Panama Papers expose a tale of data leaks and toothless bodies
Progress in cleaning up offshore financial centres should be driven by international jurisdictions not the leaking of documents.
As far as data leaks go, the so-called Panama Papers dwarf any other public release of corporate or state files, including the ‘offshore secrets’ in 2013 and ‘Luxembourg tax files’ in 2014. The 2.6 terabytes-worth of 11.5 million confidential documents belonging to Panamanian law firm Mossack Fonseca has refuelled public rage at the tax privileges available to the rich and powerful. But the matter ought to be looked at with a cool head.
The privacy offered by offshore centres helps individuals in politically unstable countries or conflict areas to protect their wealth or even their lives by keeping sizeable assets safe and granting owners a financial low profile. Such jurisdictions can also offer ad-hoc structures to, say, a group of international investors coming together to direct capital into a risky market that does not otherwise offer products suitable to foreign buyers. Even when corporates use offshore centres to channel their international investments there may be benefits to the country of origin by way of higher tax revenues, as such investments – and the larger turnovers they could generate – would not otherwise exist.
In all cases, the real burning issue has to do with a level of secrecy that prevents tax authorities from obtaining information on such investments. Lax policies also open the door to money laundering and terrorism financing. In a recent interview with The Banker, Panama's finance minister, Dulcidio De La Guardia, said that his country is not a tax haven, does not wish to be blacklisted as one and that the government will now “speed up discussions” with the Organisation for Economic Co-operation and Development (OECD) for the automatic exchange of tax information.
This is positive, but it raises a question: were the OECD’s previous and public complaints about the country not enough to speed dialogue along? And if so, will progress in offshore jurisdictions continue to be forced by the shocks of leaked data bytes rather than the bite of international organisations?
