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MSome of the world’s richest and most powerful people are once again in the limelight by using secret tax havens and corporate structures to hide wealth and avoid paying taxes. The Pandora Papers is the third in a series of massive leaks of documents to the media Panama Papers more in 2016 heaven’s papers In 2017 – and little seems to have changed in the interim.
they include The new revelations so far include the leaders of the Czech Republic, Cyprus, Jordan and Ukraine, members of the ruling family in Azerbaijan and people close to Vladimir Putin. In all, more than 100 billionaires are reportedly involved in the revelations, which include transactions ranging from millions of pounds of assets to slush funds and superyachts.
We asked Professor Ronen Palan, an expert in offshore tax havens at the City, University of London, about the story so far.
What are your initial thoughts?
I’m afraid I’m not surprised by these papers. There is no evidence to suggest that the volume of transactions going through these offshore centers is declining, so the financial structures we heard about in the Panama and Paradise Papers are still clearly in use. are being done.
It’s tempting that in the public eye so many would know that their activities would eventually become common sense, and yet they opted for offshore secrecy anyway. I think any worry can probably be overcome by greed and the knowledge that they will not be stopped from doing so.
In some cases we are talking about (illegal) tax evasion and in some cases it is (legal) tax evasion: the difference comes down to whether the people in question have told the authorities in their home countries what is being used by them. Was fully informed about offshore formations. In the instances when I read that they are asked by the media to comment and they refuse to respond, it seems that we are talking about plagiarism – although this is unproven.
Why is the situation not showing improvement?
in the last 20 or 30 years, international regulation Is focused on tool making that allow Tax authorities to ensure that taxpayers are not evading taxation. Systems were introduced that focused on “Know Your Customer” or KYC – requiring people transacting in particular jurisdictions to fully identify themselves so that this information could be shared with other jurisdictions.
This essentially creates transparency so that you know who has the money, so that tax officials can use this information to make sure their citizens are not evading taxation. But while it may be effective in countries where the tax authority is operating independently of government and politics, it will not work in Russia or China or many other developing countries. So it is not surprising to me that many of the revelations are about activities outside the developed world.
Read also: Anil Ambani, Tendulkar among Indians investing in offshore firms, ‘Pandora Papers’ revealed
But why hasn’t transparency compelled the tax haven to change?
It has brought change, but some jurisdictions are more compliant than others. So you have some British jurisdictions like Jersey or the Cayman Islands which are far more transparent than they used to be. On the face of it, they can claim to be more regulated than Denmark or Sweden.
But professionals who have the expertise to create structures that enable tax evasion are still often based in these locations, and they create structures with different layers that will be partly registered in these jurisdictions but partly Those with loose transparency rules like the British Virgin Islands or Panama – follow the letter but not the spirit of the law. This makes it very difficult to see what is going on and whose money is involved.
How do we improve the current situation?
Pandora’s papers show that we are reaching the limits of what can be done with data transparency. Until we find ways to tighten the trap, this won’t be the last leak of its kind. This is recognized OECD (Organization for Economic Co-operation and Development) and at least indirectly other international bodies In his growing interest in going after supporters, rather than focusing only on tax evaders.
Maybe it’s time to make something similar to that applied in medicine, so that, if supporters violate certain standards, they can be prosecuted – even in countries that are not directly affected by their activities. If they went to such a country, they could be arrested upon arrival.
Should we create a new international institution dedicated to curbing tax evasion?
In practical terms, the three places that it comes to making international rules are the US, the European Union, and China. Unfortunately they don’t agree much with each other right now, so it would be difficult to come to an agreement about such an institution. Even if they agreed, they would be accused of imperialism, or acting as dictators, by smaller countries.
Of course, these three players would still need to agree on an initiative, so that you could make the same critique of this strategy, but it is at least more modest in its scope and therefore potentially more realistic.
Are all these revelations really helpful?
There is certainly a risk of media saturation, in which the public is aware of this type of activity and may be far less interested. But we need to emphasize that the results are not going away: to run a modern state, it is very expensive. In order to pay for a good education system, a good health system, properly working infrastructure etc., one has to pay for it.
If the rich are avoiding paying their share, someone else is picking up the tab, and that is the poor or the squeezed middle class. So if the public is tired of all this scam, it doesn’t change the fact that they are suffering because of it.
ronen rearing, Professor of International Politics, City, University of London
This article is republished from Conversation Under Creative Commons license. read the original article.
Read also: Pandora’s papers show that stringent laws alone won’t deter rich Indians from financial juggling
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