'The Hidden Wealth Of Nations' Author Explores World Of Offshore Tax Havens

NPR's Ari Shapiro talks with Gabriel Zucman, author of The Hidden Wealth of Nations, about the leaked Panama papers and what they say about the practice of hiding money offshore worldwide. He's estimated that up to 8 percent of the world's financial wealth is hidden away.

ARI SHAPIRO, HOST:

For more insight into the world of offshore tax havens, we turn now to Gabriel Zucman. He literally wrote the book on this subject. He is the author of "The Hidden Wealth Of Nations: The Scourge Of Tax Havens." Welcome to the show.

GABRIEL ZUCMAN: Thank you.

SHAPIRO: You've see what is in these documents. Having studied the subject for years, were you surprised at the specifics?

ZUCMAN: No, I'm not surprised because this is what you see, you know, in the data, as I try to explain in my book. So we know that there are hundreds of thousands of shell corporations that are incorporated, you know, in the British Virgin Islands, in Panama and that are used for all sorts of criminal activity, including tax evasion but not only, so it was not a big surprise.

SHAPIRO: Given that so much of this is illegal, how have so many countries allowed this to proliferate?

ZUCMAN: That's a very good question, and I think, you know, we need to put an end to that. You know, why do we even allow such a huge financial industry to exist in the British Virgin Islands since leaks after leaks, we discover that it is largely used for criminal purposes?

SHAPIRO: You mention the British Virgin Islands. This leak comes from one law firm in Panama. Does that mean that this is just the tip of the iceberg and there's that much more that we cannot see?

ZUCMAN: Of course. You know, it's just one firm in one tax haven, and there is much more going on. And if you want to have a comprehensive view of the scale of problem, you need to look at macroeconomic statistics. And when you do that, you see that there's about 8 percent of the world's financial wealth that is held in tax havens globally. So that's about $7.6 trillion today, a huge amount of wealth.

SHAPIRO: Can you distinguish between how much of this is illegal behavior as opposed to just unethical behavior?

ZUCMAN: Yes. So the data that we have suggests that out of the $7.6 trillion total, about 20 percent of this wealth is duly reported on tax returns so does not correspond to illegal behavior. But 80 percent is not reported, and that's criminal tax evasion.

SHAPIRO: Talk about the real-world impact of this kind of behavior. If a corrupt oligarch gets rich in ways that he's not supposed to, who is actually harmed by that?

ZUCMAN: The people, you know, of the country are harmed by that. You know, if billionaires pay very little in taxes, it means that the rest of us - we have to pay more. So it means more taxes for the middle class, and so we all pay the cost of tax evasion by the wealthiest individuals.

SHAPIRO: Given the sheer magnitude of this, when you look at the Justice Department trying to penalize these behaviors, does the - I suppose if you look at it as cops and robbers, do the cops seem up to the task of stopping the robbers?

ZUCMAN: At this stage, no. You know, we've had extensive anti-money laundering regulations in place since the late-1980s, and we keep discovering year after year that the basic rules are constantly violated by a number of offshore financial institutions, and so we can rely on these rules and on some audits from time to time to curb this criminal activity.

We need to take a different approach which involves saying, look; you know, it's clear that most of the financial activity that occurs in those centers is conducive to criminal behavior, so we should have immediate sanctions that will remain in place as long as Panama, the British Virgin Islands or similar territories are able to show that they've correctly identified all the potential owners of the shell companies on their territory.

SHAPIRO: That's Gabriel Zucman, economist at University of California, Berkeley and author of "The Hidden Wealth Of Nations: The Scourge Of Tax Havens." Thanks for speaking with us.

ZUCMAN: Thank you very much.

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