Act together to expose GLOBAL TAX EVASION, MONEY LAUNDERING

The so-called Panama Papers reveal that a great number of politicians – as well as their families, relatives and aides – have connections to offshore companies in Caribbean countries and other tax havens. Among the long list are names of former and current world leaders.

Tax havens are named for their minuscule rates of taxation, which are exploited by companies and wealthy individuals seeking to minimise contributions to state coffers. They are also known for being hotbeds of illicit activity such as tax evasion, money laundering and concealment.

World leaders named in the Panama Papers might not fall into the latter category, but they are nevertheless obligated to provide detailed explanations of their finances. 

After being obtained by German newspaper Suddeutsche Zeitung, the massive leak of information from a Panamanian law firm is now being scrutinised by the International Consortium of Investigative Journalists.

So far it has spelled disaster for Iceland’s Prime Minister Sigmundur David Gunnlaugsson, who was forced to resign for not disclosing ownership of an offshore company. Meanwhile British Prime Minister David Cameron has his back against the wall after admitting he benefited from an offshore trust set up by his late father.

Judicial authorities in Europe and Latin America, including Germany and Panama, have begun probing the 11.5 million leaked documents for signs of tax evasion or other illicit activities. 

But one-off legal investigations aren’t enough. The Panama Papers – from one firm in one country – have revealed just the tip of an iceberg of opaque financial dealings global in scale. Hence it is essential that the international community make concerted efforts to make tax havens more transparent.

Last year, the Organisation for Economic Cooperation and Development and the Group-of-20 countries took a step in the right direction by compiling international rules to prevent multinational corporations from evading taxes under the name of fictitious business deals.

From the viewpoint of preventing money laundering and tax evasion, it is important to urge tax haven countries and regions to cooperate to establish such effective measures as sharing bank-account information.

The response of China to the leak is particularly troubling. The names of relatives of three top Communist Party leaders – including President Xi Jinping – emerged in the Panama Papers. The Xi administration not only flatly refused to offer any explanation but also tightened control on the Internet in an attempt to contain the spread of information on the leak.

As the chair of this year’s G-20 summit, China should be taking a leading role on measures to curb tax evasion. Its response to the Panama Papers shows it is, instead, lagging well behind. 

Russian President Vladimir Putin is also under scrutiny over the revelation of massive financial transactions conducted by a close friend. The Russian president reacted by claiming a conspiracy theory against him, saying, “They are attempting to rock us.” That response is unpersuasive.

Measures to curb tax evasion will be a key item on the agenda when the G-7 countries meet in Japan next month. For the sake of global financial justice, they need to act quickly and strongly to lift the veil that’s concealing a massive network of illicit finances from the public eye.