Understanding The Hidden Economy

Fifty trillion US dollars—that’s the latest scholarly estimate of the hidden wealth in the world today. This staggering sum is concealed from law enforcement, regulators and tax authorities by some of the world’s wealthiest individuals and most powerful corporations, as well as by global criminals. Corruption in its many forms siphons off public funds—which could otherwise be deployed for the benefit of humanity—for personal gain. The result is a massive liability for humanity.

Tax abuse is one component of this puzzle. Nearly half a trillion US dollars (US$ 483 billion) in tax revenues are lost each year to tax abuse by ultra-wealthy individuals and large multinational entities. This erodes entire nations’ tax bases right under their noses.

Latest estimates—based on new country-by-country reporting data collected by the Organisation for Economic Cooperation and Development (OECD)—peg the cost of individual tax abuse at US$ 171 billion a year, and corporate tax abuse at US$ 312 billion a year ... but the total amount of tax lost annually to corporate tax abuse swells to more than US$ 1 trillion after factoring in the knock-on revenue losses that result when nations respond to tax abuse by reducing their corporate tax rates in the mistaken expectation that doing so will reverse capital flight and attract corporate investment back into the country.