Panama Papers: My broader response to the hate mongers of offshore banking

Tax avoiding or tax reducing wealthy and political figures have effectively had their bank accounts raided for information and been exposed in leading world newspapers.

This has resulted with the release of the Panama Papers. If it had been any of us financial mortals who had their financial affairs so exposed, we would wish the police to fully apply the privacy laws on the perpetrators with serious punishment.

And that is an interesting aside that many on that Panama list may have been following the law and wished to low ball their profiles through offshore shell companies as to how much money they had for legitimate reasons.

These reasons could include avoiding public or even family envy snd harassment, increasing security against fraud and kidnapping, easing physical access to ones bank because one is working in a “haven” or closer there than the home country, promoting diversification of number and location of accounts to reduce risk of all saving eggs in one basket, escaping bail-in confiscatory jurisdictions like the EU (remember Cyprus) and even avoiding confiscatory tax rates of 70 percent or higher from places like France using legitimate tax management.

Yes, folks there are reasonable reasons for such accounts to exist too in which you can partake for legitimate reasons if you need them and are eligible.

From this perspective, the average middle class person should be saying not all the time how they hate those who have gone offshore but how do I join them in a legal, ethical way?

Why can’t you for example, have a bank account in Barbados to manage your bills when you are renting a two star accommodation in the winter without being hated by your retirement friends say in Toronto?

There is indeed, much negative emotion and even ignorance about offshore banking possibly because of the limited but dramatic cases of the “pirates in the Caribbean” and other such thieves in offshore areas.

A number of these offshores include Manhattan and the City of London, by the way. See the book, Treasure Islands, Nicolas Shaxon (sp?.)

Sorry folks this Panama story may have the good too to it being unfairly treated as well as the many bad and ugly no doubt who probably dominate in those files.

And supporting cyber theft of these private, confidential files means setting a precedent of sorts that maybe invading everyone’s tax files to health records, for example might be good too to get at some cheats? How do you like them apples. I bet you don’t

There is glee in “Mudville” over these Panama Papers and I have no hesitation to say to the authorities go get’m “tiger” to those who have operated illegally or shown bad ethics including what appears to be the PM of Iceland.

But let us also stand back a bit and see the full horizon as why so many individuals fear putting their money in many western or other countries or do not wish to repatriate their money.

This is not a healthy sign from a macro-economic perspective and a growing issue why people and companies evermore feel more secure offshore from their home countries.

And if you go to much media or attend G20 meetings, all the talk is sometimes about tax havens and grabbing the money from them as a grand solution. And as simple as complementary talk on managing massive debt and deficits of developed country governments in particular through getting such cheats -very simplistic, indeed.

Without dealing with both at separate ends too, there will be no solution. I will explain why.

A company is out to maximize its profits, pure and simple. It can make lovely statements if it wishes about environment, social responsibility, tax fairness etc but profits are the focus.

On the immediate side it wishes to reduce costs in obtaining those profits it considers acceptable to keep shareholders from turning on the executives.

However, companies also look strategically. If a country carries high debt and continues high deficits – or even just within some of its regional jurisdictions- a company may worry.

It might worry that it will be a tax target to assist in paying off such huge deficits in the future and subsidize bad public management.

It may worry that the political environment may become hostile to enterprise as such governments tend to make corporations the scapegoat for their incompetency in managing public revenues.

And what we see in high debt America and deficits are some of the highest corporate taxes in the West.

So what does the government do? Does it seriously reduce its debt and say positives about getting its expenses in order.

Does it say to corporations headquartered in America that they can count on a better tax regime and a more fiscally responsible America -not that much. And both Republicans and Democrats with some exceptions are almost equally guilty.

So such a free spending government panics with more and more corporations fleeing offshore dissatisfied with current and projected tax rates.

Fiscally disorder governments go after Switzerland big time to find tax cheats and scare others who want to go offshore.

They scream about tax inversion of icons like Burger King setting up in offshore in unknown cantons or possibly going to Canada which has much lower corporate tax rates than the United States.

Here is a solution. Yes tax inversion where US companies that get significant revenues from the United States and pay almost no taxes appears unsavory.

Yes, it is too bad they do not want to return a trillion plus dollars they have in tax havens.

But also why not use positive incentives to reduce motivation for tax inversions and get this money into the US and other western economies.

How about getting the US government fiscal house in order so as to give more optimism about future tax rates and pro-business politics.

Then how about declaring a flat tax for companies and individuals of 15 percent and tax credits for the poor?

How about a reduced US military with the benefit going into reduced corporate tax rates and tax credits for the less privileged. How about people’s monetary easing to give real relief to the poor and less well to do than spending so much time on the politics of the envy that largely does not feed the needy but gets everybody just angry.

How about the 15 percent tax rate be Europe wide and coincidentally synchronous with Asian rates? How about more sales taxes on luxury items and less time chasing down minor tax offenders.

Because these wooly eyed Europeans and Americans who want to get too aggressive will chase head offices further offshore if they are not careful and catalyze reduced economic activity in the US and Europe.

That would just worsen poverty no matter how good the honorable intentions of ensuring fair taxation.

With these recommendations, tax havens would be much less relevant. And governments would have more moral force to be much more punitive against tax cheaters or unjust tax avoiders.

The anti-tax haven people forgot something. Companies and individuals flee their country and/or take their money offshore out of current fear or future fear that they will be overtaxed and one day face even confiscation of their money.

They will dump their corporate citizenship freely if need be and their executives will dump their country citizenship and domicile their office thousands of miles away from the head office in a European tax haven country.

So most of Europe’s loss in such an instance could be Texas’ or Singapore’s benefit where their income will be spent and benefit those economies.

Anti-tax haven activists and those who like tax competition need a productive two-way discussion on tax reform to a reasonable satisfactory solution. End of story however dramatic the Pansma story seems.

I covered Pansma in a way in my novel, Zurabia, years ago. It is an old story.

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