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Following the Money from ‘Panama’

Posted April 5th, 2016 at 4:32 pm (UTC-4)
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Tax shelters. Money laundering. Dodging sanctions. Shell companies. Tax havens.

These are the loaded phrases associated with the findings of the so-called Panama Papers — documents that were leaked from the Panamanian law firm Mossack Fonseca detailing how the rich and powerful park their assets to avoid scrutiny.

Among those named in the year-long probe of millions of documents by the International Consortium of Investigative Journalists: 12 current or former heads of state, including Iceland’s Prime Minister Sigmundur David Gunnlaugsson, who resigned today amid questions of a conflict of interest regarding his holdings.

The documents also indicate $2-billion in transactions were secretly shuffled through banks and shadow companies by associates of Russian President Vladimir Putin.

Putting money in offshore banks is not necessarily illegal. And there are many legal tax shelters and legitimate reasons to establish a holding company in another country. But ordinary citizens become outraged when their politicians and their close associates are the ones involved.

Panama Papers: The Elites’ Shields from Laws Imposed on Us

Editorial Board – Investor’s Business Daily 

[T]he real story is how global elites shield themselves from the laws of the countries they control by using secretive offshore entities, capable of concealing assets, laundering money and evading taxes.

So while one group of people is condemned to high taxes, “austerity,” and stiff regulations in countries like Greece — and sternly lectured to about their obligations to the state — another group of people — their ‘leaders” — escape by putting their assets in shell companies….

Any wonder that voters across the world are starting to choose protest-candidate leaders such as Donald Trump?

Politicians Should Keep Their Money at Home

Leonid Bershidsky – Bloomberg View

The Panama Papers have revealed the offshore companies of soccer star Lionel Messi, action film hero Jackie Chan and art house film director Pedro Almodovar and lots of other high-earning individuals….It’s likely these people did nothing wrong and their tax structures were perfectly legal….They are being dragged into the scandal unfairly, at least until their home countries investigate their schemes and deem them illegal. They are, after all, private citizens, under no legal or ethical obligation to pay the highest taxes possible or to reveal more than a government should know about their business….

Politicians, officials and other “politically exposed persons,” or PEPs, shouldn’t be using the offshore industry. It’s not even a matter of keeping their hands clean of corruption: These people are supposed to fix their own countries so that citizens don’t have to go offshore for tax benefits or better legal protections.

People demonstrate against Iceland's Prime Minister Sigmundur David Gunnlaugsson over allegations of financial corruption detailed in the "Panama Papers" in Reykjavik  on April 5, 2016. (Reuters)

People demonstrate against Iceland’s Prime Minister Sigmundur David Gunnlaugsson over allegations of financial corruption detailed in the “Panama Papers” in Reykjavik on April 5, 2016. (Reuters)

‘Panama Papers’ Underscore the Crucial Importance of Tax Havens

John Tamny – Real Clear Markets

So while readers can expect all sorts of commentary about the rich essentially burying their money under the proverbial tax-haven designed mattress, the actual truth is that the more the world’s superrich are able to shield their wealth from the tax man, the better the odds we all have of accessing the savings of the superrich. When the rich get to keep their wealth, we have immediate access to it through loans and investments in the ideas of today and tomorrow. Put more simply, what the rich keep from the government is wealth that is immediately spread around among those who aren’t rich….

At the same time it’s hard not to be offended by news of politicians possessing far more wealth than these alleged men and women of the people generally let on. News like this should definitely offend us, but it shouldn’t surprise us. Politicians get into politics and dictators lust for power so that they can get rich.

The Panama Papers: Where Have Russia’s Billions Gone?

Editorial Board – The Washington Post

Two years ago, a professional cellist, Sergei Roldugin, a lifelong friend of Russian President Vladimir Putin, told a reporter that he was just a humble musician. “I’ve got an apartment, a car and a dacha,” he said. “I don’t have millions.” Now it turns out that Mr. Roldugin’s name is all over documents leaked from an offshore banking network that may have been a conduit for hidden assets of Putin loyalists….

When Mr. Putin came to power 15 years ago, the Kremlin was under the influence of a handful of wealthy oligarchs who had made their fortunes during the years of President Boris Yeltsin….Putin promised to establish order and wipe out the oligarchs as a class….

The new disclosures affirm that what changed was not the system but its beneficiaries. Mr. Putin did not establish rule of law and battle corruption, but rather created the rule of one and a band of brothers who grew very rich on his watch. None of them could have amassed such wealth on government salaries alone, or on those of a professional cellist.

Watch the president’s remarks on the Panama Papers:

Why Draining Vladimir Putin’s Secret Bank Accounts Is So Difficult

Jeff Spross – The Week

In a way, fighting this sort of international tax avoidance is a lot like fighting climate change. The problem requires all countries (or at least most countries) to adopt very similar sets of policies. But there’s no world government to direct nation states to do so….So countries have to rely on trust, cooperation, and dealmaking to create and sustain an international system that can actually tackle the problem.

International tax dodging doesn’t actually do tremendous harm to the U.S. government’s finances. We only lose about $35 billion a year to it — less than 1.3 percent of 2015’s tax revenue. But the total tax revenue loss for all countries collectively is around $200 billion a year…Globally, the practice keeps about $7.6 trillion in wealth hidden from the eyes of national tax systems.

So while America may not be the biggest victim of the practice, we do have a stake. Furthermore, we have the diplomatic and geopolitical clout to start setting up these policies, and thus bring the rest of the world onboard for a healthier and fairer set of interlocking tax systems.




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