The rich getting richer: Why we need to eliminate tax havens

Quoting Credit Suisse, it reiterates that “the richest 1% have now accumulated more wealth than the rest of the world put together”.

Titled ‘An Economy for the 1%’ Oxfam’s briefing paper reveals that “In 2015, just 62 individuals had the same wealth as 3.6 billion people --- the bottom half of humanity.

This figure is down from 388 individuals as recently as 2010.

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It elaborates that “ the wealth of the richest 62 people has risen by 44% in the five years since 2010 --- that is an increase of more than half a trillion dollars ( $ 542bn) to $1.76 trillion while the wealth of the bottom half fell by just over a trillion dollars in the same period --- a drop of 41%”.

These figures merely underscore an obvious truth.

As Oxfam puts it, “There is no getting away from the fact that the big winners in our global economy are those at the top. Our economic system is heavily skewed in their favour and arguably increasingly so. Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate”.

This is happening for a variety of reasons.

In proportional terms, the larger share of the income of a nation has been going to the owners of capital rather than to workers.

In fact, almost everywhere the workers’ share has been decreasing significantly. While “many workers have seen their wages stagnate, there has been a huge increase in salaries for those at the top”.

Economic policy in recent decades has also emphasized liberalization, deregulation and privatization which have brought much greater benefits to the rich and powerful.

This emphasis is part and parcel of a general enchantment with the “market” which is largely ideological.

Within these market dominated economies, it is the financial sector that has “grown most rapidly in recent decades, and now accounts for one in five billionaires.

In this sector, the gap between salaries and rewards and actual value added to the economy is larger than in any other.

A recent study by the OECD showed that countries with over-sized financial sectors suffer from greater economic instability and higher inequality.

Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hit the poorest people the most”.

This is why any attempt to reduce gross economic inequalities must address issues in the financial sector.

Of these issues, Oxfam in its briefing paper has focused upon “the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades”.

Tax havens and tax avoidance lead to a situation where governments are forced to cut back on critical public services.

This is happening both in the Global North and the Global South.

In the Global North, welfare programs are downsized while in the Global South efforts aimed at overcoming dire poverty, building primary schools and expanding basic health care are severely hampered by shrinking government budgets --- a victim of the rich escaping the tax net.

Oxfam provides a concrete example of this.

Almost “a third (30%) of rich Africans’ wealth--- a total of US 500bn --- is held offshore in tax havens. It is estimated that this costs African countries 14bn a year in lost tax revenues.

This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school”.

According to one source “7.6 trillion of individual wealth --- more than the combined gross domestic product (GDP) of the UK and Germany --- is currently held offshore”.

Tax havens, Oxfam argues, should be brought to an end. Only if this happens will it be possible to overcome inequalities.

The governments of the world should work together towards this goal. It will require making some significant changes to domestic tax law and enacting new rules for global finance.

It is the sort of change that will take time.

But if there is the will it can be done.

Through its clarion call to bring tax havens to an end, Oxfam has thrown a challenge to the entire human family.

Persuade governments to eliminate an institution which is a bane upon equality and justice.

If we don’t, our grandchildren will inherit a world where there is greater divisiveness and destruction than what we are now witnessing.

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Dr. Chandra Muzaffar is the President of the International Movement for a Just World (JUST).