Few parties come out of this debacle with much credit
Kitty Miv, Editor
11 April, 2016
Kitty's Country Rankings are below, with a description of how they are compiled. This week, as every week, I give out Encomiums to countries which have done Good Things, and award Execrations for countries which according to my highly personal and partial views have done Bad Things.
It's difficult to know where to begin with the Panama Papers affair. Predictably, most people have latched on to the "us and them" angle - how the rich, powerful, and well-connected get to live by a different set of rules from those who pay tax in full. The world does seem like a very unfair place sometimes. But for me, it's difficult also not to highlight the stunning hypocrisy of some of the world's leading politicians, who seem to rule by the mantra of "do what I say, not what I do." Meanwhile, the sanctimonious utterings of bodies like the OECD, as they tell sovereign nations how to run their affairs, are just getting repetitive and boring.
It might be an unpopular thing to say, but the massive irony about all this is that the vast majority of people named in the Panama Papers probably have done nothing illegal. Yet nobody has drawn attention to the crime that was committed to create this expose in the first place, and quite a serious crime at that: the theft of 11 million confidential financial documents is no trifling matter. Just imagine if it had been 11 million confidential government documents that had been swiped from one of the world's major powers. What would happen then? The Government in question would be busting a gut to collar the thief, sparing no expense in its law enforcement budget, and probably getting help from its allies, that's what. Just look at Edward Snowden.
There's doubtless innocent people named in the Panama Papers who have had their privacy breached and their reputations dragged through the mud by association. Moreover, these people might now be vulnerable to attack from the criminal fraternity. Again, standing on the side of privacy is not a popular place to be, but the desire to protect this important human right seems to have been lost in a maelstrom of righteous indignation. Still, given the amount of personal information that people are prepared to share via various social media applications and other online platforms these days, I'm beginning to think that those of us who still care about individual privacy are looked upon as a crazy minority!
Nevertheless, the affair is yet another demonstration of how easy it is for people with the requisite technical knowledge to hack into servers and databases at will, and take what information they need to fulfill their aims, whether their actions are well-intentioned or more malign (usually the latter). It hardly bodes well for the security of the tsunami of information that will be criss-crossing the globe as a result of FATCA and the Common Reporting Standard, does it?
Many people are saying that the UK has a large role to play in cleaning up the mess, because it still effectively rules many territories now facing negative press coverage, including various paradise islands flung out across the Caribbean and the Crown Dependencies in chillier northern climes nearer to dear old Blighty. So let's just suppose Britain invokes the spirit of its colonial past, and goes marching into these little islands and territories to impose its will. In the unlikely event that direct rule did happen in all these places, what would be the outcome? Economically, it could be potentially ruinous for some territories. Besides tourism, services - in particular financial services - are a major breadwinner. And besides tourism, there's not much else for these jurisdictions to fall back on. Therefore, removing their tax and regulatory advantages could be disastrous for these UK territories. Would the UK really want to be responsible for impoverishing these already economically vulnerable places? I think the answer is probably no, but the anti-offshore hawks might see it as a small price to pay for ridding the world of "tax havens."
Also, it must be remembered that the UK is not responsible for every "tax haven" on earth. And just like it's hard to stop water from going wherever it wants to go, national borders represent no barrier to financial flows these days - they would merely head to other jurisdictions with similar fiscal and legislative advantages. A loss of flows for Bermuda, the BVI, and the Bahamas could be a gain for Mauritius, the Seychelles, and Singapore.
This leads me on to my final point: if the world, or, more accurately, certain influential people in the world, want to shut down offshore once and for all, how do they go about it? They've been trying for two decades after all. We've seen how the US Government managed to impose FATCA on much of the globe without too much of a fight after many observers said that such a thing would be impossible (although it'd be interesting to know if it could have achieved this without dangling the carrot of reciprocity). BEPS represents another feat of international cooperation on tax, although it's too early to judge whether the project's goals will be met. Having considered all this though, how are the aforementioned influential people going to get every nation to adopt similar laws, short of invading countries or forming a world government? I think I'll wait for them to come up with the answer to that. But maybe if taxes in the onshore world weren't so high and horrendously complex, people wouldn't feel so inclined to go offshore. So maybe the answer's closer to home than they think.
Few parties come out of this debacle with much credit, so no points either way are awarded this week.
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