Read another “Big Question”: Should we build on the floodplain?
This weekend, 11.5 million files were leaked from Panama-based law firm Mossack Fonseca. They have been dubbed the “Panama Papers.”
The documents include sensitive financial information, and apparently implicate 72 former or current heads of state. Among them is David Cameron, who has admitted to profiting from his father’s offshore trust Blairmore Holdings, which is alleged to have paid no British tax for thirty years after its foundation in the early 1980s. Elsewhere, Iceland’s Prime Minister stood down on 5th April after the Papers revealed his wife owned an offshore company with multimillion-pound claims on three Icelandic banks that have collapsed in recent years.
Tax evasion is often viewed as being morally problematic. But will tax havens always exist? If so, how can we ensure that people pay their fair share? Experts offer their views.
Tell us something we don’t know
Giles Wilkes, writer for the Financial Times
The Panama Papers remind me of the gusts of outrage that greeted Thomas Piketty’s Capital in the Twenty-First Century: it was a huge amount of paper, telling people what they felt they already knew, and were already angry about. In the case of Piketty it was chronic inequality, here it’s the relentless efforts of the wealthy to keep their riches out of view and lightly taxed.
This explosion of transparency will boost the impetus to change. But it would be brave to predict a sharp tilt in the balance of power away from the rich. This is a political struggle. Some (clearly not all) of the £11tn allegedly booked through offshore centres is there for defensible reasons. That many trillions has a powerful voice. Disruption of international investment scares politicians.
And “clamping down” on avoidance or evasion is the classic squeeze-the-balloon problem—the money is chased someplace else. Look at the places used by Mossack Fonseca and you see US states among them. Will America yield up its secrets as happily as the Cayman Islands are being asked to.
Avoiding costs is human nature
Diego Zuluaga, Research Fellow, Institute of Economic Affairs
It is human nature to arrange one’s affairs in the least costly way, and that includes legally reducing one’s tax bill. Some do it by buying a…