinated pressure is required to shift incentives for tax havens to cooperate, as politely asking has not worked. Data and sanctions are needed to ensure progress in fighting tax evasion.

    Here is a summary of the key points about offshore wealth and tax havens:

  • An estimated $7.6 trillion is held offshore, with 80% ($6.1 trillion) undeclared for tax purposes. This costs governments $200 billion annually in lost tax revenues.

  • Major losses are from income taxes ($125B), inheritance taxes ($55B), and wealth taxes ($10B). Developing countries lose a larger share (20-30%) of potential tax revenues to havens.

  • Offshore wealth has grown 25% since 2008 due to market gains and inflows from developing nations. Tax evasion methods are also more sophisticated using shell companies and trusts.

  • Early international agreements lacked enforcement mechanisms and only provided information upon request, not automatically. A comprehensive, coordinated global approach is needed.

  • The US FATCA law set a stronger precedent by mandating automatic reporting from foreign banks to the IRS. This helped shift norms towards global automatic information exchange.

  • Imposing targeted trade sanctions on uncooperative tax havens, proportionate to costs imposed, could be an effective enforcement method. Coalitions of major countries applying pressure increase negotiating power.

  • A public global register of financial asset ownership could help address anonymity that enables crimes like money laundering, if implemented with beneficial owner identification.

    Here is a summary of the key points:

  • International rules now require tracing ownership of funds and assets like shares through intermediaries to address transparency issues.

  • While some privacy concerns exist, most countries already have public land and property records, so a global financial register of asset ownership would not be unprecedented. Access could initially be limited to authorities.

  • The register aims to eventually include complex derivatives which currently lack comprehensive registration. This is important for regulatory purposes and preventing tax evasion.

  • A financial register could support proposals for a global wealth tax by providing worldwide data on ownership of taxable assets, helping ensure they are appropriately taxed. Overall it aims to increase transparency in offshore financial holdings.

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