The Panama Papers And The Tax Dodging Network
The Panama Papers have
revealed the normal, banal ways that the wealthy rob from the public purse.
They insist that we pay taxes on our wages and, increasingly, on public
services while they feel entitled to get away with paying nothing. As Ivana
Trump once put it, ‘Tax: It is for the little people’
Mossack Fonseca is a
powerful law firm that was set up in Panama by a German immigrant who arrived
in Panama after his father had served in the Waffen-SS during World War 2. It
is one of the centre points of a global tax laundering operation to protect the
wealthy elite. Its main activity lies in setting up ‘shell companies’ which are
corporate bodies that are used to hide the ownership of assets.
These companies are
then located in tax havens and money is funnelled to them through a complicated
network organised by Mossack Fonseca or firms that work with them.
Gabriel Zucman, the
leading expert on tax havens estimates that tax dodging by wealthy individuals
amounts to 8% of all global household wealth. That approximates to $7.6
trillion. Figures like that are hard to comprehend so it is maybe best to
measure it by human suffering. World hunger could be eliminated if $30 billion
was made available on an annual basis to eradicate it. If the money that was
stashed away in tax havens was used, this would pay for the elimination of
hunger for 270 years! Even that is an underestimate because Zucman’s figures
only related to household wealth – not corporate wealth.
Mossak Fonseca are the
technical experts for wealthy people, specialising in keeping their secrets.
They use techniques like ‘bearer shareholders’, ‘nominee company officers’ and
‘trusts’ to hide the real beneficiaries of the tax dodging.
The Panama Papers
reveal the sheer scale of the operation. The prime ministers of Iceland,
Pakistan, Ukraine and the King of Saudi Arabia all use their services. So too
did David Cameron’s father and the children of the family members of the
Chinese Politburo Standing Committee. Declared political ideology has nothing
to do with it.
These respectable
figureheads join with criminals and fraudsters in this toxic network. Take, for
example, the unknown Graham Maddock. This odious individual received ‘VIP
service’ from Mossack Fonseca after he used money he fraudulently stole from South
Africa’s miners pension fund. It makes little difference to Mossack Fonseca
where the money comes from.
Mossack Fonseca could
not act alone and the records that have come into the public domain show that
it is plugged into a global network of banks, law firms and accountancy
companies to sell financial secrecy to the rich.
Over the next few days
and weeks, these names will start to appear. But for now it is enough to know
that the Panamanian law firm is only one point at the centre of a web of
secrecy. The other strands of that web reach into the most respectable names in
global capitalism.
THE IRISH CONNECTION
The Irish rich have
turned this country into a tax haven. They have produced an army of accountants
and legal firms who specialise in finding loopholes to allow them avoid taxes.
Bizarrely, the Irish Revenue Commissioners regularly meet up with accountancy
representatives who organise the tax dodgers to discuss their recommendations
on how to create even bigger loopholes.
Not surprising then that
a number of Irish figures would feature in the tax dodging network.
Top of the list is
Stanley Watson, a senior figure in Matheson solicitors. Leaked papers reveal
that when he moved to head up their London office, he ‘in effect’ resigned from
the company only to set up a consultancy company through which he billed his
former employers. This was apparently located in Cyprus because Ireland had a
‘very attractive double tax agreement ‘ with that country. By ‘attractive’ was
meant a very serious way of avoiding taxes.
Watson is by no means
a household name for the person on the street. He is better known among the
rich and famous who want advice on tax.
In 2012, the tax
planning department of Matheson Ormsby Prentice wrote to the government to
demand that there be no change in Irish tax law to make paying tax a
requirement for Irish citizenship. They wanted to keep the arrangement whereby
‘non-domiciled individuals’ would not be charged tax on foreign income. No
wonder they did because one of their own top managers was setting up
arrangements to ensure that he paid little tax on his foreign income. The case
provides a small glimpse of how the Irish rich operate.
Another key individual
was Frank Flannery, the insider strategist for Fine Gael. He simply cannot explain
how a £250,000 deposit in the name of a British Virgin Islands (BVI) company
was used to support his purchase of a house in London. This is the same
individual who received payments of €351,000 from Rehab over six years.
He was paid to lobby
the government and used another consultancy company to invoice Rehab.
However, the most
important revelation so far has been the activities of a little known company
known as Intertrade Project Consultants which has a registered address in
Botanic Road Dublin. Its primary business is sharing the commissions earned on
arms and aerospace sales. ‘Commission sharing’ in the arms industry is often a
code word for murky payments used to generate contracts.
The Quinn family who
disputed Anglo-Irish bank’s attempt to recover their assets were also linked to
firms that were set up in the British Virgin Islands by Mossack Fonseca.
WHAT IS TO BE DONE
The sly defenders of
these practices who appear on the main stream media make a distinction between
tax evasion and tax avoidance. The former, they assert, is wrong because it is
illegal while the latter may be unfortunate but it is, they stress, legal. Yet
even Barack Obama has pointed out that tax laws are written so carelessly in
order to give an army of accountants and lawyers a free hand to serve rich
people.
If the Irish
government had an ounce of sincerity in their hand wringing, they would change
the law to stop Irish citizens using off-shore secret locations.
It is simply a matter
of the Dail making it illegal for anyone with an Irish passport to hold assets
in secret tax havens.
If they can pass laws
to make people pay property taxes, they can pass laws to stop wealthy people
robbing the public purse.