There are trillions of dollars stashed in tax havens. So, why don't we recover those and use them for the much-needed pandemic relief?
On paper, the amount can solve the world's problem. There's allegedly $36 trillion in currencies, precious metals, and securities - excluding tangible assets like real estate and art. However, in reality, there's so much going on when it comes to tax haven wealth, in such a way that accessing the offshore funds for whatever purposes a challenging issue.
Government's policies - e.g. the pro-big-corp policies, bad political/economic situation, etc. facilitate the wealth transfer to offshore jurisdictions. Once the assets reach offshore, their existence is simply below the radar due to the way offshore wealth strategic plan is set up.
So, the big question is this: Is it possible to 'confiscate' offshore money for countries to fund pandemic relief? Even if it was possible, can we trust the Governments of the world to manage the usage of such massive funds?
This article will talk about the background of the issue, the (ideal) solution, and the realistic results of the confiscation and repatriation.
Funding the Pandemic Relief and Prevention with Offshore Money: Possible?
According to the World Bank, the funds required to prevent pandemic in developing countries are approximately $3.4 billion, annually. What about the stimulus packages required to help people impacted by the pandemic? It can be in the trillions of dollars (the first stimulus check in the U.S exceeded $2 trillion.) With $36 trillion stashed offshore, it should be very much possible to fund the pandemic relief.
It is a noble idea, really - those big corporations and HNWIs, who are getting their wealth offshore, enjoying tax-free asset holdings, should shoulder the burden created by the pandemic - well, at least a part of it.
Unfortunately, there are reasons why ideas remain, well, ideas.
In practice, Governments of the world cannot repatriate and confiscate the offshore wealth, even for a noble cause of funding the pandemic relief. There are several reasons for this
1. Offshore structures promote secrecy and confidentiality
One of the biggest reasons why offshore assets remain 'untouchable' is because the way the offshore structures are set up makes it difficult for (almost) anyone to get their hands on the funds. With the various strategical approach to offshore asset protection, such as Double Irish with a Dutch Sandwich, offshore jurisdictions' laws and regulations allow asset holders to make their assets untouchable.
2. The Governments reputation in dealing with citizens money
Ideally-speaking, your Government's job is to make sure that your well-being stays on top of their list of duties. However, due to various reasons - i.e. limited resources, conflicts of interest, corruption, poor leadership, etc. - they fail to do their job properly.
If - that is a big IF - your Government managed to confiscate and/or repatriate offshore wealth, the actual allocated funds for pandemic relief can be less-than-ideal. Some countries do better than the others, as they can allocate aplenty - some others just don't.
3. Shutting down the tax haven is challenging
The idea of shutting down the tax haven, such as what France is doing by stopping the citizens' access to establishing offshore holdings in Monaco in the 1960s, makes sense, but related to the reason #2 above, it all depends on the Governments' leadership in preventing capital flights by putting much pressure on organizations and individuals participating in the offshore tax avoidance and evasion schemes. For now, shutting down a tax haven is a tough ordeal.
Conclusion
The COVID-19 pandemic has crushed - and is crushing - the world, and the end seems so far away. The healthcare crisis is yet to be mitigated in many parts of the world, causing countries to fall into a deep recession.
While the idea of using funds hidden in tax haven makes sense, it is nearly impossible in practice. Pressuring or persuading offshore asset holders to repatriate their holdings through various policies and new laws will be yielding mixed results, as asset holders will always find the available legal loopholes - making offshore asset confiscation and repatriation a lost cause.
The pandemic will end eventually. But until then, it is probably safe to say that you're on your own in this. You cannot seem to count on your Government to manage the confiscated and repatriated funds for your benefits as a citizen - which is also a reason why offshore asset protection is still alive and well.
AUG
2020
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