The laborious hunt for Russian oligarchs triggered by the invasion of Ukraine shows, once again, how easily large fortunes manage to hide, and not just from taxes. Will this speed up the slow process of change already underway? Not sure.
Failing to send troops to fight alongside the Ukrainians against the Russian invaders, several Western countries have promised to wage a massive economic war on several fronts at once. One of their main targets is the Russian oligarchs on whom President Vladimir Putin relies. These Western countries track not only their bank accounts and investments to freeze them, but also their palaces, their yachts or their private jets.
According to economists Filip Novokmet, Thomas Piketty and Gabriel Zucman, their fortunes hidden abroad already exceeded 800 billion US dollars in 2015, equivalent to all the financial assets of their 145 million compatriots. Having currently in its line of sight 1100 people and entities linked to the Russian regime, Ottawa signaled this week its intention to give itself the right to sell these war prizes in order to donate the proceeds to the financing of the reconstruction of Ukraine. But now, we still have to start by finding the trace of this hoard.
It is that if the “Panama Papers”, “Pandora Papers”, “Paradise Papers” and other leaks of information on the subject have taught us anything, it is how kleptocrats, mafia godfathers, big fraudsters or “simple” ultra-rich who do not want to pay their taxes are masters in the art of covering the tracks between them and the some 10,000 billion that individuals would hold anonymously abroad, according to the specialized NGO Tax Justice Network (TJN).
Little secretive
The process is always somewhat the same. Helped by unscrupulous accountants and bankers, but also by complicit or complacent governments, our little secretive men have recourse to all sorts of nominees at the head of a multitude of shell companies, trusts and foundations, linked between them through opaque financial and legal entanglements and often passing through tax havens. In 2018, US authorities found a Russian oligarch who had passed through Italy, the United Kingdom, Luxembourg, Cyprus, the Bahamas, the British Virgin Islands and the Cayman Islands to control a company in the United States, reports TJN. French tax inspectors have already found no less than forty intermediary companies between a yacht and its owner, the newspaper reported last month. The echoes.
Tax havens and other authorities allowing this kind of maneuvers are not always islands of sand and palm trees, TJN recalled this fall. In fact, if one had to, for example, draw up a list of the main countries that accept the most opaque bank deposits from large fortunes, the United Kingdom would come just behind the Cayman Islands, followed by the United States, the Luxembourg, Ireland, the Netherlands, then, not far behind, France (8and), Italy (11and) or even Switzerland (14and). In total, the member countries of the OECD “and their tax dependencies” would thus represent more than 90% of the 171 billion in tax revenue lost only on the side of wealthy individuals.
But it’s not just a problem of tax evasion, as the case of the Russian oligarchs shows. In some cases, this money is the fruit of corruption, embezzlement of public funds or crime. It widens wealth inequalities, influences political and economic powers, and undermines the population’s confidence in its democratic institutions, argued last week, in a letter addressed to the leaders of the G20, the fifteen experts of the Independent Commission for the Reform of International Corporate Taxation (ICRICT in English), including economists Joseph Stiglitz, Thomas Piketty and Gabriel Zucman.
Global Asset Register
It is true that the “wall of opacity” behind which the ultra-rich hide their money abroad has begun to be tackled, they admitted, in an accompanying document. In particular, the OECD has just launched a mechanism under which a country must automatically report bank deposits made by a foreigner. About 80 authorities, including the United States and the European Union, are also requiring that the true owners of companies and trusts be identified.
These “beneficial ownership” rules, however, stop at country borders and do not extend to all assets such as financial securities, intellectual property, cryptocurrencies, real estate, yachts, planes, luxury cars, art collections or jewelry. However, countries should not only collect all this information, says the ICRICT, but also share it among themselves, through a “global asset registry”, so as not to lose track money as soon as the borders are crossed. And for this tool to reach its maximum potential, all this data should also be accessible to NGOs, journalists and the general public.
For the moment, the hunt for the Russian oligarchs seems to have had the effect of chasing them from Europe to other skies, such as Dubai, reported last month. The world. As for London, which had made so much effort to attract them in recent years that it had come to be nicknamed “Londongrad”, it will quickly replace them with more large Chinese, Saudi, Azeri or Nigerian fortunes, had predicted The Economist.