There's another much bigger problem with off-shore financial centresby Nicholas Shaxson / April 21, 2016 / Leave a comment
Read more: Is reform of international tax law possible?
Thanks to the leak of 11.5 million documents from Mossack Fonseca, a Panamanian law firm, Britain is fixated on how we tax the wealthy and the powerful. Revelations that David Cameron’s family finances were tangled up in the tax haven of Panama, have caused an endless political kerfuffle and put a new cudgel in the hands of people who want to attack him.
A few have called this the “Panama tax avoidance scandal,” but this reveals a profound misunderstanding of tax havens. Tax is important, but it’s a subsidiary issue—and that goes for tax havens more generally. The dangers these places pose are of a greater order.
Tax havens allow individuals to take money elsewhere to escape the laws and rules of society that they don’t like. Those rules may include paying taxes. But the Panama papers reveal a much bigger, richer world of generalised law avoidance.
Associates of Vladimir Putin used Mossack Fonseca’s services to build up secret strategic stakes in sectors of Russia’s economy, transferring up to $200m a time. The papers reveal the antics of the super-wealthy hiding assets from divorced spouses. They uncover shell companies linked to senior Chinese politicians—the leader, Xi Jinping, has vowed to fight “armies of corruption.” There are links to Mafia bosses; to Mexican drug lords; to the Brinks Mat heist; to Ponzi schemers; to owners of Nazi-looted art; to the Fifa bribery scandal; to Saudi royalty and to 29 billionaires; and a sex offender who signed papers for an offshore company while in jail in Nevada.
Most of these stories are not about tax, but about hiding, usually because there are questions about the origins of these funds.
Offshore is, in the words of Brooke Harrington, a researcher at the Copenhagen Business School, “a domain of libertarian fantasy made real, in which professional intervention made it possible for the world’s wealthiest people to be free not only of tax obligations but of any laws they found inconvenient.”
Harrington, a sociologist, took the extraordinary and fascinating step of training to…