It’s easy enough to be distracted by the big names and the offshore fortunes that have been exposed by the Panama and Paradise Papers (Russia’s Vladimir Putin in the former and Queen Elizabeth II in the latter), but this scale of financial deviation demands a deeper analysis. An analysis that is more multi-dimensional than the knee-jerk reactions of the likes of US Senator Bernie Sanders or UK Labour Party leader Jeremy Corbyn, but probably produces conclusions that are not all that different, where the moral imperative of looking at the rights and wrongs is inescapable.
Starting with the legal aspect, whatever their moral legitimacy, offshore bank accounts are not illegal if properly declared (although even here legality is established in most rather than all cases). Beyond this general truth there is a welter of technicalities disputed by the tax experts, which exceed the space of this editorial.
Then there is the democratic criterion, according to which – just as the electorate decides whether it wants Sanders or Corbyn or anybody else – the rights and wrongs of tax havens hinge on whether the electoral thumbs are up or down. Thus as the US electorate dumped Richard Nixon over Watergate and spared Ronald Reagan over the in many ways more serious Irangate, that is the prerogative of popular sovereignty as enshrined under democracy.
Politically, the full impact of the Paradise Papers remains to be seen of course, although there are already reactions, among them denunciations from Cristina Fernández de Kirchner’s Unidad Ciudadana. But if we remember the case of the Panama Papers, those ranged from toppling Nawaz Sharif, Pakistan’s longest-serving prime minister with nine years under his belt, to being almost impossible to detect in last month’s midterm election results here, for example.
When taxation is at stake, fiscal criteria cannot be absent either. And here at least we will depart from a general and global perspective to focus on the Mauricio Macri administration’s tax package, which is still very much a work in progress. In drafting this package the president’s economic team needs to face questions raised by this leak. Do the often steep increases in excise (severely affecting some regional economies, even when retreating in the case of wine), in a system with already far too much indirect taxation (the least progressive burden of them all) reveal a lack of courage or will to tackle the personal wealth tending to gravitate offshore? The future of the proposed financial taxation will depend on how much the Macri administration takes the Paradise Papers to heart – will these levies prove to be a bold new initiative and a serious revenue source, or a slap on the wrist that merely hastens the capital exodus? And that brings us to the moral.
These revelations have not just highlighted the lack of transparency in offshore accounts, they have also exposed the unsavoury nature of some of these investments. Like, for example, the aforementioned Queen of England, whose private estate invested in a portfolio that backed a retailer known for exploiting low-income individuals with high-interest loans. Not a good look for anyone, let alone a monarch.
Even after exploring other aspects and accepting the basic legality of offshore accounts, the idle wealth of the idle rich remains ethically repugnant, quite apart from serving no useful economic purpose. Tax havens are the most obscene face of an accelerating inequality of income worldwide, whereby the rich grow richer even more than the poor grow poorer (since the most destitute are now measured at US$2 a day instead of one as a generation ago). If the rich are so allergic to paying taxes, there is no end of tax-exempt charities and cultural activities they could support – 1,000 new Rockefeller Foundations could bloom. The Paradise Papers cannot be ignored – and in line with the local saying ‘no hay dos sin tres’ (“never two without three”), the Panama and Paradise Papers deserve a follow-up. Otherwise, it’s just another normal day in paradise.