The Island of Nevis is the most secretive tax haven in the world. Nevis is a solitary volcano in the Caribbean, with a population of just 11, 000, notorious for its involvement in Britain’s biggest ever tax fraud, as well as having been implicated in many other sordid financial scams of modern times, such as when 620, 000 Americans were fleeced out of $220 million in a pay-day loan scam.
Despite its tiny population, Nevis is also home to six domestic banks, one international bank, 18 insurance managers, and dozens of registered law firms. In fact Nevis might well have the highest lawyer to person* ratio on earth.
Nevis is becoming increasingly popular with the world’s rich: since 2012 its financial services sector has grown by a quarter.
Nevis specializes in letting its clients create and register corporations with greater anonymity than almost any other place on planet earth: even the island’s own corporate land registry doesn’t know who owns the corporations registered there.
Companies benefit from further protections: if you suspect a company of having acquired some of its assets illegally, you have to file $100 000 bond with the courts in Nevis before initiating legal proceedings, in order to make sure that no-one makes frivolous claims.
Not that you would have much luck filing a claim against a company registered on the island: Nevis’ regulator holds no information on who owns the companies registered there, or on who owns its companies’ assets.
Then there’s the fact that anyone disclosing financial information without a court order is liable for a $10 000 fine and up to a year in prison. This would serve to put of investigative journalists.
All of this poses a problem for authorities wishing to tackle global crime: if Nevis continues to guarantee anonymity over ownership of assets then there is no way for global crime fighting agencies to trace whether or not those assets have been acquired illegally.
A further problem is that it makes it more difficult for nation states to track down whether large corporations or individuals are dodging their taxes.
It also suggests support for the Marxist/ World Systems Theory view of globalization. The existence of Tax Havens allows the richest to keep their wealth, perpetuating global inequality. They certainly don’t benefit the global poor!
*some research suggests that ‘lawyer’ and ‘person’ are mutually exclusive categories. Although there’s no actual evidence to back this up.
Sources: The Week July 2018.
This post will also be published to the steem blockchain.
In this Channel 5 series, one family in the ‘wealthiest 10%’ of Britain swap lives for a week with a family in the ‘poorest 10% of Britain’. As I see it this programme performs an ‘ideological control function’ – spreading the myth of meritocracy.
They two families swap houses, budgets and leisure-timetables for a week – in episode two for example, the poor family, living on the rich family’s typical weekly disposable income, have to live off about £3000 per week, while the rich family, have to live off just under £200 per week, and in this episode, both families seem to be genuinely hard working and just, well, nice.
The meat of the programme consists of watching the families hanging out in their respective houses, doing whatever activities the other family would normally do, and meeting their respective friends/ work colleagues, including some running reflections on how ‘nice’ it is to be rich, and what a ‘struggle’ it is to be poor.
Here’s how the programme performs the function of ideological control – basically it spreads the ‘myth of meritocracy‘.
It misrepresents what the top 10% look like – the narration keeps talking about how the rich family is in the top 10%, they are, but their weekly disposable income of over £3K, and the fact that they own 12 restaurants and employ 60 odd people, puts them easily in the top 1%. This fact alone really annoys me – it is the extreme minority that lives like this. I worked this out using the IFS’ income calculator)
The family in the top 1% are further unrepresentative in that the father genuinely worked his way up after failing school, cleaning toilets and then getting into restauranteering. This is most definitely NOT how the majority get into the top 1%, especially since social mobility has been declining in recent years.
The working class father keeps saying ‘I want my children to see this and want this’ – he seems to take the experience of his week in the rich mans world as evidence that anyone can make it if you try hard enough – in fact there is LESS CHANCE TODAY HIS KIDS than he would have had to climb the career ladder.
Maybe the same point as above – the working class guy has 4 kids – I wonder what the actual chances of all four kids from one working class family independently becoming millionaires actually are? It’s probably lottery odds.
The ‘luck’ word is mentioned once, apparently it’s all about hard work. NO – this view is just plain wrong, Malcome Gladwell convinced me of this in his book ‘Outliers’
Personally I think this series (if it carries on this vein) is lazy and appalling television – it wouldn’t take much to add in some depth analysis, have some commentary or stats overlying how likely it is for someone to go from working class to millionnaire, for example.
There’s also absolutely no mention of the sheer injustice of the fact that both sets of parents are doing similar amounts of ‘work’ but the rewards are so incredibly different, and no mention of how good it is that we’ve got social housing so at least the poor family have a decent house.
In short, my intense dislike of this show stems from the misleading portrayal of the richest 1% as representing the richest 10% and from its total lack of analysis of the actual chances of social mobility occurring.
NB – It was also quite dull viewing. If you think it sounds a little like Wife Swap, it’s much less entertaining as it’s the whole family doing the swapping, so there’s much less conflict.
Global wealth inequality is increasing, but how can we explain this, is this is a problem, and what could we do to make the world a more equal place?
Trends in Global Wealth Inequality and Poverty
According to the 2016 Global Wealth Report produced by Credit Suisse, wealth inequality in 2016, measured by the share of the wealthiest 1 percent and wealthiest 10 percent of adults, as compared to the rest of the world’s adult population, continues to rise.
While the bottom half collectively own less than 1 percent of total wealth, the wealthiest top 10 percent own 89 percent of all global assets.
NB – You need to look at the pyramid below carefully, what it shows (to compare the very top and bottom) is as follows:
The richest 33 million people (0.7% of the world’s population ) control $116 trillion, or 45.6% of the world’s wealth, or more than $1 million each
The poorest 3.5 billion people (73% of the world’s population) control only $6.1 trillion of wealth, or less than $10, 000 in wealth each.
NB – Inequality is no longer simply a matter of poor people living in less developed countries and rich people living in more developed countries -there are plenty of millionaires in low and middle income countries – the report notes that ‘today, emerging nations are home to 18 percent of the world’s ultra-high net worth population. China alone accounts for 9 percent of the top decile of global wealth holders, which is well above France, Germany, Italy, and the United Kingdom.’
However, this is hardly cause for celebrations, it simply means that not only is global inequality increasing across the world as a whole, but also within most countries in the world – there are billions of poor people living right alongside those millionaires in low income countries!
The infographic below, taken from the World Economic Forum Website (published 2015), displays global wealth inequality more simply, and it’s also easier to remember:the richest 1% control 50% of the world’s wealth, while the poorest 50% control less than 1%.
Finally, to turn to trends in inequality over time, the chart below, also taken from the World Economic Forum website, shows how the global share of wealth controlled by the wealthiest 1% has increased from 45% to 50%, while the share of the ‘other 99%’ has decreased from 55% to 50%. (The chart below is derived from Oxfam’s 2016 Report: An Economy for the 1%?)
Oxfam further notes that:
The wealth of the richest 62 people has risen by 45% in the five years since 2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 38%.
Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%
Some Potential Problems with Statistics on Global Wealth Inequalities
Firstly, there are issues with reliability when tracking global inequality – different nations tally income and wealth in different ways, and some nations barely tally reliable stats at all
Secondly, you may have noticed that you get different figures depending on what groups your comparing – things look very different if you compare the top 1% to the rest, rather than comparing the top ten percent to the the bottom ten percent, or the top 50% to the bottom 50%. You might like to think about which is the most ‘valid’ comparison to give you a fair idea of global wealth inequalities (tough question!?)
Why has Wealth Inequality Increased?
What we are asking here, in short form is – how have the rich got so rich, and why have the poor lagged behind? In this section I summarise for changes which are correlated with increasing wealth inequality, all taken from the the Oxfam Report referred to above: Neoliberal economic policy; the global tax haven system, the growth of the financial sector and increasing returns to capital versus labour:
Neoliberal Economic Policy
Neoliberal Economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization – have supercharged the ability of the rich and powerful to to further concentrate their wealth.
For example, companies working in oil, gas and other extractive industries are using their economic power in many different ways to secure their dominant position. They lobby to secure government subsidies – tax breaks – to prevent the emergence of green alternatives. In Brazil and Mexico, indigenous peoples are disproportionately affected by the destruction of their traditional lands when forests are eroded for mining or intensive large-scale farming. When privatized – as happened in Russia after the fall of communism for example – huge fortunes are generated overnight for a small group of individuals.
The Global Network of Tax Havens
A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries.
As taxes go unpaid due to widespread avoidance, this leads to cuts in vital public services and that governments increasingly rely on indirect taxation, like VAT, which falls disproportionately on the poorest people.
This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases.
Almost a third (30%) of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.
Tax avoidance is a problem that is rapidly getting worse and has rightly been described by the International Bar Association as an abuse of human rights and by the President of the World Bank as ‘a form of corruption that hurts the poor’.
Increasing Returns to Capital Versus Labour
One of the key trends underlying increasing wealth inequality is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing.
NB This article in The Economist challenges the idea that there are increasing returns to capital versus labour!
The Growth of the Financial Sector
The financial sector has grown most rapidly in recent decades, and a recent study by the OECD10 showed that countries with oversized financial sectors suffer from greater economic instability and higher inequality. Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hurt the poorest people the most.
NB2 – given that measuring inequality involves measuring relative wealth – that is what percentage share to the richest 10% control compared to other 90%, for example, then we’re necessarily looking at a zero sum game – If the richest 10% go from controlling 40% of the world’s wealth to 60% of the worlds wealth, then the amount of wealth controlled by the other 90% of the population must fall from a 60% share to a 40% share.
Is Increasing Global Inequality a Problem for Humanity?
Neoliberals argue that increasing inequality isn’t necessarily a bad thing, the important thing is that even though the rich have got richer compared to the poor, the poor have also got richer, just not as rapidly as the rich and the middle.
However, Oxfam argues that growing economic inequality is bad for us all for the following reasons:
It undermines growth and social cohesion and the consequences for the world’s poorest people are particularly severe.
Had inequality within countries not grown since 2010, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.
The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.
The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
From and ecological point of view, there’s even more injustice: the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions. The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.
What can we do to make the world a more equal place?
Oxfam notes that inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model.
As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens
World leaders need to commit to a more effective approach to ending tax havens and harmful tax regimes, including non-preferential regimes. It is time to put an end to the race to the bottom in general corporate taxation. Ultimately, all governments – including developing countries on an equal footing – must agree to create a global tax body that includes all governments with the objective of ensuring that national tax systems do not have negative global implications.
In addition Oxfam is calling on leaders to take action to show they are on the side of the majority through doing the following:
Keep the influence of powerful elites in check: for example by reforming the regulatory environment, particularly around transparency in government; separating business from campaign financing; and introducing measures to close revolving doors between big business and government.
Share the tax burden fairly to level the playing field: by shifting the tax burden away from labour and consumption and towards wealth, capital and income from these assets; increasing transparency on tax incentives; and introducing national wealth taxes.
Pay workers a living wage and close the gap with executive rewards: by increasing minimum wages towards living wages; with transparency on pay ratios; and protecting workers’ rights to unionize and strikes.
Use progressive public spending to tackle inequality: by prioritizing policies, practice and spending that increase financing for free public health and education to fight poverty and inequality at a national level. Refrain from implementing unproven and unworkable market reforms to public health and education systems, and expand public sector rather than private sector delivery of essential services.
Official statistics suggest that the richest 20% of the U.K. are 100 times wealthier than the poorest 20%; the richest fifth’s annual household income is 5 times greater than the poorest 20% of the U.K. Population, after benefit and taxes are taken into account.
This post provides two accessible ‘headline’ statistics on wealth and income inequality, courtesy of some excellent animated infographics, and then goes on to look at the original data sources and organisations who produce the data in more depth. The point of this post is to both provide and overview of wealth and income inequality in the United Kingdom and to provide some useful links to allow students to explore statistics on wealth and income inequalities in more depth.
Wealth and income inequalities are closely correlated with social class, although economic measurements are just one indicator of social class, which is a broader concept, also encompassing social and cultural capital (if we are going to use the latest social class survey – see here for an introduction to the concept of social class.
Wealth Inequality in the United Kingdom
The richest 20% are about 100 times richer than the poorest 20% –
If we represent the wealth of nation as £100 pounds, then the richest 20% have £60 out of every hundred, while the bottom 20% have only 60 pence.
The inequality briefing below provides an overview of how wealth is distributed in the UK. It compares how people think wealth should be distributed, what they think the actual wealth distribution is in the UK, and finally what the actual wealth distribution is.
What people think wealth distribution in the UK should be
How people think wealth is actually distributed in the UK
How wealth is actually distributed in the UK
Income Inequality in the U.K.
The bosses of Britain’s biggest companies earn 100 times more than the average wage.
It takes them just three days to earn what a Nurse earns in an entire year.
This video by the High Pay Centre summarises the situation in 2014
Brenda, nurse, earns £12 an hour, the average wage in the U.K.
Brian, a chief executive of one of Britain’s biggest companies, earns £1200 an hour, 100 times what Brenda earns.
It takes Brian just three months to earn what Brenda will earn in her entire working life.
Brenda’s annual salary of £27 000 has hardly changed at all over the last decade, while the cost of living has increased.
Brian’s annual salary on the other hand has increased from 2.6 million to 4.3 million over the last decade.
If we redistributed the income of the U.K. on the same basis of the Netherlands, which would effectively involve reducing the income of the top 1% by a mere 25%, then 99% of us would be an average of £3000/ year better off.
Income inequality in the UK 2014
A fairer income distribution, based on the Netherlands
Further Sources on Wealth and Income Inequalities
The sources below provide a more in-depth focus on the nature and extent of wealth and income inequalities in the United Kingdom today. Click on the links to explore them further!
Source 1 – The Office for National Statistics bi-annual ‘Wealth in Great Britain’ Survey
Original household income (before cash benefits and direct taxes) for the richest fifth of households was around 12 times higher than the poorest fifth (£85,000 and £7,000 per year respectively)
Disposable household income (after cash benefits and direct taxes) for the richest fifth was 5 times higher than the poorest fifth (£62,400 and £12,500 per year respectively).
This shows us that, overall, cash benefits and direct taxes led to income being shared more equally between households
Over the past year, median disposable income for the poorest fifth of households rose by £700 (5.1%). In contrast the income of the richest fifth of households fell by £1,000 (1.9%) over the same period.
Looked at over the past decade, the incomes of the poorest fifth of households have increased by approximately 13%, while the incomes of richest fifth of households have fallen by approximately 3%.
Poverty is a concept that is often linked with wealth (you might crudely say that poverty is the opposite of wealth.