Jaweria Waheed |
The Paradise Leaks follow as a sequel to last year’s Panama Papers and offer an unusually vivid and skewed view of the capitalist system that has sucked the life out of the global economy through various “tax avoiding tactics” by the world’s elites. The list of high profile names in the Paradise Papers might even be greater than the infamous list of the Panama Papers that made heads of states resign from office (Prime Minister of Iceland).
The preliminary readings of the Paradise Papers have revealed that even the Queen of England had invested millions of pounds from her estate in an offshore Cayman Islands fund. This money had never been disclosed before.
With the release of such Leaks previously in the name of Offshore Leaks, Luxembourg Leaks, Swiss Leaks, Panama Leaks and now Paradise Leaks, we are exposed to the financial corruption taking place worldwide under the auspices of capitalism. The channel, which implements the idea into reality, is the offshore companies which have been explicated in the name of tax havens as well as the secrecy jurisdiction. These terms are used interchangeably with the slightest clarifications to the meaning of each term.
Murphy suggests reforms in the corporate tax laws, which is a major driving force behind tax evasion because it taxes the shareholders and not the companies.
The New York Times writes that “Holding money in an offshore company is generally not illegal, although such financial arrangements can be used in illegal ways—for example, to facilitate tax evasion or money laundering.” The basic purpose it serves to the individual is to provide it a safe passage for tax evasion and money laundering which by benefiting the elite of our society not only undermines the laws but also increases the concentration of wealth and income across the world. These leaks have therefore elucidated the implications of this fiscal venality well suited for our elites.
By drying up the economies of welfare states through tax avoidance, the secrecy jurisdiction has largely contributed to the growing economic inequality around the world. This system has also denied poor states the resources they need to tackle poverty, education, health and other fundamental necessities by widening the gap between the global North and South.
These leaks have revealed that the world’s most important providers and beneficiaries of financial secrecy, which harbor looted assets, are mostly the world’s biggest and wealthiest countries. Major economies of OECD and their satellites are the main recipients of “or conduits for these illicit flow”. Thus, it forms a part of a wider capitalist dynamic of hiding assets and arrangements from avoiding tax.
Political will is lacking in part as politicians and global leaders themselves take advantage of financial secrecy to manage their own wealth.
Richard Murphy in his book ‘Dirty Secrets: How tax havens destroy the economy’ explicates the implications of these secrecy jurisdictions or tax havens of the global economy. He is of the view that tax evasion has a different meaning for the core and periphery states.
The core states suffer relatively less than the loss that these tax avoidance tools have in the periphery or developing states because the larger economies have a capacity to withstand a loss. But, this isn’t true for developing states in which low earning combined with tax evasion forces them to look for high-interest loans which could have been avoided if the tax was systematically collected.
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This is how the capitalist system has a strong reliance on the dependency factor. This serves as a tool to the capitalist elite that maximizes their benefits at the expense of dependent entities.
Moreover, the opacity that this secrecy jurisdiction creates hurts transparency in markets by hiding the perfect knowledge and causes a disturbance in the market equilibrium. This obscurity further ails equal supply of opportunities to all that include “equal access to capital, so that those with good ideas can bring them to market”. Therefore, this concentration of wealth hinders economic growth as well as market competition.
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Tax havens prevent the access of information to the citizens, thus raising a serious concern in the selection of candidates to elect a democratic government. The revelations made by Panama Papers have caused a resultant unrest in our own country where an elected Prime Minister Nawaz Sharif has been ousted because he did not disclose all his assets and had links to offshore banks.
The list of high profile names in the Paradise Papers might even be greater than the infamous list of the Panama Papers that made heads of states resign from office (Prime Minister of Iceland).
The international community has completely failed to address this pertinent issue as it assigns itself a major role to deal with matters related to human rights violations, nuclear proliferation, human trafficking, and drugs. Political will is lacking in part as politicians and global leaders themselves take advantage of financial secrecy to manage their own wealth as has been revealed in Panama and Paradise Leaks. OECD, IMF, and EU have tried to deal with these challenges but have ultimately failed to do so due to the failure that is inbuilt into them from the start.
Since multinational corporations operate most offshore companies, the writer suggests that legislation is introduced for a transparent regulation of affairs in these corporations. Murphy suggests reforms in the corporate tax laws, which is a major driving force behind tax evasion because it taxes the shareholders and not the companies. Above all, there is a need for generating a political will, both at the national and international level, in dealing effectively with the challenge.
Jaweria Waheed is a graduate in International Relations from Kinnaird College. She is a member of the Editorial Board for the magazine ‘Voice of Students’ and has been a blogger with media organizations ARY News & Dunya News, Pakistan. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.