One of the greatest struggles for the Obama administration and the nation’s tax collection operation has been the widespread proliferation of tax havens. The definition of a tax haven is a country or independent area where taxes are levied at a low rate. Its chief examples include Switzerland, Monaco, the Bahamas, and the Cayman Islands. On April 3, 2016 a set of 11.5 million confidential documents were released to the public by a whistleblower from the Panamanian corporate service provider Mossack Fonseca. Run by a Swiss tax expert named Jurgen Mossack, this company has been a player in the world of tax havens for years. The company’s service is solely to hide money. By “investing” in this business, people can mark the money that they have “invested” as a business expenditure, which means that it is not taxed. In reality, the business is totally phoney, and that “investment” really just serves as a bank account. Now, people worldwide have a close up view on the hidden finances of the rich and powerful.
The document is a scandalous indictment of the global elite. In the documents, connections have been made to world leaders such as Xi Jinping of China, Vladimir Putin of Russia, and David Cameron of the UK. None of the men named are in legal danger at the moment, but their presence on the list makes an already bad opinion of politicians worse. Protests have broken out in the U.K., and at the very least Cameron’s popularity ratings - typically stellar - are falling. The documents confirm that Mossack Fonseca has helped facilitate money laundering, tax avoidance, and criminal activity without restraint. As British politician Denis Healey once said, “The difference between tax avoidance and tax evasion is the thickness of a prison wall.” Grouping some of the world’s most powerful people with such a morally gray company not only sheds light on the world of the political elite, but also on the growing epidemic for the world at large. It’s a wake up call, and it’s up to the American people to see it for what it is.
From a distance, this story should come as no surprise. Political corruption is ever present, and no credited economist or politician was caught unaware by the scandal itself. The thing that did come as a surprise, though, was the true scope of the problem. Mossack Fonseca is just one company in one haven, and they had over 11.5 million documents containing world leaders from across the globe. Multiplying that by the rest of the companies in the other havens and you’re looking at billions of papers hiding trillions of dollars. To put it in perspective, the Fortune 500 alone have a combined $2.1 trillion dollars in offshore cash. That by itself is more than the combined GDP of every single major tax haven in the world. Obviously, this blatant evasion of taxes and responsibility seems wrong on the surface. But as you dig deeper, the problem becomes even more worrying. Beyond just hiding criminal activity and money, offshore accounts are also widening the wealth gap in the United States substantially. With all the large companies across America hiding money beyond U.S. borders, Fortune 500 taxes are far lower than they should be. While small to medium sized businesses are forced to pay the full tax rate year after year, these immense conglomerates scrape by paying a fraction of what they owe. According to Demos, that fraction has added up to a whopping $3 trillion dollars in the US over the last decade. That’s not only undermining the world tax system, it’s also depriving the US of things like schools and hospitals. All that money that could have been directed towards building new infrastructure is instead put in the pockets of the elite. It’s a sad tale that’s been the unfortunate truth for decades now, and unless we find a way to fix it, people will begin to suffer. Luckily though, the release of the Panama Papers may be the chance the world needed to make a change.
The reason the issue of large scale tax evasion has gone unnoticed for so long is due to one main reason: lack of publicity. The rich and elite hid their tax evasion through layer after layer of confidentiality agreements, and no one had the gall to uncover it. Everyone knew what was going on behind the scenes, but it was never so clearly a problem as it is now. The Panama Papers give cold hard evidence of the world behind the veil, and major organizations are beginning to take notice. For example, G20, a coalition of countries including the U.S, China, Russia, and Japan set on maintaining global economic balance, has already placed the issue of tax havens on the top of their agenda. Their job, while not an easy one, is the next step in forming a balanced and fair world economy. There are a ton of hoops to jump through, and the change will take years, but it will all be worth it in the end. At the moment, trillions of dollars are being kept from the governments of the world to be kept in offshore bank accounts. Those are dollars that could be spent feeding the hungry or healing the sick. It’s about time the world realized that fact and made the changes to achieve it. The world would be a much better place because of it.
One of the greatest struggles for the Obama administration and the nation’s tax collection operation has been the widespread proliferation of tax havens. The definition of a tax haven is a country or independent area where taxes are levied at a low rate. Its chief examples include Switzerland, Monaco, the Bahamas, and the Cayman Islands. On April 3, 2016 a set of 11.5 million confidential documents were released to the public by a whistleblower from the Panamanian corporate service provider Mossack Fonseca. Run by a Swiss tax expert named Jurgen Mossack, this company has been a player in the world of tax havens for years. The company’s service is solely to hide money. By “investing” in this business, people can mark the money that they have “invested” as a business expenditure, which means that it is not taxed. In reality, the business is totally phoney, and that “investment” really just serves as a bank account. Now, people worldwide have a close up view on the hidden finances of the rich and powerful.
The document is a scandalous indictment of the global elite. In the documents, connections have been made to world leaders such as Xi Jinping of China, Vladimir Putin of Russia, and David Cameron of the UK. None of the men named are in legal danger at the moment, but their presence on the list makes an already bad opinion of politicians worse. Protests have broken out in the U.K., and at the very least Cameron’s popularity ratings - typically stellar - are falling. The documents confirm that Mossack Fonseca has helped facilitate money laundering, tax avoidance, and criminal activity without restraint. As British politician Denis Healey once said, “The difference between tax avoidance and tax evasion is the thickness of a prison wall.” Grouping some of the world’s most powerful people with such a morally gray company not only sheds light on the world of the political elite, but also on the growing epidemic for the world at large. It’s a wake up call, and it’s up to the American people to see it for what it is.
From a distance, this story should come as no surprise. Political corruption is ever present, and no credited economist or politician was caught unaware by the scandal itself. The thing that did come as a surprise, though, was the true scope of the problem. Mossack Fonseca is just one company in one haven, and they had over 11.5 million documents containing world leaders from across the globe. Multiplying that by the rest of the companies in the other havens and you’re looking at billions of papers hiding trillions of dollars. To put it in perspective, the Fortune 500 alone have a combined $2.1 trillion dollars in offshore cash. That by itself is more than the combined GDP of every single major tax haven in the world. Obviously, this blatant evasion of taxes and responsibility seems wrong on the surface. But as you dig deeper, the problem becomes even more worrying. Beyond just hiding criminal activity and money, offshore accounts are also widening the wealth gap in the United States substantially. With all the large companies across America hiding money beyond U.S. borders, Fortune 500 taxes are far lower than they should be. While small to medium sized businesses are forced to pay the full tax rate year after year, these immense conglomerates scrape by paying a fraction of what they owe. According to Demos, that fraction has added up to a whopping $3 trillion dollars in the US over the last decade. That’s not only undermining the world tax system, it’s also depriving the US of things like schools and hospitals. All that money that could have been directed towards building new infrastructure is instead put in the pockets of the elite. It’s a sad tale that’s been the unfortunate truth for decades now, and unless we find a way to fix it, people will begin to suffer. Luckily though, the release of the Panama Papers may be the chance the world needed to make a change.
The reason the issue of large scale tax evasion has gone unnoticed for so long is due to one main reason: lack of publicity. The rich and elite hid their tax evasion through layer after layer of confidentiality agreements, and no one had the gall to uncover it. Everyone knew what was going on behind the scenes, but it was never so clearly a problem as it is now. The Panama Papers give cold hard evidence of the world behind the veil, and major organizations are beginning to take notice. For example, G20, a coalition of countries including the U.S, China, Russia, and Japan set on maintaining global economic balance, has already placed the issue of tax havens on the top of their agenda. Their job, while not an easy one, is the next step in forming a balanced and fair world economy. There are a ton of hoops to jump through, and the change will take years, but it will all be worth it in the end. At the moment, trillions of dollars are being kept from the governments of the world to be kept in offshore bank accounts. Those are dollars that could be spent feeding the hungry or healing the sick. It’s about time the world realized that fact and made the changes to achieve it. The world would be a much better place because of it.
