The law firm Mossack Fonseca had clients from 204 countries. There are 193 member countries the UN.
The Panama Papers make reference to over 200,000 companies. Confindustria, the most representative business association in Italy, has less than 150,000 members. More than eleven million documents. And all pertaining to just one law firm in Panama. Only one. Although they were good, we are talking about a single law firm. How many are there, only in Panama? And we talk about lawyers; then there are accountants, notaries, financial advisors, brokers specialized in offshore operations and so on and so forth.
And of course there is not just Panama. Definitely a popular destination for the “discretion” which the wealthiest clients and their swags are treated, but there are many, many more tax havens.
The Italian Revenue Service listed over 50 locations in the last published version of his “black list”, virtually in every continent and at all latitudes. And we have to take into account that, for obvious diplomatic reasons, the state of Delaware in the USA, the City of London or the Netherlands, just to name a few, are not included in this list, even though international networks such as the Tax Justice Network consider them among the most important tax havens on the planet. And certainly there is no shortage of law firms and consultants in these places.
You almost feel sorry for these poor law firms. We can only imagine the fierce competition to gain as clients not the infamous “1%”, but the 1% of the 1% which is the real objective of these intermediaries. Clearly, given the competition, it is then difficult to be too fussy: rock stars or dictators, captains of industry or mafia bosses, it makes little difference. Pecunia non olet [money does not stink].
If you run a simple search on the Internet you can understand that there are not only the big law firms.
Today, with a few hundred dollars, anyone can open up his own shell company. A random site among the hundreds that can be found online, offers the registration of a company in the British Virgin Islands for about 1,000 euro a year, and even less to register it in the Seychelles or Belize.
Panama, like Gibraltar or the Bahamas, is perhaps a little more expensive, but it is a destination within the reach of any good football player or noteworthy criminal. Big deals also for a designated manager for your company or a figurehead to ensure the highest level of confidentiality and to exercise control and management of the company outside the country of residence. There are a lot of sites that explain in detail where it is better to settle down, depending on the type of operations.
If you wish to evade taxes there is a certain tax haven, if you want anonymity there is another, if you want to create a shell company, another.
It is the free market, honey. A market that offers tax evasion, secrecy, money laundering, impunity.
Each tax haven specializes in a few specific operations, a real commercial and professional niche, in order to be the best at attracting a slice of the limitless capital on the constant lookout for a safe haven.
If this is the situation, can something be done?
On the contrary, it would be possible to intervene effectively, but it is absolutely necessary to change the approach followed until today.
First of all, let’s stop looking at the “offer” side only, focusing on the small tropical island of the day. Let’s start looking into the “supply” side: who benefits from the existence of tax havens? Where do the funds that flock there come from? And is it possible to intervene in our house? The answer is yes.
For example, by asking corporations to publish their balance sheet data broken down by each jurisdiction in which they operate.
It’s called reporting country by country.
Today, companies are required to include in their budgets only aggregated data. This makes it impossible to know what happens in every country, and in particular, to determine if companies pay taxes owed for the activities of production and trade and the profits generated.
A paradoxical situation, to say the least: multinational companies publish their balance sheets as a single entity, but pay – or don’t pay – taxes as if they were so many different entities as there are countries in which they operate.
Still, for years there has been the need to determine the actual beneficiary of each company, in order to avoid anonymity and Chinese boxes that are synonymous with money laundering and organized crime.
Also thanks to the efforts of civil society networks, these and other proposals have been finally added to the political agenda.
Just this week, the European Commission is working on a legislation for reporting country by country.
The risk, once again, is that the usual hands are able to weaken and water down the proposals until they are completely useless.
As an example, today there are discussions whether to limit the reporting country to country within the EU only, leaving the possibility to publish aggregated data for all third countries, thus negating the demand for transparency.
Will the Panama Papers be an opportunity for a real change of course, or once again we will see a race to be surprised and make a fuss and then not to lift a finger?
As with many other financial regulatory issues, stopping the shame of tax havens is not so much a technical problem: we would know what to do and how to proceed.
What has been missing until now is the political will to do so. And reading the names in the Panama Papers, it’s easy to see why.