Fifth column: Papers from paradise

Paradise has lifted its veil and exposed many of its shrouded inhabitants. The new data leaks, dubbed as the Paradise Papers, have yet again exposed how the world’s rich and powerful – from business tycoons, pop stars and royals to politicians, celebrities and multinational corporations – hide their wealth through secret, and often questionable, financial practices.

Consisting of more than 13.4 million files containing financial documents, the Paradise Papers are the world’s second-biggest data leak – second only to a similar and earlier leak in 2016. The information, which comprises more than 1,400 GB of data, spans almost 70 years – from 1950 to 2016 – and contains the names of more than 120,000 people and companies who have taken advantage of tax havens, much to the detriment of common people. According to the documents, nearly 80 percent of the wealth warehoused in offshore tax shelters belongs to the 0.1 percent of the rich elite from across the world.

Among those revealed in the leak include famous Irish singer-songwriter Bono, who is celebrated for his work on poverty alleviation, and other Hollywood stars as well as companies like Apple, Facebook and Nike. Apple reportedly holds more than $250 billion overseas. The New York Times reported that “Apple has accumulated more than $128 billion in profits offshore, and probably much more, that is untaxed”. The Guardian reveals that the universities of Oxford and Cambridge – and nearly half of all the colleges associated with the two universities – have secretly invested tens of millions of pounds in offshore ventures, including environmentally disastrous oil exploration and deep sea drilling.

Even Queen Elizabeth has reportedly stashed away over $13 million into offshore tax havens in the Cayman Islands and Bermuda, prompting demands for an investigation from the Labour Party and anti-monarchists. Responding to the revelation, Jeremy Corbyn, the Labour Party leader, said: “Anybody who is putting money into tax havens should do two things: not just apologise for it, but recognise what it does to our society”.      

Through an opaque maze of companies and frontmen who are masters of manufacturing obscurity for their clients, aided by complex structures of rules and regulations, big bucks are horded away. This is done out of the public eye and beyond the reach of poor people who are denied a slice of this stash for their daily needs – from health to education and infrastructural development.

As a corollary to that, the gap between the rich and the poor has grown exponentially as has the deprivation of millions around the world as the delivery of services has declined for want of public funding. In addition, the practice increases the tax burden on small businesses and individuals who can neither move their meagre wealth overseas nor afford the services of ‘loophole experts’ – lawyers and accountants – who can find them legal albeit immoral ways to exploit the instruments of wealth generation, its storage and taxation. Besides, this encourages tax avoidance, depriving states of much-needed revenue.

Aptly, this scrupulous enterprise, which is conducted in total secrecy and absolute discretion, is conveniently named as offshore business. This conjures up images of exotic and far-off locales that must be exempt from the writ of normal state structures and their protocols and is, therefore, not worthy of any scrutiny, oversight or debate by the people – commoners who toil in sweaty jobs and are always worried about fulfilling their basic life needs and that of their families.

After the collapse of the Soviet Union and the haste with which capitalism was projected as democracy’s twin and given charge over vast swaths of the ‘liberated’ world, corruption – embezzlement and bribery – has grown manifold as the wealth of a limited number of individuals around the world has multiplied. As a result, tax havens have grown in size and popularity. The campaign group, Tax Justice Network (TJN), estimates that $21 trillion to $32 trillion is now invested in these shelters.

Since the business of stashing away money is completely opaque, it also attracts monies from terrorists and terrorism as well as drugs and other unsavoury occupations. But there is little political resolve to review the realm as the rich and the powerful cannot afford to agitate the milieu that shelters them. 

In May 2016, following the Panama Papers, a group of 300 prominent economists, including the 2015 Nobel Prize economics winner Angus Deaton, wrote a letter to world leaders and demanded more tax transparency. The letter, coordinated by Oxfam, demanded greater transparency and called for “new global agreements on issues such as country-by-country reporting, including for tax havens”.

The leading economists argued that: “The existence of tax [havens] does not add to overall global wealth or wellbeing; they serve no useful economic purpose”. Dr Ha-Joon Chang, a leading economist and a Cambridge academic, who was also a signatory to the letter, contended that the “tax [havens] basically allow companies and certain individuals to free-ride on the rest of humanity”. According to the TJN, corporate tax avoidance costs governments $500 billion per annum while personal tax avoidance costs about $200 billion per year.

It is terribly disheartening to learn that these companies are able to run smoothly in democratic systems of governance and that too not only without any hindrance but with active support from the political elite. These elite groups often end up as beneficiaries of the system themselves through a myriad of impervious and unyielding regulatory instruments that they themselves support through legislation to afford a legal veneer to these iniquitous and exorbitant practices.

The Paradise Papers reveal that the International Financial Centres Forum (IFC), a body representing offshore law firms, has a considerable influence with the UK government – ministers and bureaucrats. A report in The Guardian reveals the IFC “speaking of its influential ‘penetration’ of the UK government”. According to the report, the IFC even boasted that its “behind-the-scenes activity may have prevented world leaders from agreeing [to] more wide-ranging transparency measures at a G8 Summit in 2013”. This is not only morally reprehensible but also outrageous and deeply unfair. 

Twitter: @murtaza_shibli