400 journalists from more than 100 media organizations in over 80 countries have yielded the Panama Papers, have been offered an unprecedented look at how the world's rich and powerful, from political leaders to celebrities to criminals, use tax havens to hide their wealth. We are fools to think this is just a matter of a few bad apples. The details are from just one law firm involved in the practice, but there are thousands of companies involved in orchestrating these schemes. There may be 60 to 65 other countries besides Panama where such activities were taking place. Panama is a relatively small country that is a major banking centre but it’s only one country. So if you multiply that times 60, including some of the major secrecy havens like Switzerland, Liechtenstein, the Caribbean islands and others, you’re talking about a massive number of people who are hiding money of one type or another. Roughly 10 million people worldwide have offshore accounts, with 100,000 people owning half of those secreted assets. John Christensen of the Tax Justice Network expressed shock by the sheer scale of the figures.
"What's shocking is that some of the world's biggest banks are up to their eyeballs in helping their clients evade taxes and shift their wealth offshore," said Christensen. "We're talking about very big, well-known brands - HSBC, Citigroup, Bank of America, UBS, Credit Suisse - some of the world's biggest banks are involved... and they do it knowing fully well that their clients, more often than not, are evading and avoiding taxes."
The UK was second only to Hong Kong in a list of international jurisdictions where the most banks, law firms and middlemen associated with the Panama Papers operate. Toby Quantrill, an expert in international tax avoidance at the Christian Aid charity said the leaks exposed to the extent to which UK-based middlemen and UK-administered tax havens are “at the very heart of this rotten system… The UK simply cannot continue to provide cover for the rich and powerful who wish to operate in the shadows”. Oxfam said the UK was in “a unique position” among the countries of the world to “clean up the murky world of tax havens”. Critics say the UK government still soft-pedals reform of an international system in which wealth can be relatively easily shielded from tax and they point out that major centres of evasion such as the British Virgin Islands, the Cayman Islands and Bermuda (many of which feature prominently in the cache of 11 million documents from the Panamanian law firm Mossack Foneseca) are British protectorates. Jolyon Maugham QC, a barrister who specializes in tax, said the Government was forced by public opinion to talk tough on tax havens but that ministers were also concerned to protect the economies of its overseas territories and the City of London, which makes a good deal of revenue from facilitating offshore avoidance. “They want to appease the angry mob without actually doing much” he said. According to many experts, Britain’s government could take a much tougher stance on its overseas territories and dependencies and force them to be transparent. The UK Parliament could simply change the law and mandate full transparency in dependent territories such as Bermuda and the Cayman Islands because they are not sovereign territories. “I don’t think there’s any doubt that we have the power to directly legislate,” Jolyon Maugham QC, a tax expert counselled.
In a world of extreme inequality and massive social problems such as ours, the economic, social, and political effects of tax avoidance due to the existence of tax havens are enormous. Without taxes, societies will struggle to function. Small-to-medium-sized businesses are paying the full tax rate, yet global corporations and the super-rich have been paying fewer and fewer taxes over the years with the concomitant growth of the world economy and the spread of offshore tax havens. According to Tax Justice Network 2012 estimates, some $21 trillion to $32 trillion is hidden away by the super-rich in offshore entities. This amounts to roughly the US and Japanese GDP combined. Why should we care? Because global governance is engineered to benefit the super wealthy. Just imagine how less severe and painful the refugee problem could have been if this hidden wealth were made available today to address the problem.
Demanding the resignation of Prime Minister Sigmundur Davíð Gunnlaugsson revealed as one of the elites who use shell companies in offshore tax havens to stash untold fortunes 22,000 Icelanders protested outside the Parliament, one of the largest by percentage of population in history.
Rana Foroohar, assistant managing editor of economics and business at TIME magazine, suggested that the corruption exposed in the Panama Papers will likely build on the mounting populist frustration—captured by the Occupy Wall Street movement, “The Panama Papers illuminate a key aspect of why the system isn’t working–because globalization has allowed the capital and assets of the 1 % (be they individuals or corporations) to travel freely, while those of the 99 % cannot. Globalization is supposed to be about the free movement of people, goods, and capital. But in fact, the system is set up to enable that mobility mainly for the rich (or for large corporations). The result is global tax evasion, the offshoring of labor, and an elite that flies 35,000 feet over the problems of nation states and the tax payers within them.”
Canadian broadcaster, the CBC, has already announced it will not release the names of the 450 Canadians exposed, dismissing the group—which reportedly includes "lawyers, mining and oil executives, business people, and even known fraudsters"— because none of them were deemed "prominent personalities." Our corporate media feeds the majority of persons its own version of news, views, events and alleged reality.
If there is a silver lining in all this it would be that it bolsters the case for socialism which surely must finally come. We either submit to the tyranny of wealth or end entirely for the common good and an egalitarian society. We need to overthrow capitalism; we need a socialist revolution. We need system change. We need to end the rule of capital. And we need to talk to each other extensively about this, about how we get there, and about how we structure the system that we need.