It has been around five months since the International Consortium of Investigative Journalists (ICIJ) published major portions of the Panama Papers on its website. It was clear from the beginning that, whoever the leaker may be, the motivation behind the leak was to unveil the dark secrets behind the complex workings and transactions of offshore firms that utilize tax havens. However, although the Panama Papers was at the center of the global political stage for several weeks, it soon seemed that international politics was quickly taken up by more “important” issues such as Brexit, the South China Sea dispute, and Donald Trump. So, have policymakers and international organizations forgotten this leak? What have we done to mitigate the countless problems that were revealed by it?
An insightful and informative editorial recently published by the Japan Times may provide answers to my questions. Titled “Stop international tax dodges,” the editorial provides commentary and an update to the progress that has been made to eliminate tax dodging and evasions. First, the editorial gives a concise overview of the tax haven problem: currently, businesses are dodging around 24 trillion yen – equal to 240 billion USD – of taxes, putting the burden of these missing taxes on lawful taxpayers, most being middle class citizens. However, the problem with tax dodging, as the editorial expounds, is that the flow of money is very difficult to track due to the complex nature of international transactions. Thus, the editorial points out, there has been action by the Organization for Economic Co-operation and Development (OECD) and the G-20 to “beef up the international regime to fight tax evasion.”
The major progress that has been made since the Panama Papers was on the international framework of taxation rules. In the past, the “non-cooperative” nations/jurisdictions blacklist maintained by the OECD was unsuccessful due to the lack of transparency in smaller and more secretive jurisdictions that made it difficult to track the flow of money. This blacklist was first implemented in the late 1990s as part of the OECD’s Harmful Tax Competition Initiative (HTCI) with the purpose of encouraging tax havens to implement stronger and harsher tax regulations that were in compliance with an international benchmark; jurisdictions that did not comply would be added to a public blacklist. The editorial states that the G20 will soon agree upon a new and updated criterion for taxation rules at the summit in Hangzhou, China, next month. In fact, many jurisdictions that have not yet met the current criteria, according to the editorial, have “rushed to join… countries that have already imposed tougher taxation rules,” showing the high potential of the new criterion that will be agreed upon next month. As these new rules take their place, there seems to be a high probability that many more jurisdictions will enact tougher policies to combat tax dodging and evasion.
Although it is not a perfect resolution to the complicated network of problems surrounding offshore firms, a newly agreed criterion on tax regulations is surely an amazing start in actively combatting this issue; through added transparency and harsher regulations, it will be tougher for businesses to hide their tax dodging schemes. From this major precedent, I seriously hope that the international community continues to make agreements and regulations to limit the ability of offshore firms to dodge taxes. As the Panama Papers revealed, we, as a global community, have a long way to go before we can address all the different ways offshore firms and businessmen minimize their tax duties. Without persistent action taken against these firms, illicit tax evasions will inevitably continue. In the following months and years, we will unequivocally find that international cooperation is cardinal when handling such a problem.
Japan Times – http://www.japantimes.co.jp/opinion/2016/08/20/editorials/stop-international-tax-dodges/#.V7lrGpOF5mA