Over the past week you have may have heard, perhaps floating around in conversation, of the Panama Papers. The 11.5 million newly publicized documents mark the biggest leak in history – and probably the biggest annoyance and career-destroying of all.
The numerous documents describe celebrities, politicians and the top of the top who have taken advantage of offshore tax havens thanks to Mossack Fonseca, a Panama-based law firm specializing in setting up offshore companies, and the fourth largest company in the world of its kind.
So, if there’s a law firm specializing in this sort of thing, shouldn’t that mean it’s legal?
Well, yes.
Offshore investments aren’t illegal. In fact, they are entirely legal. Many companies use offshore services to keep anonymity for protection of their assets, estate planning or inheritance. With globalization in the 80s and 90s, it became an increasing way to transfer money easily and efficiently through companies and shareholders.
The “offshore” part comes in because the clients consist of people from outside the country the offshore policy exists. In this case, Panama (the tiny country in Central America). Usually these countries don’t have strong ties with where the clients come from, which culminates in lack of transparency and effective information exchange. The “tax havens” are havens for a reason – they take little to no taxes from the money put into them.
Think of it as someone offering a space to put all your money – a bank account – but without charging you for it.
That’s what makes them quite appealing to the top of the top and the richest of the rich. For those who make a lot (and perhaps too much) money, offshore tax havens allow them to keep their money out of the country where they are required to pay taxes in.
But if this isn’t illegal, what’s the problem then? Well, when we see politicians, who govern tax collection and distribution, hide their money from their own society, it’s not only shocking, but also quite aggravating. When we see celebrities get million dollar paychecks for a simple movie only to spend it on beautiful dresses and fancy dinners, all documented by paparazzi and media, it kind of sucks to hear how they’re trying to avoid contributing to society just like we and our parents do.
After the leak, Mossack Fonseca hasn’t really said anything – though they are complying with their laws. However, many documents have linked back to politicians. Two billion dollars links back to Vladimir Putin, Russia’s president, who claims this to be “Putinphobia.” Understandable.
In Iceland, harsher repercussions followed as Iceland’s public forced Prime Minister Sigmundur Davíð Gunnlaugsson to step down. He immediately refused, but, due to a vote of no confidence (where party members in the House feel like they can no longer trust their leader) and even stronger public backlash ended with the prime minister’s abdication.
Turning to Britain, Prime Minister David Cameron has no offshore account. But his father does. Ironically, this Prime Minister has been adamant to buckle down on tax evasion and make such things like offshore tax havens liable to transparency laws.
At this point, this seems more like just talk.
Should we thank whoever leaked the Panama Papers? Though it was an invasion of privacy, perhaps it can be seen as a vigilante act of transparency. Particularly, if we’re voting for leaders who are collecting taxes, perhaps it’s fair that we have a chance to make sure they’re also contributing to the society we try to build.
References and Pictures:
http://www.qwealthreport.com/wp-content/uploads/2015/06/tough-on-corpora…
http://www.theguardian.com/news/2016/apr/03/the-panama-papers-how-the-wo…
http://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-…
http://www.theguardian.com/news/2016/apr/06/panama-papers-reveal-offshor…
http://www.taxpayer.com.au/KnowledgeBase/10074/Individuals-Tax-Super/Tax…
https://grapevine.is/mag/feature/2016/04/08/the-unraveling-of-a-governme…
http://cdn.theatlantic.com/assets/media/img/mt/2016/04/RTSDPVJ-1/lead_96…
http://i.cbc.ca/1.3522847.1459947354!/fileImage/httpImage/image.jpg_gen/…