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Safe Havens for Economic Elites and their Wealth: Money, Visas and Artwork

12 Dec 2018

  • Author(s): Andrés Solimano

Safe Havens for Economic Elites and their Wealth: Money, Visas and Artwork
This contribution is published as part of the UNRISD Think Piece Series, Overcoming Inequalities in a Fractured World: Between Elite Power and Social Mobilization, launched to coincide with a major UNRISD Call for Paper Conference by the same name. In this series, experts from academia, advocacy and policy practice engage with the topic of inequality by critically exploring the various causes of deepening inequalities in the current context, their implications for sustainable development, and strategies and mechanisms being employed to reverse them as part of the global conversation on inequalities leading up to the review of Sustainable Development Goal 10 at the UN High-Level Political Forum in July 2019.

Personal wealth is very concentrated in small economic elites: according to the Credit Suisse 2017 Global Wealth Report, those with net wealth over USD 1 million represent nearly one percent of the total adult population but own an overwhelming 46 percent of the world’s personal wealth. So where do the very rich place their assets and where do they choose to reside? This think piece considers three factors which influence their decisions and suggests that fair taxation and regulation may be part of the solution to this damaging concentration of extreme wealth.

Andrés Solimano is President of the International Center for Globalization and Development

Tax havens and secrecy jurisdictions

It is estimated that in 2001-2015, on average, around 10 percent of global GDP was maintained offshore as personal wealth in special tax jurisdictions (Solimano 2018). These special tax jurisdictions offer discretion, or even secrecy, for owners of bank accounts and set low taxes (or no taxation at all) on yields on assets and other sources of income from foreign depositors. Countries or territories include the Cayman Island, US Virgin Islands, Luxembourg, British Virgin Islands, Switzerland, several states in the United States, Panama, Jersey (Channel Island), Hong Kong, Singapore and Macau. The monetary value of offshore wealth is estimated (conservatively) to have ranged somewhere between USD 8.6 trillion and USD 10 trillion in 2015 (Solimano 2018). Tax havens erode tax collection in the home countries of account holders and encourage flows of financial resources to high-income recipient countries which is detrimental to balanced global economic development. Even in high-income countries, offshore deposits benefit the very rich. Evidence from Norway, Sweden and Denmark shows that the average rate of tax evasion rises sharply with wealth: while average personal tax evasion for these three Scandinavian countries is 3 percent, the percentage rises to 25-30 percent for the top 0.01 percent of the wealth distribution.

The ratios of offshore wealth across countries vary from 2–4 percent of GDP in Korea, Sweden, Norway, Denmark, Japan and China to around 35 percent in Greece and Argentina and up to 40-70 percent in Russia, Saudi Arabia, Venezuela and the United Arab Emirates (Figure 1). Countries with a history of financial crises, weak taxation systems and significant indices of inequality have higher percentages of offshore wealth relative to their GDP compared with more stable and egalitarian nations.

Figure 1. Offshore Wealth for Selected Countries (percent of GDP)

Source: Alstadsaeter, Annette, Niels Johannesen and Gabriel Zucman. 2017. Who Owns the Wealth in Tax Havens? Macro Evidence and Implications for Global Inequality. Working Paper 23805. Cambridge, MA: National Bureau of Economics Research (NBER).

The global art market

Another vehicle for storing wealth and reducing taxation and regulatory burdens is the art market. This market trades, globally, about USD 60 billion per year and transactions at the high end of the market are often surrounded by opacity and tax avoidance, and are affected by provenance and forgery issues. It is estimated that billionaires (individuals or families with net wealth over one billion dollars) hold on average between USD 5 million and USD 50 million in artwork (Mc Andrew 2018). While the value of an artwork has historically been considered aesthetic, it has also become an important asset in portfolios, competing in terms of store of value and diversification with stocks, bonds, real estate and precious metals. Nowadays, hedge funds, family offices and banks are actively investing in creating their own internal knowledge capacities in order to advise their wealthy clients on investments in the art sector (Solimano and Solimano, 2019).

Top collectors are increasingly using so-called freeports to store valuable artwork (and other luxury items such as expensive cars, wine, gold and diamonds). Historically , freeports were intended to store goods while the merchandise was in transit to other destinations, so “custom authorities [allowed] duties and taxes to be suspended until goods [reached] their final destination.” Today the merchandise “in transit” is valuable art work that may be stored for a long time waiting for its price to increase. Such storage facilities for art and other luxuries can be found in Geneva, Zurich, Luxembourg, Monaco, Singapore and Beijing. It is worth noting that freeports are located in roughly the same places as tax havens for bank deposits, suggesting the existence of an industry of wealth protection and tax avoidance that employs various vehicles (valuable art storage, bank deposits) for that end.

Investment migration regimes

The wealthy not only have to make decisions regarding the allocation of their wealth but also make migration choices on where to reside. The evidence shows that they prefer cities or countries that ensure economic stability, safety, good education facilities for their children, sophisticated financial systems and legal predictability. They tend to leave their home countries if they perceive conditions of instability, changing rules of the game, weak financial systems, capital controls and legal insecurity (Solimano and Solimano 2019). One vehicle that facilitates the international mobility of the wealthy are investment migration regimes (IMR). These are special provisos within a general migration system designed to attract migrants of high wealth and entrepreneurs. Specific rules vary from country to country but IMRs grant citizenship or permanent residence visas to individuals and households who meet certain requirements such as buying real estate in the host country, opening a bank account, investing in a development fund and, in some countries, like the US and the UK, making investments which create a certain number of jobs. Due diligence procedures are also undertaken before accepting prospective entrants. Although the physical residence of the wealthy and the location of their assets may not coincide, some of these programmes are located in countries with special tax jurisdictions.

What is to be done? Regulation and enhanced taxation

We live in a world of high wealth concentration at the top in which wealthy individuals can take advantage of special migration regimes and their financial assets can be placed in special tax jurisdictions and freeports in the case of investments in valuable artworks. IMRs tend to raise issues of fairness in migration criteria, and tax havens and freeports erode the tax base of home and recipient countries.

A global agenda of fair taxation and regulation of high-value activities (such as art and luxury markets) should consider mechanisms to reduce tax avoidance and evasion through regulation, information disclosure and a registry of financial assets and high-value artwork. International cooperation to reduce the scope of tax havens and freeports that are mostly located in high-income nations would be an important step in that direction. In addition, tax systems at national level can be revamped to ensure compliance and make them more progressive. Some countries have wealth taxes in place (collecting revenues of different magnitudes) while others rely more on taxing wage incomes and specific goods and inputs with inelastic demand. Finally, the investment migration regimes can be controversial as they make the right to citizenship or residence in a country conditional on the wealth levels of prospective immigrants.


Credit Suisse. 2017. Global Wealth Report and Global Wealth Databook. Zurich: Credit Suisse AG, Research Institute.

McAndrew, Clare. 2018. The Art Market 2018. Basel and Zurich: Art Basel and UBS.

Solimano, Andrés. 2014. Economic Elites, Crisis and Democracy. Oxford: Oxford University Press.

---- 2018. Global Mobility of the Wealthy and their Assets: An Overview. Research Paper 2018/02. Geneva: Investment Migration Council.

Solimano, Andrés. and P. Solimano. 2019. “Global Capitalism, Inequality and the Art Sector.” In Handbook of Transformative Global Studies, Routledge.

Photo: Shifaaz Shamoon (public domain via Unsplash)


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This article reflects the views of the author(s) and does not necessarily represent those of the United Nations Research Institute for Social Development.