cross-posted from citizenshipsolutions dot ca
Appreciate your article. But the "Panama Papers" are more about compliance with corrupt laws than about tax evasion! https://t.co/053f00SYrE
— Citizenship Lawyer (@ExpatriationLaw) April 10, 2016
The above tweet references an article written by Tony Burman, which appeared in the Toronto Star (and other papers) on April 9, 2016.
The article included:
The global aftershocks of the so-called Panama Papers are only beginning to be felt. More revelations are expected in the weeks ahead, and this will only add to the uproar.
The prime minister of Iceland has already been dumped. Other government leaders have been embarrassed. Several countries have announced inquiries into the secretive world of offshore tax evasion. And public anxiety about the corrupt coddling of the world’s superwealthy “1%” is showing signs of turning into red-hot anger.
But we shouldn’t be surprised. It’s not as if we didn’t already know that the world’s political and business elites frequently cheat and steal, that our governments are swindled out of trillions of dollars of revenue and, as a consequence of this greed, the vast majority of people suffer from a painful culture of austerity so these freeloaders can get richer. We already knew that.However, it is the disgusting detail contained in this week’s revelation of leaked documents that is so revolting — and, of course, the appalling fact that so much of this is technically “legal.”
With their own interests in mind, politicians and business leaders in many countries have worked quietly in the dead of night to make this so. The result is that, more than ever, taxes now appear to be primarily for the little people.
The documents come from an influential Panama-based law firm. They include 11.5 million internal records disclosing the financial secrets of heads of state, billionaires, drug lords, celebrities and others.
While expressing outrage at the part of the “Panama Papers” that represents tax evasion, Mr. Burman identifies that much of the revelations of the “Panama Papers” was the result of clear and deliberate government policies and laws. In other words, the story of the “Panama Papers” is mostly about “legal tax avoidance” and ” NOT illegal “tax evasion”. Therefore, it is entirely unreasonable and counterproductive to focus on “tax evasion” and exclude “tax avoidance” from the discussion.
Nevertheless, when it comes to tax evasion …
Q&A on the "Panama Papers" – OECD https://t.co/1YnEZPXb2K – lack of info on beneficial ownership of entities is facilitating illicit flows.
— Citizenship Lawyer (@ExpatriationLaw) April 17, 2016
The OECD’s Q and A about the “Panama Papers” reveals:
Q&A on Panama Papers
What does the release of the “Panama Papers” actually tell us?
The Panama Papers describe in detail how a veil of secrecy is still allowing funds to be transferred between jurisdictions and held offshore, where it can be hidden from tax authorities. Panama’s consistent failure to fully adhere to and comply with international standards monitored by the Global Forum on Transparency and Exchange of Information for Tax Purposes is facilitating the use of offshore financial centres for hiding funds, depriving governments of tax revenue and often aiding and abetting criminal behaviour.
The Panamanian government says that the OECD has recognised its efforts to improve access to information about beneficial ownership of entities and its willingness to share such information with authorities in other jurisdictions. Is this actually true?
The OECD has been working for more than seven years to establish robust international standards on tax transparency and ensure their implementation. In 2009, when the initial objective of the Global Forum was to reach international agreement on the Exchange of Information on request, most countries and jurisdictions were quick to get on board, while a few, including Panama, were reluctant to make commitments or move forward along with the rest of the international community. After many years of resistance, Panama updated its domestic legislation in 2015, which provided the basis upon which to engage in the phase of the review process that assesses whether effective information exchange is actually taking place. Panama remains well behind most other comparable international financial centres.
To push the transparency agenda forward, the G20 identified Automatic Exchange of Information as a new international standard in 2014, and almost 100 jurisdictions and countries have already agreed to implement it within the next two years. Whilst almost all international financial centres including Bermuda, the Cayman Islands, Hong Kong, Jersey, Singapore, and Switzerland have agreed to do so, Panama has so far refused to make the same commitment. As part of its ongoing fight against opacity in the financial sector, the OECD will continue monitoring Panama’s commitment to and application of international standards, and continue reporting to the international community on the issue.
Is Panama the only outlier, or is it the tip of the iceberg? Are there other jurisdictions posing similar problems
Having conducted well over 200 Phase 1 and 2 peer reviews in the past 7 years, the Global Forum has identified a number of member countries and jurisdictions whose legal and regulatory framework for the exchange of information are as yet not up to international standards. They include Guatemala, Kazakhstan, Lebanon, Liberia, Micronesia, Nauru, Trinidad and Tobago and Vanuatu. It is clear that there are other jurisdictions where a lack of information on beneficial ownership of corporate and other entities is facilitating illicit flows.
The “outliers” appear to be listed in alphabetical order. One wonders how the OECD went from Trinidad to Vanuatu without including the “outlier” beginning with the letter “U” – The United States of America.
This series is composed of the following nine posts which I have called the “Tax Haven or Tax Heaven” series of posts.
Tax Haven or Tax Heaven: Introduction – “Were the “Panama Papers” about #offshore “tax evasion” or “tax avoidance”?”
Tax Haven or Tax Heaven 1: “@FranHendy and @BarrieMcKenna see “Panama Privacy Leak” as about more than #offshore witch hunt”
Tax Haven or Tax Heaven 2: “Tax Havens and the “poaching” of capital – theft or competition?”
Tax Haven or Tax Heaven 3: “ Why the USA is an attractive place to lure “foreign capital” and keep that “foreign capital” secret”
Tax Haven or Tax Heaven 4: “Why bother “poaching capital” as a Tax Haven, if you can steal the capital using citizenship-based taxation? ”
Tax Haven or Tax Heaven 5: “How the 1966 desire to “poach” capital from other nations led to the 2008 S. 877A Exit Tax”
Tax Haven or Tax Heaven 6: “Must read interview with @FranHendy – The movement of wealth transparency and the right to privacy”
Tax Haven or Tax Heaven 7: “Senator @PercyDowne, the “tax gap” and the need to “close” it”
Tax Haven or Tax Heaven 8: “The US attempt to “suck and blow” at the same time – keeping corporate profits out of the USA “
Yes, the laws are corrupt. And the wealthy seem to have made these laws. Looks like it is going to come back and bite them in the butt now. One wonders if similar to Wall Street they wont get a pardon too?
Financial Secrecy Network has an interesting account of America’s journey towards tax haven status, going back to the 1921 Revenue Act.
Followed, after the Second World War, by the first US refusal to co-operate with other capitalist countries on information sharing provisions:
Apologies – I should have closed the blockquote after the words “over the long run”.
@iota
Although you are right about the swiss- at least their law of bank secrecy was conceived to help people hiding their money from people like Hitler!
But the law was severely mis-used later.
@Polly – I was speaking ironically.
The US in its usual hypocritical fashion pretends that the UBS case, and the ongoing pursuit of Swiss banks, is all about punishing wrongdoing. But in fact it’s apparently about destroying a tax haven competitor by wrecking the Swiss power to offer secrecy as a lure to attract flight money. While the US is able to maintain secrecy for US accounts – as I understand it, the Swiss IGA is Model 2, which doesn’t even pretend to offer reciprocity.
@iota
Yes- it is such hypocrisy. Mind-boggllng. And these things are always sold as some sort of virtuous christian caring about others and about right from wrong.
In the end, with capitalism running rampant and not mitigated with some form of social aid, it is always about the money.
‘The “outliers” appear to be listed in alphabetical order. One wonders how the OECD went from Trinidad to Vanuatu without including the “outlier” beginning with the letter “U” – The United States of America.’
Now we know why letters from the IRS usually have return addresses ending in Panama’s country code, PA. In order to cover up its own tracks, the US steals Panama’s identity.
To answer your question, Trish, “yes”.
@Tricia, thank you for this great post.
Someone I know well (who doesn’t live in North America) recently told me 3 attorneys who specialize in drawing up these structures have contacted him to see if he’d like to use their structure “services.” What’s remarkable about this? The law firms are all from the US and from states that specialize in this sort of thing. So, the Panama Papers “scandal” is really about poaching this very juicy business from said country, since approximately 80% of Panama’s GDP comes from financial services. As noted in an earlier post, however, Panama also has bilateral tax treaties with the US, Canada and EU countries so there is no problem about exchanging info with them. And the Panamanian govt. has said that this exchange will be automatic come 2018. So what’s all the noise about? Well, the big money is now migrating to the US for it’s now considered “THE” safe haven in the world. Why would the OECD not go after the US? Bc their budget is largely dependent on US taxpayer funds. (They’re on a leash). The whole thing is quite suspect. The US wants the offshore business all to themselves. The Fatca law is also part of this effort to drive funds to the US.
Well, the OECD might not do anything, since it is largely seen as a talking shop, but then there are the E.U., Russia, China, and India, all of which are soon going to be quite alarmed by that great sucking sound coming from the U.S. India and the E.U. will probably just put their lawyers and trade negotiators on the case and maybe impose capital controls. 1/3 of Mossack Fonseca clients were Chinese and the Russian state has endemic problems with offshoring. Now that Mossack Fonseca has been hacked (quite probably by a government intelligence service) and the info widely shared, what is to prevent Russian intelligence from doing the same to a U.S. firm?
What and who is behind the ‘Panama Papers’? Read and watch these reports:
http://www.cnbc.com/2016/04/12/swiss-banker-whistleblower-cia-behind-panama-papers.html
http://beta.fortune.com/2016/04/13/cia-panama-papers/
Is anyone really surprised?
Not surprised, but not convinced.
My money’s on China. 🙂
There is noise in the US against home-grown tax havens. I wonder where that will lead.
The US has been very effective in imposing a pseudo moral order on the rest of the world, but not at home. I wouldn’t have thought it was easier to intimidate most of the world into swallowing FATCA whole than to reform the tax code at home. But it was, by much.
As for Panama, which was in the process of getting its house in order, who knows how hard this will hit them. But clearly the message is that money is safer in obscure US shell companies than anywhere else in the world.
@Iota
Wouldn’t China want to Out the US? There are few US persons on the Panama list any many more Chinese….unless China has removed the US ones and there is a blackmail threat involved.
@hiedi – I don’t the US would have been embarrassed if there had been a lot of US persons named. They’d see it as proof that there are a lot of tax-evading Americans and therefore the US was right to impose FATCA on the rest of the world.
{speculation}The reason I wonder if it could have been China, is because China is causing a lot of disruption to Western economies. They’ve just wiped out the UK steel industry without even trying. They apparently have gazillions invested in the US. The Western/OECD nations are bound to be feeling their control of the global free-market system is under challenge. They keep trying to assert control over China (IGA, CRS, etc) and China doesn’t like it. Panama’s tax-haven status is America’s creature, just as the BVI’s tax-haven status is the UK’s creature. Now, as a result of the leak, the spotlight is firmly focussed on Western nations’ complicity in tax-dodging. {/speculation}
Rather a good outcome for China. 🙂
But it is only speculation,
@iota
The US would have been embarrassed if there were any gov officials named.
The UK steel industry was plagued by the cost of energy( over twice that of any other EU countries, many of which control their energy industry prices) and the high cost of labour.
The US has only itself to blame for printing cheap money and selling it’s debt to China. China doesn’t need to embarrass the US, it does that quite successfully itself.
My money is closer to home.
@heidi – you may be right. As I say, it was only speculation.
https://panamapapers.icij.org/20160405-spies-secret-offshore-companies.html
‘Spies and Shadowy Allies Lurk in Secret With Help From Offshore Firm’
‘Firm helps CIA operatives and other characters — real or fanciful — from the world of espionage set up offshore companies to obscure their dealings’
By Will Fitzgibbon
Apr 5, 2016
“Spy chiefs, secret agents and alleged CIA contractors among those to use offshore companies
Secret agents used offshore companies to, among other things, own golf courses”
……………….
Why should there be american names in the Panama Papers? They can just go to Delaware or Wyoming.
Please repost this where you may…. probably somebody at IBS has already posted something about this interview, but I permit myself to do so to make sure that it is part of the record.
https://www.youtube.com/watch?v=ZjvX5zq7BXg
At 3:50 Obama defines US Persons as those on US soil.
At 6:00 Obama uses the cliché of “Swiss Bank Account” and to my mind shows that he still cannot discern between the myth of the “Swiss Bank Account” and reality… somebody in Europe should make a movie and the characters in such a movie use “Delaware corporations” and “Delaware ‘numbered’ bank accounts”. For all bank accounts have numbers don’t they?
Once again confirms we are persona non grata when it comes to any protections by the US government.
@iota
It can’t be China because Chinese politicians were too heavily implicated and have tried to quash the story on the Chinese internet.
One person who has really been hard done by in all of this is Tina Turner. She was mentioned by one of the wire services as being involved in this, but it’s not true. The very lame explanation for the mistake was that people had allegedly suspected in 2015 that she had a Swiss bank account, but considering that she has long lived in Switzerland and has been a Swiss citizen for a while now, the whole thing looks slanderous.
Here’s an interesting article about US hypocrisy. Something we are only too familiar with by now.
http://mountainvision.com/panama-papers-try-united-states-papers/
@Embee, in the same vein;
‘ US tax havens: The new Switzerland
The US is a magnet for offshore wealth, notably South Dakota, which has guaranteed secrecy for family trusts’
“….After years of threatening Swiss and other foreign banks that helped Americans hide their money, the US stands accused of providing similar services for the rest of the world. “America is the new Switzerland,” says David Wilson, partner of Schellenberg Wittmer, a Swiss law firm. “In the industry we have known this for several years.”
The US has a long history of attracting funds from undisclosed foreign sources. In 2011, The Florida Bankers Association told Congress there were hundreds of billions of foreign deposits in US banks because “for more than 90 years the US government has encouraged foreigners to put their money in US banks by exempting these deposits from taxes and reporting”
https://www.ft.com/content/cc46c644-12dd-11e6-839f-2922947098f0