Offshore wealth reaches $8.5tn despite pressure on tax havens

The wealth held abroad in offshore financial jurisdictions has grown by 6.1 percent in the last year despite efforts by governments to curb tax evasion. The figures have soared to a total of $8.5 trillion, according to Boston Consulting Group.

Offshore assets, those booked out of the investor’s home country, have grown by billions of dollars in 2012, Financial Times reports. Switzerland is crowning the list of jurisdictions where the funds are being kept, the new research from BCG revealed.

Investors appear to prefer the risks related to keeping funds in tax havens against the guaranteed tithe on their fortunes by the tax authorities at home. A number of  information exchange agreements have been forced on offshore jurisdictions by governments like the US, the EU and the UK, since the leading economies are striving to cope with budget deficits at home and demand more transparency.

According to experts cited by the Financial Times, there seems to be more for the investors in the offshore centres than an easy way to save as much money as possible.The strong performance of the offshore centres amid a growing crackdown on evasion is seen by some experts as evidence that investors are using offshore centres for reasons other than hiding money.

According to the BCG study, the major inflow of money to the offshore centers over the next five years is likely to come from the rich in emerging economies. These investors chose banks in Switzerland or Liechtenstein for stability and security reasons, rather than for tax evasion.

“The raft of tax information disclosure deals signed by traditional European banking centres have not had a significant impact on the amount of money and assets held there which supports the idea that only a small fraction of overseas money held in those jurisdictions is for tax avoidance or evasion,” the head of tax, at Pinsent Masons law firm Jason Collins told the Financial Times.

He named insecurity of domestic banks among the reasons why investors transfer their money to jurisdictions like Switzerland.  “While it is true that some individuals will use banking centres like Switzerland or Liechtenstein to avoid or evade taxes, many are using these banking centres for the security they provide their assets.”

Both Luxembourg and Switzerland marked a significant decline in wealth floating from Western European countries and North America.

Meanwhile UK based charity Oxfam, has recently released a report saying that individuals are holding some $18.47 trillion in tax havens around the world. According to the organization’s estimates, tax lost in tax havens is enough to end global poverty twice over.