What are the real assets of a nation?

Where the wealth of the nations is hidden

With this title Gabriel Zucman’s "The Missing Wealth of Nations" was published in German translation. With his extensive research program, which connects him with wealth researcher Thomas Piketty, Zucman estimates the wealth hidden in tax havens around the world and the resulting tax losses from an enormous amount of data. At the same time, he also provides bold solutions.

Solid data & new estimation method

The analysis is based on official, generally accessible statistics from various data sources. The statistics used are generally accessible and the methods used are shown in detail. This also makes Zucman's research easy to understand.

Zucman's calculations are based on a comparison of the balance sheets of the federal states. The securities issued abroad are listed as liabilities in the respective country in which the securities are issued. If the securities are acquired by foreigners via a tax haven, these values ​​do not even appear as assets in the balance sheet of the state of the foreign purchaser. This country does not receive any information due to the banking secrecy in the tax haven. The assets affected by the acquisition are missing, so the country's balance sheet remains incomplete. In addition, securities held in bank custody accounts do not appear on banks' balance sheets. There is also no information about non-financial assets such as works of art or castles.

Zucman's method thus delivers valid results, but leaves time deposits and cash out of the equation. To compensate for this deficiency, Zucman uses data from the Bank for International Settlements and the national banks of the individual countries. In this way he can estimate the private assets in the bank accounts. Zucman - like Piketty - makes the data used and the methods used transparent, but also makes it clear that he is continuing to work on closing existing data gaps.

10% of the financial assets are offshore and 80% are untaxed

Based on the total global financial assets of 73,000 billion euros, Zucman calculates that 8% of private financial assets worldwide, that is 5,800 billion euros, are located in offshore centers. 80% of this remains untaxed. A third of this is in Switzerland, the rest is spread across other tax havens. With the help of the additional estimates, Zucman can calculate offshore assets of approx. 8,000 billion euros or 10-11% of global financial assets.

Tax havens have never been better off than they are today - that is what the facts say. Both in terms of the freedom of property travel and the impunity of tax evaders.

A long-term decline in wealth is not discernible with the financial crisis. In 2013, 1,800 billion euros in foreign assets were deposited in Switzerland. From 2009 to autumn 2013, the foreign assets, i.e. the assets managed by non-residents in Switzerland, rose by 14%. Through the exchange of information between Switzerland and the USA via accounts of US citizens in Switzerland, the flight of assets could be limited slightly. However, this mainly affects "small" investors. At the same time, the ultra-rich were drawn in, which more than compensated for the minor losses suffered by Swiss banks and wealth management companies.

130 billion euros in tax losses

Assuming that 80% of the assets under management offshore (according to official Swiss statistics) are not declared, the estimated tax losses are 130 billion euros annually. The loss of revenue is largely related to income taxes, inheritance taxes and property taxes.

Double damage & insufficient control

In order to protect against supposedly even higher loss of income, the federal states wanted to create incentives to keep capital in the country. For this reason, the individual states engaged in an intense tax-reduction race. However, lowering tax rates did not produce the desired results. Ultimately, states have suffered double damage from both the loss of revenue due to tax evasion and the loss of revenue due to lower tax rates. The damage from this is considerable, but is not taken into account in Zucman's estimates.

Worldwide there is no effective strategy to hold the individual states accountable in the fight against tax havens. Even the automatic exchange of information that will apply in the EU from 2017 will not be able to contain the problem - the one-year extension period only for Austria will be just as meaningless. With the help of certain company structures, trusts and letterbox companies, the true ownership structures will continue to remain in the dark. For a successful fight against tax havens, means of coercion to implement measures and control options would be necessary.

Action plan against tax evasion

A global solution is required to curb tax evasion in tax havens. Zucman proposes a concrete action plan based on three levels. As a central measure, a global financial cadastre is to be created, which records the actual owners of securities such as stocks, bonds, etc. The second level relates to effective pressure exertion on tax havens. Their economic significance consists solely in the lack of transparency offered to asset investors. These countries are highly dependent on trade, so they would be hit hard by tariffs. Corresponding sanctions from economically important international communities such as the USA and the EU would bring effective results.

For the implementation of the financial cadastre, Zucman suggests the IMF as a suitable institution, to which almost all countries in the world belong and which is currently entrusted with capital flows and securities holdings. The IMF is to ensure the merging of the registers or databases of the national central custody accounts, the database of Euroclear Belgium and Clearstream Luxembourg (both are registers of securities issued abroad). This merge must contain information about all securities. A comparison with the balance sheets of corporations is possible to check the data supplied. The provisions of money laundering laws are helpful for determining the owner. Finally, the national tax administrations must have access to the financial cadastre.

Tax optimization of multinational corporations through profit shifting or transfer pricing systems as well as double non-taxation is particularly serious. According to Zucman's estimates, corporate income tax revenue could be increased by 30%, global profits would be taxed and tax revenue could be allocated using a distribution formula according to group sales in the respective countries. Here, too, effective sanctions are a prerequisite. With the introduction of global taxation, capital no longer has the opportunity to evade tax registration.


Gabriel Zucman describes concrete ways of tax evasion by large fortunes and multinational corporations. However, networks and the actual power influence of capital owners and corporations on governments are not mentioned. Zucman's final criticism of the lack of courage and determination of the individual nation-state governments, despite numerous proposals for effective measures to combat tax evasion and tax havens, falls short of this dimension. Nonetheless, his proposals for globally common regulatory and control mechanisms are effective solutions.

Aviso: On January 30th, 2015 Gabriel Zucman will present his book in the AK Vienna.