[LINK] "Global Wealthy Question Tax Havens After Cyprus"

[rfmcdonald]

If, as CNBC's Robert Frank suggests, tax havens around the world are going to start shaking as the Cyprus meltdown continues, I'd call this a good thing. Taking use of loopholes in the globalized financial system to evade a nation-state's taxes doesn't strike me as something viable in the long run, not economically and not politically (as we're seeing now).

Wealth travels wherever wealth is treated best. And for decades, Russian wealth was treated well in Cyprus. The tiny island-state has long been the largest destination for Russian capital and largest direct investor in Russia.

According to Global Financial Integrity, the financial-watchdog group, Russians invested $199.7 billion in Cyprus in 2011, while Cyprus sent $128.8 billion into Russia. That's about five times the annual GDP of Cyprus.

[. . .]

The sudden tax on depositors in Cyprus is causing the very wealthy to wonder if other favorite havens are also at risk, reports CNBC's Robert Frank.While Cyprus is a unique case, the bail-out terms have sent a shudder through the world of wealth management and the multi-trillion dollar world of offshoring.

According to the Tax Justice Network, at least $21 trillion in private financial wealth was owned by wealthy individuals through tax havens in 2010. That's equal to the size of the economies of the United States and Japan combined.

That number is growing rapidly, according to John Christensen, director of the Tax Justice Network.

"Right now, wealth is cascading offshore," he said. "There's no question that it's accelerating. Wealth is concentrating in the hands of a tiny elite. And that elite is moving money offshore at a faster rate than we've ever seen."

He added that rising tax rates in many countries – from the United States to France and Britain – have driven more of the wealthy to seek shelters.