Economic Myths: There's £13 trillion hidden in tax havens

From the BBC:

A global super-rich elite had at least $21 trillion (£13tn) hidden in secret tax havens by the end of 2010, according to a major study. The figure is equivalent to the size of the US and Japanese economies combined. The Price of Offshore Revisited was written by James Henry, a former chief economist at the consultancy McKinsey, for the Tax Justice Network...

"The lost tax revenues implied by our estimates is huge. It is large enough to make a significant difference to the finances of many countries. From another angle, this study is really good news. The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems," he said.

OK, the £13 trillion figure itself might be correct, this would equate to about one-fifth of all the money in the world, but so what?

"Money" is a game of two halves, for every asset there is a liability and it all nets off to nothing, it's all just book keeping entries. Further, the underlying asset is usually land; three-quarters of bank assets are mortgages which are secured on land.

So if you have money on deposit with a UK bank and decide to transfer it to a Bahamas bank account, you are merely at one end of a long chain of debits and credits, three-quarters of which goes back to "land". The land does not do any work to generate the money, the borrower does the work, and the borrower hands over the cash to the bank who then hands it over to the depositor-vendor (step 1).

You can interpose an extra step between UK bank and depositor-vendor called "offshore bank" (step 2).

Or you can strip out two steps, perhaps purchaser-borrower and depositor-vendor decide to cut out the bank-middleman, and the purchaser pays directly to the vendor (step 3). If the vendor moves abroad, that's his decision, he's perfectly entitled to do so, you can hardly count that as tax evasion or anything.

Or maybe the current owner of the land decides not to sell it but to rent it out instead (step 4), that's not much different from step 3.

And maybe the occupier and the owner are the same person, step 5.

The basic picture is always the same, it doesn't matter how few or how many intervening steps there are. And of course, when the depositor-vendor wants to spend that money, the only place he can spend it is where happens to live, which almost certainly is not in the tax haven in which the bank is situated in which he thinks he has his money: