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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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The Hidden Wealth of Nations summary
Gabriel Zucman
The Scourge of Tax Havens
3.7 (25 ratings)
15 mins
7 key ideas
Audio & text
What is The Hidden Wealth of Nations about?
The Hidden Wealth of Nations (2015) reveals the truth about the decades of deceitful business practices that have added to today’s economic turmoil. Trillions of dollars worldwide go untaxed, and nations put the burden on innocent citizens, which only increases economic tensions. So what can be done to stop tax evasion and get corporations to start paying their dues?
About the Author
Gabriel Zucman is a French author and economics professor at the University of California, Berkeley. He is also a frequent contributor to the Quarterly Journal of Economics.
Table of Contents
The Hidden Wealth of Nations
summarized in 7 key ideas
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Key idea 1 of 7
The first tax havens appeared after World War I, and their numbers grew as time went on.
As you can imagine, world wars are expensive. And after World War I, many European nations raised income taxes in an effort to rebuild communities and assist veterans.
An extreme case is post-war France. In 1924, the country’s previous top-tier income tax (two percent) had been raised to a staggering 72 percent.
Similar tax increases were popping up across the continent, and, as a result, wealthy Europeans devised methods for dodging these taxes – most commonly, by moving their money to other countries.
Switzerland was the most obvious tax haven. A neutral state during World War I, Switzerland was untouched by combat and had no reason to raise taxes, and it also had a well-established banking network with high interest rates.
By 1938, Swiss banks stored ten times more foreign wealth than in 1920. At the time, this amount accounted for 2.5 percent of the total wealth of European households and would equal about $130 billion in today’s value.
Then in the early 1980s, tax havens began to proliferate.
When Prime Minister Margaret Thatcher came to power in the United Kingdom, she deregulated Britain’s financial markets. This allowed cities like London and Hong Kong, as well as British territories like the Virgin Islands, to compete with Switzerland in the private wealth-management market.
Soon, these policies spread to other European nations like Ireland and Luxembourg, which gave people more options to choose from.
Despite of the competition, Switzerland’s private banking sector continues to thrive. As of 2015, almost $2.3 trillion is still being held in Swiss banks, an 18 percent increase since 2009.
Remarkably, $1.3 trillion of that still comes from wealthy Europeans, representing a staggering ten percent of the total wealth of European citizens.
Now we know how tax havens got their start. In the next blink we’ll learn how people redirect their money.
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Who should read The Hidden Wealth of Nations
- People curious about the Panama Papers leak
- Students and professionals interested in global finance and economics
- Anyone interested in the politics of money
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