Surreptitious in nature and home to many of the world’s wealthiest corporations, tax havens have recently been shone under the spotlight of news media outlets thanks to the efforts of Vermont senator Bernie Sanders and the infamous “Panama Papers” leak in mid-2016. The “Panama Papers” was an unprecedented leak conducted by an unknown source who supplied 2.6 terabytes worth of digital documents to the International Consortium of Investigative Journalists (ICIJ) in 2015. It contains documents that relate many of the world’s most influential individuals to tax havens around the world. A few days after the ICIJ publicly disclosed a portion of the “Panama Papers” in April 2016, The Economist published a very interesting and thoughtful article titled “The Lessons of the Panama Papers.” This article outlines some of the major realizations that we can obtain from reading through the ICIJ’s summaries and suggests some lessons governments and policymakers must takeaway from the leak.
Indeed, the “Panama Papers” is a groundbreaking leak that reveals secrets about how many affluent individuals and families are able to evade taxes through the use of tax havens. As the article mentions, the Papers provide links between Mossack Fonseca, a Panamanian law-firm that specializes in offshoring companies, and major businessmen, politicians, and influential figures around the world. From David Cameron’s late father to the daughters of Azerbaijan’s presidents’ daughters, the ICIJ revealed that the prevalence of offshore companies, commonly associated with the term “tax havens,” has a strong link with many powerful politicians and affluent families around the world. Furthermore, the ICIJ has found a substantial number of links between the aforementioned companies and Vladimir Putin, the president of Russia, mainly through Putin’s close friends who have “shuffled $2 billion through a network of banks and offshore firms.” Over “140 politicians and officials, including 12 current and former presidents, monarchs and prime ministers” have been unveiled thanks to the “Panama Papers” as of April 2016.
More importantly, although it is patently clear that the evasion of taxes is unjust, there exist many lessons that we must learn from this leak, as emphasized by The Economist. First, we must learn that corruption is still a major problem around the world. Although the tax haven loophole can be legally justified in some nations as “off-shoring,” corruption still plays a major role in tax havens and the creation of offshore firms. Mainly attributed to a lack of transparency and a lack of strict regulations, tax havens encourage tax evasion and other illicit means to not avoid taxation. The Economist suggests that stricter regulations must be in place in order to be more stringent on those who evade taxes through offshore firms. Furthermore, the article provides insight on regulating intermediaries such as Mossack Fonseca and other law firms to weaken the structure under which offshore firms operate. Through the application of these recommendations, offshore firms can be held more accountable for their financial crimes.
Though the international community has not taken effective action against tax havens and offshore firms in the past decades, we hope to see improvement in combatting corruption and financial crimes that leave heavy burdens on lawful taxpayers and benefit large multinational conglomerates. The “Panama Papers” was a glimpse at the large shadow that glooms over the international financial and banking industries. With recent action by key political figures such as former Prime Minister David Cameron at the UK Anti-Corruption Summit in May, policymakers around the world must realize the severity of the issue at hand and must set long-term goals to foster more transparency and to establish justice.
Panama Papers (ICIJ): https://panamapapers.icij.org/
Image Source: http://www.bbc.com/news/world-35918844