Book Reviews

This book by London School of Economics and Political Science economist Gabriel Zucman is an easy, relatively short nontechnical read that is aimed at the nonacademic reader, although it might be of interest to tax accounting academic readers and academics interested in income distribution and social equity issues. The headline grabber is that wealthy individuals hide an estimated $7.6 trillion, or 8 percent of a total $95.5 trillion of household financial wealth, giving rise to an annual loss in government tax revenue estimated to be $190 billion. The book is also timely given the revelations in the April 2016 release of the so-called Panama Papers, which listed individuals and companies with bank accounts registered in Panama, and the European Commission’s recent Apple-Ireland ruling. The book contains five chapters plus a short introduction and conclusion section, and a forward by Thomas Piketty, author of Capital in the Twenty-First Century, who also is Zucman’s adviser and occasional co-author. The core of the book is that the ability to hide wealth by wealthy individuals and multinational corporations enables tax evasion. The title is somewhat misleading as it is not the wealth of nations that is being hidden but that of individuals and businesses. The thrust of the book is well summarized by this quote: ‘‘Each country has the right to choose its forms of taxation. But when Luxembourg offers tailored tax deals to multinational companies, when the British Virgin Islands enables money launderers to create anonymous companies for a penny, when Switzerland keeps the wealth of corrupt elites out of sight in its coffers, they all steal the revenue of foreign nations . . . Nothing in the logic of free exchange justifies this theft’’ (p. 1–2). The chapter on multinational corporate taxation might be of most interest to readers of this review with the caveat that Zucman’s focus is U.S. multinationals, as if they are the only multinational corporate tax avoiders. The book is also somewhat Euro-centric except for this chapter on U.S. multinationals— which likely reflects Zucman’s French origins, the magnitude of wealth in Europe (both declared and hidden), and the long-term role played by Switzerland, and more recently Luxembourg, in helping the world’s wealthy hide financial assets. Chapter 1 provides a high-level overview of the development of tax havens that enable the wealthy to hide both wealth and income from tax authorities. The value of bank secrecy emerged in Switzerland after World War I as European countries raised individual tax rates to help pay off public debt and finance recoveries from the ravages of the war. For example, in 1920 France raised the top marginal tax rate from 4 percent on dividends in the pre-war period to 50 percent after the war to 72 percent in 1924, offering tremendous incentives for wealthy French individuals to transfer their ownership of financial assets to Switzerland. Because Swiss banks did not communicate with other countries, these wealthy individuals could then hide their income and evade taxes in their home countries. Much of what is known about the size of Swiss bank operations is due to two commissions (the Volker Commission and Bergier Commission conducted in the mid-1990s) investigating Swiss banks’ role during World War II, including trying to identify dormant accounts belonging to those persecuted by the Nazis. Swiss offshore (i.e., wealth belonging to non-Swiss residents) grew from 10 to 125 billion Swiss francs between the two world wars—a tenfold growth. While initially this growth was touted by the banks as enabling the persecuted to protect their savings, Zucman argues that this myth was debunked by the Volker Commission: only 1.5 percent of the accounts belonged to victims linked to the