Tax Haven or Tax Heaven: Introduction – Were the “Panama Papers” about #offshore “tax evasion” or “tax avoidance”?

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 …

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

Tax Haven or Tax Heaven 9:US Treasury Secretary Lew claims USA is a leader in information exchange!