The wealthy are avoiding paying tax, new report reveals


13th June 2017

For years it has been argued that the average person is just as likely to avoid paying the correct amount of tax as the super-rich, for example, by paying cash in hand for services work, buying goods on the black market or misreporting earnings on a personal tax return. However, a new report has highlighted that in fact, it’s the wealthy who are avoiding paying tax.

Wealthy avoiding paying third of taxes

According to economists Annette Alstadsaeter, Niels Johannsen and Gabriel Zucman, the wealthiest 0.01% evaded 30% of their personal taxes on average, compared to just 3% in the total population. They studied data taken from the Swiss Leaks and the Panama Papers which highlighted documents containing details of thousands of individuals’ and companies offshore activities. However, because those leaks only contain a small snapshot of the world of tax evasion and avoidance, they also sourced data from Norway, Sweden and Denmark, where transparency laws require high levels of disclosure over income and tax record. By combining these two data sets they were able to calculate the estimate of the true size and scope of global tax evasion.

Incorrect assumptions

The findings highlight that many widely held beliefs about tax evasion are incorrect. Firstly, that tax evasion is an uncommon practice amongst the super-rich that is exaggerated by a handful of major cases. And secondly, that tax evasion among lower-income earners working ‘off the books’ is more damaging than the use of offshore banks.  In addition, the authors of the study have argued in previous work that as much as 10% of the world’s wealth is hidden in tax havens and then reinvested elsewhere.

Perhaps most worrying of all is that the authors believe the situation is much worse in countries they haven’t yet examined, such as the US and UK where they expect to find an even higher level of wealthy individuals and firms avoiding paying the right amount of tax. The research also suggest it’s likely that the strict rules in the countries in focus discourage tax evasion, highlighting that they believe that more stringent and ‘tighter’ systems in Scandinavia are more effective than random audits found in the UK.

Regardless of where you’re operating or the scale of your wealth, major leaks like the Panama Papers scandal and the increasing focus by governments around the world highlight that there really is nowhere to hide for individuals and organisations committing tax evasion. If you’d like to find out more about taxation around the world, or if you’re at all uncertain over your status – or that of the contractors you’re placing – then get in touch with the experts to ensure you remain on the right side of the law.

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