Shock! Horror! The wealthy employ savvy, expensive accountants and law firms to minimise taxation, premised on legal avoidance rather than illegal evasion, and to hide their assets from prying eyes. Tut tut, who would have thought it.
The leaked so-called Panama Papers revealing the directors and shareholders of 214,000 offshore companies have elicited a worldwide firestorm impacting heads of state and senior officials. So what’s new?
This has been common practice for eons. And if such schemes are deemed to fall within the law, then taking advantage of them is par for the course. What is immoral is that they have existed and flourished for so long, depriving state coffers, in particular those of developing nations and countries with struggling economies, of much-needed revenue. I would suspect that much of the prevailing outrage is fabricated or amplified by the critics of individuals caught up in this scandal tainted with a modicum of envy when most employees don’t have access to such profitable schemes.
The first casualty of public anger was the Prime Minister of Iceland Sigmundur Gunnlaugsson, forced to resign when it became known that he and his wife held an interest in a shell company in the British Virgin Islands at a time when the country’s banks were collapsing.
Less than squeaky clean
In reality, he did nothing illegal because he sold his 50 per cent stake to his wife before a new law came into force that would have obliged him to announce a conflict of interest. Nevertheless, he was viewed as less than squeaky clean and succumbed to public pressure to step down.
British Prime Minister David Cameron now finds himself in the hotseat over his admission that he benefited from an offshore company set up by his father to the tune of £31,500 (Dh163,331) after selling his share in 2010 when he became prime minister.
“I paid income tax on the dividends. There was a profit on it, but it was less than the capital gains tax allowance so I didn’t pay a capital gains tax, but it was subject to all the UK taxes in all the normal ways,” he told ITV.
Like Gunnlaugsson, Cameron has done nothing at all that can be judged as illegal. His problems stem from the fact that he failed to come clean from the get-go and has in the past labelled tax avoidance schemes “morally wrong”. He has also positioned himself as leading the global fight against tax evasion, which smacks of ‘Do as I say, but not as I do’.
With calls from within his own party to resign and thousands galvanised to protest outside Number 10, it will be interesting to see whether he can survive the flak.
Russian President Vladimir Putin has been also been implicated even though his name isn’t mentioned in the trove of information, only a few of his associates.
Yet, the international media has indicted Putin by association without a shred of proof that they had acted on his behalf. Putin insists the leaks are part of a US instigated plot to destabilise Russia in order to weaken its economic and military power.
“In this connection, attempts are made to weaken us from within, make us more acquiescent and make us toe their line,” he said, adding, “It is to spread distrust for the ruling authorities and the bodies of power within society and to set people against each other.”
On the defensive
Other world leaders on the defensive include Pakistan’s Prime Minister Nawaz Sharif, whose son Hussain has four apartments in London’s Park Lane ‘owned’ by offshore companies, and Argentina’s anti-corruption President Mauricio Makri, who was a director of an offshore company until 2009, which he omitted to declare when he was appointed the capital’s mayor. He insists he never derived any income from the company in question. I am not in the business of defending a longstanding dodgy system, but it seems to me that most of this brouhaha is emotionally generated or hyped by opportunists.
I am certain that a good proportion of those expressing noisy indignation are people in glass houses, safe in the knowledge that their own offshore accounts and holdings are unlikely to be exposed. Others are gleefully jabbing knives into their leaders’ Achilles heels to suit their own agendas.
Politicians aren’t saints, but as long as they aren’t breaking existing laws then their personal financial arrangements and those of their parents, children and close buddies are nobody’s business except the taxman’s.
Linda S. Heard is an award-winning British political columnist and guest television commentator with a focus on the Middle East.
