Offshore banking - tax havens for the super rich

SBP ensures strict monitoring of any funds coming in or going out of the system.

Zeeshan Shah August 05, 2012

KARACHI: Approximately $21 trillion of unreported private financial wealth owned by the world’s super rich is stashed in tax havens through offshore banking. This sum is equivalent to the total economy of the United States and Japan combined. The three private banks handling the most assets offshore on behalf of the global super rich are UBS, Credit Suisse and Goldman Sachs. The top ten banks alone commanded over half of the total assets owned worldwide.

Analysis shows that in 2010, the top 50 private banks alone managed more than $12.1 trillion in cross-border invested assets for private clients, including their Trusts and Foundations. This is up from $5.4 trillion in 2005, representing an average annual growth rate of more than 16%. The number of global super rich has amassed a $21 trillion offshore fortune is fewer than 10 million people.

Basically, less than 100,000 people worldwide own $9.8 trillion of the total wealth held in offshore accounts. This is financial wealthy alone, non inclusive of real estate and other off shore wealth structures.

If unreported $21-32 trillion is taxed conservatively, the income tax revenue generated would be between $190 and 280 billion, roughly twice the amount that the Organisation for Economic Co-operation and Development (OECD) countries spent on their all development assistance around the world. This hidden offshore sector is large enough to make a significant difference to the economy. Secondly, the lost tax revenue is huge enough to make a huge difference in developing countries that are struggling through the economic crisis, revealing that most of the debtor countries are in fact, wealthy. But the wealth now offshore, is in the hands of the private banks.

For Pakistan, the State Bank of Pakistan has ensured strict compliance and monitoring of any funds going in or out of the system, creating stringer possibilities of regulation and accountability to safeguard flight of capital and offshore banking. So far, there is not enough data to implicate any individual or business involved but in due course, more surprises are expected as global research findings, pose significant value to the overall importance of money laundering prevention and tax evasion. This is more of a threat for low-middle income countries as weak anti-money laundering legislation and unstable economic indicators are easy targets for such activities and governments have to oversee a more thorough communication within the banking sector, as such activities are often connected with drug money and terrorist financing worldwide.


Published in The Express Tribune, August 6th, 2012.