I was reading about Panama leaks and I was wondering why do people keep their wealth secret? What's the psychology behind it?
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2$\begingroup$ It is not just wealth, it is illegal wealth. Moral issues are another matter. $\endgroup$– user3169Apr 10, 2016 at 3:21
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$\begingroup$ Some wealthy people are very paranoid about all kinds of security. Not just being literally robbed, but also the risk of attracting cons (including false friends)), piggybackers (including greedy women), and other kinds of trickery and scam. $\endgroup$– Berit LarsenApr 12, 2016 at 6:44
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$\begingroup$ Because they don't want to pay tax on it, simple as that. Is your question about the psychology behind avoiding losing money? $\endgroup$– AlexApr 13, 2016 at 7:26
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$\begingroup$ This question is a bit broad. How much people flaunt their wealth and the manner in which they do it varies a lot between cultures. Maybe ask a more narrow question about which cultures support hiding wealth the most? Or if in Western culture, how much wealth must be accrued before feeling the need to hide it? Finally, I feel like the link to the Panama Papers is off-topic for the reasons stated above. $\endgroup$– Seanny123Apr 13, 2016 at 20:26
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1 Answer
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Quiet simply: loss aversion
People are adverse to loss, the majority of people who are wealthy pay into a system they get little direct benefit from, in comparison to poorer people who tend to get back what they put in or more depending on circumstance. However the rich, and everyone else, benefit from being in wealthy westernised societies with higher levels of tax, because people have more money in these countries. It is the tax system which allows these countries to develop their citizens, poor countries have lower levels of education and poor infrastructure as a result of low taxation and poor distribution of expenditure. However people do not calculate costs and indirect benefits together..."individuals bracket indirect benefits and costs separately. This is the case when the primitive utility function"..."satisfies the decomposability property (Tversky and Kahnemann, 1991)" Alesinay and Passarelliz (2015). Basically as indirect benefits are not calculated directly from costs individuals will look to avoid loss, its quiet natural to avoid loss. If you think about inheritance tax, money and property that have already been taxed are taxed again, surely an individual should be able to decide what to do with their property? Of course the state would agree for redistributing wealth for the benefit of society. Although this would seem unfair to the individual who saved in comparison to those that spent all they had. The point is that its just as easy to justify tax avoidance as it is to promote taxation, we could easily get into the principles of collectivism and individualism here but that is for the politics and philosophy areas of stackexchange.
