Rich people have been dodging taxes around the world for centuries. But it's getting harder to get away with it.
The latest example comes from a rare look into the secret bank accounts of the world's richest people, based on a trove of documents leaked to a consortium of news outlets.
Here's a look at who's getting caught, how much money is at stake and the ongoing crackdown to catch global tax cheats :
How do these tax scams work?
It's pretty simple: You open an account with a bank or brokerage firm in a country that doesn't require your banker to report it to your home country's tax authority. While you're opening the account, you enjoy a little skiing or, if you prefer a tax haven in a warmer climate, relaxing on the beach. Then, when you go home, you don't report the account on your tax return. It's called cheating.
None of us likes to pay taxes, and there are reams of regulations known to armies of accountants ready to help you pay the least amount the law allows. Taking full advantage of the tax code is called tax "avoidance," and it's perfectly legal.
If you try to cut your tax bill by not reporting all your income or holdings—or lying about deductions or tax credits—that's tax "evasion. And it's illegal.
So how much cash is hiding out there in secret accounts?
Despite this week's trove of leaked HSBC accounts, it's hard to say. The documents refer to holdings before 2007, so much of the money may have moved on.
At the time, though, Switzerland was the favorite tax haven, and the list of account holders included drug traffickers, arms dealers and celebrities, according to a report by the International Consortium of Investigative Journalists and several news organizations. The leaked documents cover more than $100 billion held by more than 100,000 people and legal entities from 200 countries.
Not all of the accounts were illegal, the group noted, and having an account wasn't necessarily an indication of wrongdoing. Rock star David Bowie told The Guardian that he has been a legal resident of Switzerland since 1976. Tina Turner has lived in Switzerland for nearly two decades and gave up her U.S. citizenship in 2013, according to the ICIJ.
But the group noted that the records included bankers' advising clients on how to avoid paying taxes in their home countries and customers' telling bankers that their accounts are not declared to their governments.