The disclosure of the Panama Papers,
the biggest-ever leak of confidential information in human history, has
highlighted yet again how the rich and the powerful use—rather, misuse—tax
havens not just for avoiding payment of taxes but for a wide range of nefarious
activities: from money laundering to funding wars, from trading in human beings
to drug dealing. It is often claimed by clever accountants and smart lawyers
that providing offshore banking and financial services is not necessarily
illegal, leave alone evil. But there is much that is not explicitly stated
about the working of 90-odd tax havens scattered across the globe, including
some that are located within national jurisdictions of countries like the
United States (Delaware and Florida) and in principalities or microstates in
Europe (Monaco and Liechtenstein). The secrecy that is guaranteed in these tax
havens ensures a conducive environment for corrupt political leaders, their relatives
and associates, businesspersons and celebrities to park their funds and take
them out at will. Money moves rapidly across multiple tax jurisdictions, a
phenomenon called “round-tripping,” to make it difficult for regulatory
authorities to ascertain the “beneficial owners” of companies. Equally
importantly, the line that divides legal forms of tax avoidance and illegal
forms of tax evasion is so thin as to be virtually non-existent. The issues
that have been raised go beyond loss of revenue to the damage done to
democratic institutions and ensuring greater transparency in public life.
Few of the names that have been
highlighted in the Panama Papers are those of citizens from Western countries.
They are instead from Russia, China, Saudi Arabia, Malaysia, Syria, Argentina,
Morocco, Pakistan, India, Argentina, Azerbaijan, Qatar, the United Arab
Emirates and various countries of Africa. It would, however, be erroneous to
conclude from the media coverage of the leaked documents that politicians and
businesspersons in advanced capitalist countries are paragons of virtue. Far
from it. On the contrary, the one country that is responsible for overseeing
the working of as many as 18 tax havens happens to be the United Kingdom.
Today the Paris-based Organisation
of Economic Cooperation and Development (OECD), a grouping of some of the
richest countries in the world, is fretting that only a handful of countries
are refusing to go along with its Base Erosion and Profit Shifting (BEPS)
initiative that seeks to combat tax avoidance and counter strategies that
exploit gaps and mismatches in tax rules to make profits “disappear” or shift
to locations where there is little or no economic activity and where no taxes
have to be paid. The OECD has pointed out that unlike 96 countries, including
India, only four small countries have staunchly refused to go along with an
important aspect of the BEPS initiative, namely, automatic exchange of
tax-related information by electronic means. These four happen to be, besides
Panama, two small island-states in the Pacific Ocean, Nauru and Vanuatu, and
Bahrain. There is more than an element of hypocrisy in the fact that the very
same countries that once encouraged offshore banking in tax havens are now
cribbing about tax avoidance by large multinational corporations in the wake of
the Great Recession.
The Panama Papers have contributed
to a fair share of titillation in the media in India and the world, thanks to
names of so-called celebrities cropping up (most of whom deny any wrongdoing),
from Lionel Messi, Jackie Chan, Vladimir Putin and Xi Jinping to our very own
Amitabh Bachchan, Aishwarya Rai and Niira Radia. Be that as it may, what is
clear is that the flight of capital to tax havens represents an element of the
ugly underbelly of the brave new world of globalisation of economic
liberalisation. Till 2003, no Indian citizen could set up a corporate entity
overseas. Accountants sidestepped the rules and exploited the ambiguities in
the fine print of the law. Indians invested in companies while not owning them.
Firms like Mossack Fonseca in Panama showed high net worth individuals the way
by offering them companies and directorships literally off the shelf. In 2004,
the Reserve Bank of India allowed Indian residents to take out $25,000 a year
under a libera_lised remittances scheme, an amount that has since gone up
tenfold. Thus, one should not be surprised that all the businesspersons whose
names find place in the Panama Papers are saying they have done nothing wrong.
However, this is not to say that tax havens are not being used to launder money
and a host of other illegal activities. Moreover, the disclosures represent
only the tip of the proverbial iceberg. It is mind-boggling to realise that the
data that has entered the public domain—11.5 million documents or 2.6
terrabytes of data—came from a single firm of lawyers located in one small
country situated between the two American continents.
There is one commendable fallout
from the muck that has been flung around. Portions of the Panama Papers were
first leaked to Süddeutsche Zeitung, a German daily, which then roped in
the Washington-based International Consortium of Investigative Journalists that
has put together a network of over 190 journalists working in media
organisations in more than 50 countries, including the Indian Express.
The Panama Papers demonstrate that when journalists collaborate and not merely
compete with one another, the consequences can be noteworthy.
Source: EPW
The
disclosure of the Panama Papers, the biggest-ever leak of confidential
information in human history, has highlighted yet again how the rich and
the powerful use—rather, misuse—tax havens not just for avoiding
payment of taxes but for a wide range of nefarious activities: from
money laundering to funding wars, from trading in human beings to drug
dealing. It is often claimed by clever accountants and smart lawyers
that providing offshore banking and financial services is not
necessarily illegal, leave alone evil. But there is much that is not
explicitly stated about the working of 90-odd tax havens scattered
across the globe, including some that are located within national
jurisdictions of countries like the United States (Delaware and Florida)
and in principalities or microstates in Europe (Monaco and
Liechtenstein). The secrecy that is guaranteed in these tax havens
ensures a conducive environment for corrupt political leaders, their
relatives and associates, businesspersons and celebrities to park their
funds and take them out at will. Money moves rapidly across multiple tax
jurisdictions, a phenomenon called “round-tripping,” to make it
difficult for regulatory authorities to ascertain the “beneficial
owners” of companies. Equally importantly, the line that divides legal
forms of tax avoidance and illegal forms of tax evasion is so thin as to
be virtually non-existent. The issues that have been raised go beyond
loss of revenue to the damage done to democratic institutions and
ensuring greater transparency in public life.
Few of the names that have been highlighted in the Panama Papers are
those of citizens from Western countries. They are instead from Russia,
China, Saudi Arabia, Malaysia, Syria, Argentina, Morocco, Pakistan,
India, Argentina, Azerbaijan, Qatar, the United Arab Emirates and
various countries of Africa. It would, however, be erroneous to conclude
from the media coverage of the leaked documents that politicians and
businesspersons in advanced capitalist countries are paragons of virtue.
Far from it. On the contrary, the one country that is responsible for
overseeing the working of as many as 18 tax havens happens to be the
United Kingdom.
Today the Paris-based Organisation of Economic Cooperation and
Development (OECD), a grouping of some of the richest countries in the
world, is fretting that only a handful of countries are refusing to go
along with its Base Erosion and Profit Shifting (BEPS) initiative that
seeks to combat tax avoidance and counter strategies that exploit gaps
and mismatches in tax rules to make profits “disappear” or shift to
locations where there is little or no economic activity and where no
taxes have to be paid. The OECD has pointed out that unlike 96
countries, including India, only four small countries have staunchly
refused to go along with an important aspect of the BEPS initiative,
namely, automatic exchange of tax-related information by electronic
means. These four happen to be, besides Panama, two small island-states
in the Pacific Ocean, Nauru and Vanuatu, and Bahrain. There is more than
an element of hypocrisy in the fact that the very same countries that
once encouraged offshore banking in tax havens are now cribbing about
tax avoidance by large multinational corporations in the wake of the
Great Recession.
The Panama Papers have contributed to a fair share of titillation in
the media in India and the world, thanks to names of so-called
celebrities cropping up (most of whom deny any wrongdoing), from Lionel
Messi, Jackie Chan, Vladimir Putin and Xi Jinping to our very own
Amitabh Bachchan, Aishwarya Rai and Niira Radia. Be that as it may, what
is clear is that the flight of capital to tax havens represents an
element of the ugly underbelly of the brave new world of globalisation
of economic liberalisation. Till 2003, no Indian citizen could set up a
corporate entity overseas. Accountants sidestepped the rules and
exploited the ambiguities in the fine print of the law. Indians invested
in companies while not owning them. Firms like Mossack Fonseca in
Panama showed high net worth individuals the way by offering them
companies and directorships literally off the shelf. In 2004, the
Reserve Bank of India allowed Indian residents to take out $25,000 a
year under a libera_lised remittances scheme, an amount that has since
gone up tenfold. Thus, one should not be surprised that all the
businesspersons whose names find place in the Panama Papers are saying
they have done nothing wrong. However, this is not to say that tax
havens are not being used to launder money and a host of other illegal
activities. Moreover, the disclosures represent only the tip of the
proverbial iceberg. It is mind-boggling to realise that the data that
has entered the public domain—11.5 million documents or 2.6 terrabytes
of data—came from a single firm of lawyers located in one small country
situated between the two American continents.
There is one commendable fallout from the muck that has been flung around. Portions of the Panama Papers were first leaked to Süddeutsche Zeitung,
a German daily, which then roped in the Washington-based International
Consortium of Investigative Journalists that has put together a network
of over 190 journalists working in media organisations in more than 50
countries, including the Indian Express. The Panama Papers
demonstrate that when journalists collaborate and not merely compete
with one another, the consequences can be noteworthy.
- See more at:
http://www.epw.in/journal/2016/15/editorials/how-tax-havens-are-misused-rich-and-powerful.html#sthash.luRsbnNK.dpuf
The
disclosure of the Panama Papers, the biggest-ever leak of confidential
information in human history, has highlighted yet again how the rich and
the powerful use—rather, misuse—tax havens not just for avoiding
payment of taxes but for a wide range of nefarious activities: from
money laundering to funding wars, from trading in human beings to drug
dealing. It is often claimed by clever accountants and smart lawyers
that providing offshore banking and financial services is not
necessarily illegal, leave alone evil. But there is much that is not
explicitly stated about the working of 90-odd tax havens scattered
across the globe, including some that are located within national
jurisdictions of countries like the United States (Delaware and Florida)
and in principalities or microstates in Europe (Monaco and
Liechtenstein). The secrecy that is guaranteed in these tax havens
ensures a conducive environment for corrupt political leaders, their
relatives and associates, businesspersons and celebrities to park their
funds and take them out at will. Money moves rapidly across multiple tax
jurisdictions, a phenomenon called “round-tripping,” to make it
difficult for regulatory authorities to ascertain the “beneficial
owners” of companies. Equally importantly, the line that divides legal
forms of tax avoidance and illegal forms of tax evasion is so thin as to
be virtually non-existent. The issues that have been raised go beyond
loss of revenue to the damage done to democratic institutions and
ensuring greater transparency in public life.
Few of the names that have been highlighted in the Panama Papers are
those of citizens from Western countries. They are instead from Russia,
China, Saudi Arabia, Malaysia, Syria, Argentina, Morocco, Pakistan,
India, Argentina, Azerbaijan, Qatar, the United Arab Emirates and
various countries of Africa. It would, however, be erroneous to conclude
from the media coverage of the leaked documents that politicians and
businesspersons in advanced capitalist countries are paragons of virtue.
Far from it. On the contrary, the one country that is responsible for
overseeing the working of as many as 18 tax havens happens to be the
United Kingdom.
Today the Paris-based Organisation of Economic Cooperation and
Development (OECD), a grouping of some of the richest countries in the
world, is fretting that only a handful of countries are refusing to go
along with its Base Erosion and Profit Shifting (BEPS) initiative that
seeks to combat tax avoidance and counter strategies that exploit gaps
and mismatches in tax rules to make profits “disappear” or shift to
locations where there is little or no economic activity and where no
taxes have to be paid. The OECD has pointed out that unlike 96
countries, including India, only four small countries have staunchly
refused to go along with an important aspect of the BEPS initiative,
namely, automatic exchange of tax-related information by electronic
means. These four happen to be, besides Panama, two small island-states
in the Pacific Ocean, Nauru and Vanuatu, and Bahrain. There is more than
an element of hypocrisy in the fact that the very same countries that
once encouraged offshore banking in tax havens are now cribbing about
tax avoidance by large multinational corporations in the wake of the
Great Recession.
The Panama Papers have contributed to a fair share of titillation in
the media in India and the world, thanks to names of so-called
celebrities cropping up (most of whom deny any wrongdoing), from Lionel
Messi, Jackie Chan, Vladimir Putin and Xi Jinping to our very own
Amitabh Bachchan, Aishwarya Rai and Niira Radia. Be that as it may, what
is clear is that the flight of capital to tax havens represents an
element of the ugly underbelly of the brave new world of globalisation
of economic liberalisation. Till 2003, no Indian citizen could set up a
corporate entity overseas. Accountants sidestepped the rules and
exploited the ambiguities in the fine print of the law. Indians invested
in companies while not owning them. Firms like Mossack Fonseca in
Panama showed high net worth individuals the way by offering them
companies and directorships literally off the shelf. In 2004, the
Reserve Bank of India allowed Indian residents to take out $25,000 a
year under a libera_lised remittances scheme, an amount that has since
gone up tenfold. Thus, one should not be surprised that all the
businesspersons whose names find place in the Panama Papers are saying
they have done nothing wrong. However, this is not to say that tax
havens are not being used to launder money and a host of other illegal
activities. Moreover, the disclosures represent only the tip of the
proverbial iceberg. It is mind-boggling to realise that the data that
has entered the public domain—11.5 million documents or 2.6 terrabytes
of data—came from a single firm of lawyers located in one small country
situated between the two American continents.
There is one commendable fallout from the muck that has been flung around. Portions of the Panama Papers were first leaked to Süddeutsche Zeitung,
a German daily, which then roped in the Washington-based International
Consortium of Investigative Journalists that has put together a network
of over 190 journalists working in media organisations in more than 50
countries, including the Indian Express. The Panama Papers
demonstrate that when journalists collaborate and not merely compete
with one another, the consequences can be noteworthy.
- See more at:
http://www.epw.in/journal/2016/15/editorials/how-tax-havens-are-misused-rich-and-powerful.html#sthash.luRsbnNK.dpuf
