Offshore accounts in exotic locations – and not so exotic tax havens like Ireland – have been a winning formula in the efforts of the magnificently wealthy global élite to accumulate vast troves of money and stay ahead of the taxman. Being rich isn’t a crime. In fact, in the economic system we happen to live being stinking rich has become something of a virtue. So we might be tempted to turn a blind eye to the shenanigans exposed in the Panama Papers, saying simply that it’s their money and they can do what they like with it. Well, it isn’t exactly that simple either, because this behaviour impacts on every one of us. It makes us all poorer and makes the poorest people in the world even poorer. This is because it isn’t all really or morally their money.
Corporate service providers like the Panamanian firm Mossack Fonseca specialise in assisting the rich in the creation and management of shell companies. These are companies, which exist only on paper, registered in countries with lax financial and tax legislation, through which the owner – whose true identity is hidden – can channel money and other assets. In reality what this means is that these shell company owners can put their earnings and inheritances beyond the reach of the revenue services in the country in which the wealth was produced. All of this is perfectly legal, however, because, as Harrington explains, “estate planners regularly cooperate with elected officials to draft financial laws.” Yes, these people and their agents are influential enough to draft laws that protect their money.
Ordinary Joe Soaps like you and I, who don’t have the freedom to be as creative with our tax returns without going straight to jail, are forced to shoulder the burden of this behaviour. States gather money through revenue, taxing the wealth of the countries they govern, in order to provide essential services that benefit everyone in society. People who earn their crust by exchanging their work for labour (working for a living) produce the wealth the ruling class ship off to tax havens, and for their efforts take home just about enough to keep them fed until their next paycheque. We are the people who rely on tax money to pay for our treatment in public hospitals, but we have to pay more tax to cover these costs because the rich refuse to pay their fair share.
At the extreme end of this spectrum it means that much needed money is being siphoned out of the economies of the poorest nations in the world, with the result that people are dying as a result of the lack of bare essentials. This isn’t always only the actions of despotic dictators, with the advance of globalisation ever increasing numbers of rich Westerners are profiting from the exploitation of workers and resources in these countries, and rather than paying tax are exporting the money to their exclusive tax havens. This programme of inequality is making a miniscule number of people excessively wealthy, but in the process the rest of us are becoming poorer.
Harrington, Brooke. “Trust and Estate Planning: The Emergence of a Profession and Its Contribution to Socioeconomic Inequality.” In Sociological Forum, vol. 27, no. 4, 825-846.