Will policy makers put Pandora’s papers back in the box? | Pandora Papers



In early October, the International Consortium of Investigative Journalists, along with a number of media partners, released the Pandora Papers, which revealed some of the trillions hidden in tax havens by politicians, government officials and politicians. celebrities, in particular.

These leaks tell us, once again, that financial secrecy is at the heart of the global economy and runs like poison through the veins of our political systems. This institutional corruption does not make progress impossible, but it does mean that responses to growing public anger over revelations of the leaks will only be successful if they are accurate and forensic. Policy makers must put in place measures to ensure continued accountability of the main actors in these abuses, including themselves.

Currently disclosed hidden assets and secret revenues are only a small portion of what is in the nearly 3 terabyte cache of documents from 14 different professional service companies around the world. And the documents total only a tiny fraction of the estimated $ 11 trillion in undeclared assets held abroad around the world, generating annual tax losses of $ 182 billion.

Individual names and specific cases can do more to grab public attention than these insanely high numbers: 35 world leaders, past and present; more than 300 public officials from nearly 100 countries; more than 100 billionaires, plus a multitude of celebrities.

The Pandora Papers have brought public and media attention back to the shameful issue of financial secrecy. Every previous leak (including LuxLeaks, Panama Papers, and Paradise Papers) has created a similar spike of interest. And, as that peak then passes, the underlying level of public engagement and concern of policymakers has remained higher with each passing time.

The challenge is to transform this commitment and concern into comprehensive action. As researcher and writer Zuhumnan Dapel put it, what can we do “when those in charge of the tools – the policies and the government’s willingness to thwart the dirty money network – seem to be among the primary beneficiaries of the status quo ? ? “

Financial secrecy – the central challenge

The past two decades have seen substantial changes in the context of international politics. When the Tax Justice Network was established in 2003, we began to build the political platform known as the ABC of Tax Transparency.

A is for the automatic exchange of financial information – so that each tax authority is made aware of the foreign bank accounts of its own taxpayers, making simple tax evasion much less common.

B stands for beneficial ownership transparency, demanding public records of the warm-blooded human beings behind companies, trusts and foundations, to end the damage caused by anonymous ownership.

And that is for country-by-country reports, a simple measure to ensure that multinational companies publish data that can reveal the extent of profit shifting.

Each element was initially dismissed as utopian and unrealistic. But the attitude changes began with the efforts of the global movement for tax justice and the momentum for progress that followed the 2008 financial crisis. The G8 group of countries summit in 2013 gave broad support to the three. elements in principle, and practical steps have been taken towards the introduction of each.

Since 2012, the High Level Panel on Illicit Financial Flows from Africa, supported by the African Union and the Economic Commission for Africa, has been working to mobilize political support to end these abuses through the continent and beyond. The panel’s final report established the scale of illicit flows and the damage they can cause to governance. He also confirmed the centrality of ABC measures and laid the groundwork for adopting a global target to reduce illicit flows as part of the United Nations Sustainable Development Goals.

The panel also provided an important defining statement, recognizing that the common characteristic of illicit financial flows is that they are hidden. This is true whether it is about illicit tax-related flows (masking tax abuses by multinational companies or individuals with offshore interests); with other trade flows (masking market dominance, for example, or the true origin of investments); or with the laundering of the proceeds of crime – from drug trafficking and human trafficking to bribery of public officials and theft of public property.

Financial secrecy is therefore the crucial facilitator of illicit flows. Continued progress in dismantling is essential to ensure accountability and a controlled reduction in tax abuse and other criminal and corrupt activities.

Wolves guarding the chickens?

However, the change has been painfully slow. Lobbying by multinational corporations and professional enablers – bankers, lawyers and accountants – has undoubtedly undermined efforts to bring transparency to the global financial system. In addition to this, decisions on key policy reforms are largely taken within the Organization for Economic Co-operation and Development (OECD) or related organizations. Our research shows that this is very problematic.

The Financial Secrecy Index, which we first published in 2009 and updated every two years, rates jurisdictions against a wide range of objectively verifiable criteria (including the ABC). The 2020 index saw the United States climb above Switzerland to second place, with Cayman the highest ranked secrecy threat. The UK and its network of Overseas Territories and Crown Dependencies would clearly rank first if treated as a single entity.

In total, OECD countries and their dependencies together are responsible for about half of all financial secrecy risks, according to the index. The State of Tax Justice 2020 estimates that the same group is responsible for 59% of the $ 182 billion the world loses each year due to private offshore tax evasion. Dr Dereje Alemayehu of the Global Alliance for Tax Justice summed up the concerns: “Trust the OECD to define [tax] rules… it’s like trusting a pack of wolves to build a fence around your chicken coop.

In addition to the role of OECD members, there are national dynamics exposed by the Pandora Papers. In many countries, elites, including policymakers, are among the primary users, or abusers, of financial secrecy.

As Professor Brooke Harrington, the leading sociologist studying the wealth concealment industry, wrote, financial secrecy offers “something even more attractive and dangerous. [than tax avoidance], which is the avoidance of the law in general. To the already rich and powerful, offshore offers a kind of superpower: impunity.

So who keeps the wolves?

Take responsibility

Fortunately, we have the answers we need. We know the main actors and jurisdictions responsible for financial secrecy. We know the mechanisms that can ensure consistent accountability, rather than relying on sporadic leaks. And earlier this year, a new high-level panel – the United Nations Panel on Financial Accountability, Transparency and Integrity (FACTI) – made recommendations for precisely the comprehensive changes that are needed.

It recommends the full implementation of the ABC of Tax Transparency, acknowledging the failures so far and how low-income countries are particularly excluded from the benefits.

The provisions relating to the transparency of beneficial owners are fundamental. Public records of the natural person (the warm-blooded human being) behind every legal entity would end the need for leaks – and improve the functioning of markets, as well as taxes and other regulations. An important step would be to hold professional facilitators accountable by requiring disclosure of the beneficial owners of any structures that lawyers and others help establish and by imposing criminal penalties for non-compliance.

The FACTI panel also presents global architectural reforms to end impunity for illicit financial flows.

In addition to a global asset register, to join the national registries of beneficial owners, three elements are essential. A tax rights watchdog – originally proposed in my book The Uncounted – would collect and publish country-level data to provide annual accountability to jurisdictions ensuring secrecy and encouraging its abuse. A United Nations Framework Tax Convention would provide the basis for full CBA implementation, including making states accountable for meeting these commitments. It could also create space for inclusive negotiations on a global scale in the future through an intergovernmental fiscal body.

At the technical level, the solutions are within reach. Only political blockages remain – those of the elites and jurisdictions that profit from the abuses.

In the 1995 film The Quick and the Dead, villainous John Herod controls a small town and its fearful citizens. The character sums up the threat: “As I always say, put a fox in the hen house and you will have chicken for dinner every time.

If we, the citizens of the world, don’t want this every time – more leaks, more outrage and continued impunity – then the agenda is clear. Now is the time for global tax justice.

The opinions expressed in this article are those of the author and do not necessarily reflect the editorial position of Al Jazeera.


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