April, the last month of tax season, is here. Hold your applause. Depending on how you voted in the election and how happy you are about the outcome, you and I may have similar or different opinions on taxes.
Here’s one thing we can all agree on: people who try to avoid paying taxes tick us off. It’s a lousy thing to do — particularly when the people doing so are really rich.
Ever since the International Consortium of Investigative Journalists (ICIJ) reported on an enormous data-leak of offshore tax deal information from Panama law firm Mossack Fonseca, in what’s been dubbed the Panama Papers, we’ve been learning about what some very rich people from around the world are doing with the billions of dollars of their money that have gone through the firm.
Mossack Fonseca deals with world elites from 40 different countries, including millionaire athletes and musicians, drug lords, and friends and associates of the prime ministers of Britain, Iceland, Pakistan and the president of Ukraine, helping them manage some of their wealth in a secretive and, in many cases, potentially illegal manner. Mossack Fonseca, by the way, is known for starting shell companies, a.k.a smokescreens to hide asset ownership for the rich. In most cases, having money in offshore accounts isn’t illegal, and many of the people whose names appeared in this scandal have been getting their PR teams to hammer that point home. But is it that much of a stretch to assume something unwholesome is going on when all that money is squirrelled away in secret? The ICIJ claims that many of those whose names are in the leak can be directly associated with sketchy dealings like money laundering, sanction dodging and, of course, tax evasion.
Some whose names have been exposed are already facing painful consequences, like Iceland’s prime minister, Sigmundur DavÃð Gunnlaugsson, who just stepped down. Gunnlaugsson claims it’s not a full-on resignation, but someone else is doing his job for him now; so take from that what you will.
Gunnlaugson used to have money invested in a foreign business. He sold that stake to his wife. He never declared it. That was enough for the people of Iceland to call for his resignation. They obviously remember the financial crisis of 2008, in which Iceland saw several bankers and businessmen using offshore companies for risky behind-the-scenes financial deals, while the banks, and currency of the country were on the verge of collapse. Many of those businessmen and bankers went to jail for that.
Meanwhile, the governments in China and Russia have largely tried to cover up and deny any sort of wrongdoing on the part of the many associates of political leaders whose hands have been caught in the cookie jar, so to speak. A Chinese state media tabloid has been working hard to spin it all as a conspiracy by media companies in the Western world, meant to make them look bad, when not outright denying everything.
It’s too early to make any calls on what sorts of legal consequences there will be and for whom, but here’s the question that keeps returning to my mind: If you don’t have something to hide, why wouldn’t you announce those foreign assets?
I get confidence in my assumption of shady deals, just by scrolling down in the business section of any news page.
We’re in an age where this kind of thing is far too common. For example, President Barack Obama just stopped American pharmaceutical giant Pfizer from buying Ireland’s Allergan, in a $160 billion merger.
What interest did an American company like Pfizer have in buying an Irish company? A loophole through which it could move its headquarters to Ireland, where (you guessed it), corporate taxes are far cheaper.
Why do I mention Pfizer? Because its leaders are part of the rich elite, and proof that this sort of thing happens a lot. And, if anything, the gap between the rich and the poor is only growing these days. If this budding scandal has shown me anything, it’s that the super rich in many cases, may need some stricter rules on how they handle all their money; especially offshore. And if not more rules, more transparency is needed.
