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The Panama Papers: Tax Evasion Made Legal


Tax evasion: what was once a mark of shame has endured so long it’s become boring. Commonplace. Business as usual.

The Panama Papers have opened the latest chapter in this story. Detailing the dealings of Panamanian financial services firm Mossack Fonseca, the Papers don’t describe anything particularly unusual or novel, and that’s the real tragedy. This is normal. It’s normal for people with massive amounts of wealth to hide it in tiny little countries around the world just so they can avoid giving up a slice of it that they wouldn’t even miss. It’s the principle, you see! What has paying taxes ever done for anyone, really?

It’s difficult to even talk about the issues with any real depth. Let’s start, instead, with Frankie Boyle’s vicious satirical take:

One thing we’ve learned is that rich people aren’t even rational: they can afford to live in the Cayman Islands and leave their money here. Instead, they make their money go on holiday so they can live in perpetual rain, like the way the dwarves in the Snow White movie kept all the diamonds and lived in the forest. ... A standard rhetorical pose on the left is that austerity is not economic but ideological. Is it an ideology? Isn’t that giving a bit too much credibility to a philosophy that amounts to: “I think we should take everybody else’s stuff”? Describing austerity as an ideology suggests that people like Osborne and Boris have a misguided faith in free-market principles that is simply too pure for this cruel world, when they’re actually two drinks away from robbing a charity box in a pub. ... Work assessments for people with Parkinson’s and cerebral palsy isn’t a different take on morality, it’s immorality, and it doesn’t particularly matter what the rationalisation is. I sometimes wonder if austerity might be less of an ideology and more of a pathology.

Boyle is writing from a British perspective, and the Panama Papers have been an active topic in the UK thanks to the revelations that Prime Minister David Cameron benefited from funds hidden in Panama after claiming no such money existed. The discussion of public services and austerity may come off as a non sequitur except for the fact that the guilty parties outed by the Papers are the very same people who preach that their governments are broke, that they cannot afford to care for the poor, the sick, the unemployed, the needy. The money simply isn’t there, and it’s a shame, but what can you do? It turns out, of course, that the supply of money is not the problem whatsoever–it’s just that so much has been squirreled away to distant lands where its owners can pretend it doesn’t exist.

This state of affairs is also, in many ways, a consequence of the primacy we’ve placed on both globalization and legalism. Globalization was originally designed to break down national barriers to economic activity–to let capital flow freely from place to place, seeking out optimal circumstances for maximum profit. Not a terrible premise in and of itself, but a vehicle with no one driving it is going to crash in short order, and the vastly disparate cultural, political, and economic circumstances around the globe ensure that it’s easy for the already advantaged to prey on everyone else. Legalism enters the picture as a major tool to enable this predation. The global financial system was not purposefully designed to allow very rich people to hide assets in Switzerland or tiny Latin American and Caribbean nations. It’s a side effect resulting from a lack of foresight. But sums of money attract corruption, and it’s certainly better for the shelter countries to keep benefiting from that cash than to tattle on evaders. Instead of turning those assets away, they and their owners are embraced and complex systems are set up to permit their perpetual sheltering. Would countries like Panama change their tune if the rest of the world offered them a better deal? It’s possible.

But the downfall of legalism is the assumption that anything not specifically outlawed is permitted. If you only have to pay tax on income that technically touches the shores of the country where you live, well, you find a way to make sure it never crosses that border. Your government may well like to consider that income, but legally speaking, it isn’t, because it was never an asset you held in that jurisdiction. It’s still yours, of course, and the idea that handing it over to a shell corporation (or several layers of them) that you control constitutes someone other than you owning it is a pathetic fiction.

Laws are obviously necessary–we need rules upon which to organize society, set expectations for behavior, and correct those who go astray–but these systems cannot be effective so long as there remain classes of people and organizations who are beyond their reach. Corporations dodge taxes through the use of shell corporations and offshore holdings, just like wealthy individuals do. But there exists little in the way of supranational institutions which can check the behavior of individuals and companies whose activities evade mere national jurisdictions. International law barely begins to cover this area. Meanwhile, treaties like TTP and TTIP seek primarily to put restraints on governments and their citizens, as if making corporations (and wealthy individuals who can act with the power of large corporations) less accountable will ever moderate their behavior.

Unfortunately, given the troubles in the EU and the seeming inability of the UN to accomplish anything meaningful, combined with the growing dysfunction of national governments, there doesn’t seem to be much hope of these trends reversing to put the power of capital–and those who wield it–in check. There are some who believe that the world’s wealthy elite constitute a conspiracy to control the planet and its people. The truth is far more mundane. The rich just want to get richer, because the alternative is the terrifying prospect of becoming poor. If every border must be erased, every national institution dismantled, every decent way of life destroyed, it is a small price to pay–after all, paid by someone else–for the rich to hold onto their riches.