By Marcos Cintra (via Brasil247).
A recent study by ex-McKinsey economist Henry James found that world millionaires are hiding about US$21 trillion in financial institutions located in tax havens. The research was commissioned by the Tax Justice Network, an organization working against the actions of these countries which make life easier for drug traffickers, corrupt politicians and tax evaders. According to the report, many large banks involved in these transfers knew that their customers were evading taxes.
The report points out that the total amount deposited by Brazilians in tax havens was about US$520 billion in 2010. This number amounts to about 25% of the country’s GDP. Brazil is ranked as the fourth nation that does the most transactions with these money laundering regions.
The total amount deposited in tax havens is impressive because it represents one third of the global GDP. It’s not very surprising that Brazil sends a lot of money out considering that tax evasion is all too common among wealthy Brazilians.
Shame on Brazil. A significant portion of this money, which could be funding investments in Brazil, goes abroad because of the complexity of our tax system. The insane Brazilian bureaucracy is a fertile field to hide information and generate wealth that fuel tax havens.
Brazil is a leader on sending money to tax havens because Brazil is a haven itself for tax evaders. Our complex tax structure is all that the evader wishes. It’s easier to send resources out. Simplifying our system through tax reforms would be a catastrophe for those who live on tax evasion.
It is good to mention that this money outside the country is only a fraction of the overall tax evasion in Brazil (the other part circulates internally). And to make up for the country’s huge tax evasion, the government taxes the Brazilian middle class.
On the tax issue, Brazil needs to change paradigms instead of red-taping it and making things more bureaucratic. By maintaing the complex and repelling the simple, Brazil will maintain an unfair tax advantage on the minorities that send their fortunes abroad.