Sunday, January 16

Pandora Papers: ‘it’s time to go after lawyers and accountants who allow tax evasion’


Many of the world’s richest and most powerful people are once again in the limelight for using secret tax havens and corporate structures to hide wealth and avoid paying taxes. The Pandora Papers are the third in a series of massive document leaks to the media following the Panama documents in 2016 and Paradise papers in 2017, and little seems to have changed in the meantime.

Those included So far the new revelations include the leaders of the Czech Republic, Cyprus, Jordan and Ukraine, as well as members of the ruling family in Azerbaijan and figures close to Vladimir Putin. In all, more than 100 billionaires are reported to be involved in the disclosures, with transactions ranging from millions of pounds worth of properties to bribery funds and superyachts.

We asked Professor Ronen Palan, City Offshore Tax Havens Specialist, University of London, about the story so far.

What are your initial thoughts?

I’m afraid these papers don’t surprise me. There is no evidence to suggest that the volume of transactions taking place through these offshore centers is decreasing, so the same financial structures that we hear about in the Panama and Paradise newspapers are still clearly being used.

It’s fascinating that so many of these people in the public eye must have known that their activities would eventually become public knowledge, and yet they opted for secrecy on the high seas anyway. I suppose any concern can be overcome perhaps by greed and the knowledge that they will not be prevented from doing so.

In some cases we are talking about (illegal) tax evasion and, in other cases, (legal) tax evasion: the difference comes down to whether the persons in question had fully notified the authorities of their home countries about the extraterritorial structures that are using. In the cases where I read that the media asks them to comment and they refuse to respond, the appearance is created that we are talking about evasion, although this remains unproven.

Why doesn’t the situation seem to improve?

During the last 20 or 30 years, international regulation have focused on creating tools that allows tax authorities to ensure that taxpayers do not evade taxes. Systems were introduced that focus on “know your customer” or KYC, which requires individuals who transact in particular jurisdictions to fully identify themselves so that this information can be shared with other jurisdictions.

This essentially creates transparency so that you know who has money and where, so that tax authorities can use this information to ensure that their citizens do not evade taxes. But while that may be effective in countries where the tax authority operates independently of government and politics, it will not work in Russia or China or many other developing countries. Therefore, I am not surprised that many of the disclosures refer to activities outside the developed world.

But why hasn’t transparency forced to change tax havens?

It has brought about change, but some jurisdictions are more compliant than others. So you have some British jurisdictions like Jersey or the Cayman Islands that are much more transparent than they used to be. At first glance, they can claim that they are more regulated than, say, Denmark or Sweden.

But professionals who have the experience to create structures that allow for tax evasion are often still in these places, and they create structures with different levels that will be registered partly in these jurisdictions but partly in those with more flexible transparency rules such as the British Virgin. Islands or Panama – following the letter but not the spirit of the law. This makes it very difficult to see what is happening and what money is involved.

How do we improve the current situation?

Pandora articles show that we are reaching the limit of what can be done with data transparency. Unless we find ways to tweak the network, this won’t be the last leak of its kind. This It’s recognized at least implicitly by the OECD (Organization for Economic Cooperation and Development) and other international organizations in their growing interest in going after facilitators, rather than focusing solely on the tax evaders themselves.

Perhaps it is time to create something similar to what is applied in medicine, so that if facilitators 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 ending tax evasion?

In practical terms, the three places that matter when it comes to creating international regulations are the US, the EU, and China. Unfortunately, they disagree with each other very much at the moment, so it will be difficult to come to an agreement on such an institution. Even if they agreed, the smaller countries would accuse them of imperialism or of acting like dictators.

Of course, these three players would still need to agree on an initiative to really go after the enablers, so you can make the same criticism of this strategy, but it is at least more modest in scope and therefore potentially more. realistic.

Are all these revelations really helpful?

Certainly there is the danger of media saturation, in which the public is aware of these types of activities and may be less interested at this point. But we must emphasize that the consequences will not go away: running a modern state is very expensive. To pay for a good education system, a good health system, a well-functioning infrastructure, etc., someone has to pay for it.

If the rich avoid paying their share, someone else pays the bill, and it is the poor or the oppressed middle classes. So if the public is tired of all this scandal, it doesn’t change the fact that they are suffering from it.The conversation

Ronen Palan, Professor of International Politics, City, University of London

This article is republished from The conversation under a Creative Commons license. Read the Original article.


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