We would like to say that we were surprised by the data dump that lifted the lid on shell corporations that are designed to skirt taxation around the world.
But, alas, our cynicism about the way the world works and the way the rich and powerful operate above the law resulted in not much more than a stifled yawn. However, if something corrective comes about (other than a prime minister or two resigning) because of the information, now that would be worth celebrating.
Writing for Newsweek, Leah Mcgrath Goodman (a Windham County resident, by the way), characterized those identified in the documents as "A veritable Who's Who list of billionaires, celebrities and global leaders ..." who have taken advantage of offshore tax shelters. The "Panama Papers" are 11.5 million documents stolen from the Panamanian law firm Mossack Fonseca, and turned over to journalists. David Dayen, writing for Salon, noted Mossack Fonseca creates "untraceable shell companies for Mafia members, drug dealers, elites from sports and culture, and a host of corrupt politicians."
John Christensen, director and co-founder of the UK-based Tax Justice Network, told Goodman the use of tax shelters means "The public is losing basic services left, right and center, and at the same time they are being burdened with more taxes because the global elite aren't paying their fair share." Between $21 trillion and $32 trillion in private wealth is salted away in tax havens around the world. "Avoiding taxes has been a key plank of the world's wealthy for decades, contributing to the growing wealth gap and placing an ever greater strain on ordinary taxpayers," Christensen said.
Mossack Fonseca is not alone in creating shell companies, Christensen told Goodman. "They advise clients and set up the layers of secrecy that allow for the concealment of offshore money. Then they hide behind the attorney-client privilege."
Even though no residents of the United States have yet been named by the journalists combing through the Mossack Fonseca documents, the United States is a world leader in tax avoidance. "(O)ne reason why Americans haven't yet been implicated is that they already have a perfectly good place for their tax avoidance schemes: right here in the United States," wrote Dayen. "While several developed countries are already moving to reduce the anonymity behind shell companies ... the United States has resisted such transparency." Dayen noted that the United States is the second-easiest country in the world to obtain an anonymous shell corporation account. The first is Kenya. "You can create one in Delaware for your cat."
Legislation passed in 2010 by Congress requires foreign banks and other institutions to reveal information on their clients who are U.S. taxpayers, but the U.S. doesn't reciprocate. "As a result, the U.S. is becoming one of the world's foremost tax havens," wrote Dayen.
Delaware, Nevada, South Dakota and Wyoming all specialize in incorporating anonymous shell corporations, noted Dayen. "America has become a lure, not only for foreign elites looking to seal money away from their own governments, but to launder their money through the purchase of U.S. real estate."
Dayen maintains the U.S. could fix this situation "in 15 minutes," by adopting transparency standards. However, noted Dayen, entrenched interests, such as states and their secretaries of state receive a lot of revenue from incorporation fees, and the friends and beneficiaries of the rich and powerful write the laws.
But Vermont Secretary of State told the Reformer that his office "does not prosper from the fees. The Legislature sets the fee amounts, and the General Fund sweeps any funds left at the end of the fiscal year." Condos maintained that the states are fighting transparency initiatives because the IRS already collects the information but won't give it up to police investigators. Asking states to do what the IRS is doing, he said, would cause an undue burden.
While the loss of global tax revenue is nothing to sneer at, noted Dayen, what is really damaging is the creation of "a two-tiered economic and justice system where the upper class need not follow the same rules as the rest of us."
Most of us who observe the machinations of the wealthy, corporations and their minions in government have already resigned ourselves to the fact that those with the gold make the rules. It would be nice if the candidates for president would address this issue during the run-up to the November elections and propose what could be done to remedy the situation. Right now, only one politician is talking about it, and has been talking about it for a number of years. And I think you know who we are talking about.