News stories on the astonishing “Panama Papers” published over the past week in the Herald offer a peek into a sinister web of global corruption and secret money. Its existence was widely suspected but never before put on public display in such jaw-dropping detail.
Bottom line: Roughly $7.6 trillion: $7,600,000,000,000. That’s how much mind-boggling wealth is socked away in tax dodges created by one law firm in Panama.
The problem isn’t the illegality revealed by this series of news stories, although there’s plenty of that. No, it’s what’s legal that shocks the conscience and demands urgent reforms by lawmakers around the world, including the United States.
There are legitimate reasons to create a shell company that offers confidentiality and privacy. The famously rich may want to conceal ownership of a residence so they can feel safe from the reach of kidnappers.
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But let’s not be naive. Most of this is dirty money, part of a criminal enterprise or loot resulting from government corruption. Already implicated are at least a dozen current and former heads of state, their family members or associates. They can’t explain where the money came from.
The list includes officials in Russia, Iceland and Brazil — among so many others, including China. So far, few Americans have been named. But this rich trove of papers came from just one Panama-based law firm, Mossack Fonseca, and they are still being scrutinized. More revelations will come.
Those who hide money from taxes cheat everyone else. If you pay your fair share to further the legitimate purposes of government — better education, better roads, better public health — you’re the victim. Your money builds a better world. Theirs only builds personal wealth.
In desirable places to live like Miami, secret money buys tangible assets like high-end condominiums, resulting in unrealistically high real estate prices for those of us who live here and earn an honest living.
So what’s to be done? Plenty.
▪ Governments should require that law firms like Mossack Fonseca follow the same know-your-customer rules that banks do. They should list the true owners of the shell companies and create a public registry. There is no legitimate reason not to do so. In the U.S., it would make it easier for law enforcement to access tax records that accompany the creation of U.S. shell companies.
▪ Congress should demand that those U.S. states famous for allowing the onshore equivalent of offshore havens — Delaware, Nevada, Wyoming — play by the same rules as everyone else. They should collect and keep information on the true owners of these dummy corporations.
▪ Panama and other countries notorious for money-laundering should be obliged to overhaul their legal and financial systems if they want to remain connected to the international banking system. If they are actively enabling criminal activity, they should be cut off from doing business with countries victimized by tax dodgers and corrupt officials.
▪ Hold a Congressional inquiry to review whether there is any link between the U.S. financial system and high-level foreign corruption elsewhere. Mossack Fonseca’s activities and its U.S. clients should be scrutinized.
Governments had an excuse for inaction before the disclosures in the Panama Papers. They didn’t know. Now they do. If they ignore what they’ve learned, then they will continue to enable the cheaters.