THE PANAMA PAPERS: NOT THE BEGINNING AND NOWHERE NEAR THE END

by Gunnar Eigener

“The difference between tax avoidance and tax evasion is the thickness of a prison wall.”

Denis Healey, UK Chancellor 1974-79

The leak of over eleven million documents from Panamanian law firm Mossack Fonseca only really scratches the surface. Like all tax havens, there is a long history of corruption and exploitation to which the tale of Panama is no exception.

In 1937, then US Treasury Secretary, Henry Morgenthau, wrote a letter to President Franklin D Roosevelt, singling out the Bahamas, Panama and Newfoundland as places where:

‘stock-holders have resorted to all manners of devices to prevent the acquisition of information regarding their companies. The companies are frequently organised through foreign lawyers with dummy incorporators and dummy directors, so that the names of the real parties in interest do not appear.’

Years later and Morgenthau’s proposal is realised. Panama is seen to cater to a number of banks and organisations including, for example, the infamous Bank of Credit and Commerce International (BCCI) whose branches in Panama would go on to safeguard the money of Latin American drug lords and help Manuel Noriega fleece the national treasury.

That the clients of Mossack Fonseca includes dictators, politicians and businessmen is highly unlikely to shock the majority of readers. Ever since research was published by Tax Justice Network in 2012 revealing that as much as $32 trillion was being hidden in tax havens, and books such as Nicholas Shaxson’s Treasure Islands: Tax Havens and the Men Who Stole the World detailed the corruption, it’s hardly surprising to see this finally reaching the mainstream media.

Yet Gerard Ryle, the director of the International Consortium of Investigative Journalists (ICIJ), one of the main groups that consulted on the papers, said “The offshore world really only has one product and that is secrecy, and when you take away that product they don’t have anything for sale.” Ryle seems to be working on the assumption that the rest of the world has never heard of tax havens. Meanwhile, one of the ICIJ’s funders is the Sigrid Rausing Trust, run by Sigrid Rasuing, granddaughter of Tetra Pak founder, Ruben Rausing. Sigrid Rausing was accused last year of hiding money in HSBC Swiss accounts to avoid paying capital gains taxes in the UK through the non-domicile loophole.

The United Kingdom is no stranger to tax havens. Many of the world’s tax havens are under British control, places like the Isle of Man, the Cayman Islands, Bermuda, Gibraltar, Jersey and the British Virgin Islands. If David Cameron is serious about tackling tax avoidance – and that’s a big if – it really wouldn’t be difficult to find a place to start. Yet the Tory political machine is already getting into gear. Dominic Grieve MP, a former attorney general, actually said that acting on tax havens would destroy the local economy and that it was inevitable that the wealthy would seek to avoid taxes.

If David Cameron is serious about tackling tax avoidance – and that’s a big if – it really wouldn’t be difficult to find a place to start.

Perhaps what is inevitable, and what will sadly ultimately consign the whole affair to the annals of history, is that the majority of the activities are essentially legal. While investigations are being launched by a number of governments, these are more than likely being carried out to, ultimately, convince the public that governments care, and to maintain the status quo. The likelihood of any legal convictions is very slim and even then, the chances are they will just be scapegoats. The fundamental problem will still remain.

If you haven’t already realised, don’t expect the mainstream media to pay too close attention. Many have already focussed the spotlights only on the leaders of those countries who Western governments want to bring down: Russia’s President Vladimir Putin, Ukraine’s President Petro Poroshenko and Argentina’s President Mauricio Macri amongst others. The embarrassment for Western leaders was less intrusive. Prime Minister David Cameron’s father was implicated although he claimed, until forced to be transparent about the matter, that this was nothing but a ‘private matter’.

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Cartoon: Steve Bell

When addressing a new set of core tax principles – and advocating transparency – back in 2013, Cameron commented that, “the more eyes that look at this information, the more accurate it will be. This is a complete world first on transparency and I’m proud Britain is leading the way.” Despite this, in the same year, Cameron sent a letter to EU officials questioning the need for plans for public ownership registers for companies. Whether you consider tax dodging to be morally acceptable or not, the hypocrisy is astounding.

There have been calls for the entire cache of documents to be released, however that is unlikely to happen. Media organisations are directed to tread carefully by parent companies which often run their profits through the very tax havens they would report on. Undoubtedly corporations will lean on the politicians they sponsor to ensure their names don’t appear in exposes or at least cushion the blow where possible.

While the mainstream media slowly lets the story die and the alternative media keeps attacking the issue to no avail, we are left with some certainties: tax havens will not suddenly be closed down, there will be no major prosecutions, no impeachments, no votes of no confidence, very few resignations. In essence the rich will not stop hiding their money away and the politicians will not chase them down.

As Gerard Ryle, said: “These documents, if nothing else, raise an awful lot of questions.” I’m going with lots of questions, no answers and nothing else. Discussions will be held and identities and names will be withheld. Secrecy will remain even when the nature of secrecy is the very thing that is being called into question. Greed remains the answer.

“Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”

    Napoleon Bonaparte

Featured Image: Thomas Trutschel/Photothek via Getty Images

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