When an leak of documents from the Panamanian law firm of Mossack Fonseca via the International Consortium of Investigative Journalists (ICIJ) and a large network of international partners, the people responsible for setting up shell companies largely in the Caribbean where tax laws are lax at best and non-existent otherwise in order that the rich can “shelter” their cash from confiscatory taxing schemes, exposed hundreds of the world’s wealthiest people’s habits and lessons in how to keep their money, some real holes in various countries’ tax set-ups were exposed.
In the aftermath – and before the full list of people seeking shelter for their cash is exposed – the lame duck Occupier of the Oval Office, Prom King Barack Obama himself, made some off the cuff comments in the White House press briefing room that are sure to raise the hackles of nationalists in all countries everywhere.
Barack Obama has called for international tax reform in the wake of the revelations contained in the Panama Papers.
“There is no doubt that the problem of global tax avoidance generally is a huge problem,” he told reporters at the White House on Tuesday. “The problem is that a lot of this stuff is legal, not illegal.”
The US president said the leak from Panama illustrated the scale of tax avoidance involving Fortune 500 companies and running into trillions of dollars worldwide.
“We shouldn’t make it legal to engage in transactions just to avoid taxes,” he added, praising instead “the basic principle of making sure everyone pays their fair share”.
Obama described the Panama revelations as “important stuff” and highlighting the impact upon ordinary citizens, added that “a lot of these loopholes come at the expense of middle-class families, because that lost revenue has to be made up somewhere.
“Alternatively, it means that we’re not investing as much as we should in schools, in making college more affordable, in putting people back to work rebuilding our roads, our bridges, our infrastructure, creating more opportunities for our children.”
Obama spoke in favour of his administration’s new rules to close corporate inversions, by which companies move their headquarters overseas to avoid taxes. He described the practice as “one of the most insidious tax loopholes out there”.
Except for the reality that, so far, not one Fortune 500 company and no U.S. politicians have been exposed on the list…. (Read this from Zero Hedge. There’s probably a lot more to that that hasn’t dropped yet.)
What Obama is advocating is making taxing schemes international in scope rather than the subject of individual national governments’ purview. Arguing for this using loopholes that can easily be closed in the United States – a 45% corporate tax rate that COULD be lowered if Obama would be reasonable and realistic rather than face corporate inversions – is somewhat disingenuous actually, since due to the non-profit, trust, and real estate laws in the USA, many of the world’s rich are parking their money here rather than off-shore or Switzerland, but that’s a story for another post.
No, the reality here is that this leak is being used as an opportunity to not waste in order to push a one world government system for finance using the “little people” as the excuse to force the world’s “rich” to be fleeced by governments with an insatiable appetite for cash. No one will argue that all people paying taxes should pay their fair share, but that does not mean that the producers should give up so much cash so as to level the playing field for consumption. There has to be some incentive for producing. That is what Obama is overlooking.
As for the tax havens in the Caribbean, and the law firm involved, the scandal may be in who is stashing their cash “off-shore” which is perfectly legal, but the real story is in the criminal underworld as that cash is being laundered through the off-shore system. According to Zero Hedge, tentacles into drug trafficking, diamond mining, and a lot more is in the documents. In addition, the Guardian discusses the possible destruction of documents from the Nevada office of Mossack, a charge the law firm vehemently denies. At this time, the U.S. Department of Justice is investigating.
So far, since these documents have been released two international level politicians have resigned: Sigmundur Davíð Gunnlaugsson, Prime Minister of Iceland, and the president of the Chilean branch of Transparency International. Neither will impact the United States, but if there was any indication that this scandal has legs on a world wide scale, such resignations are it.