I wrote a couple of days ago about the “Panama Papers” issue and touched on the key issues. I explained that this non-scandal scandal is simply another chapter in the never-ending war by high-tax governments against tax competition, fiscal sovereignty, and financial privacy.
Here are a few of the other points I made: .
I touched on some of these topics in this interview with Neil Cavuto.
Let’s look at what some others have written on this issue.
Veronique de Rugy of the Mercatus Center looks at some reactions from onshore politicians, which range from illogical to extremist.
The French finance minister, for instance, already put Panama back on the list of countries that aren’t sufficiently willing to help enforce onerous French tax law. That’s despite France’s removal of Panama from its list of uncooperative states and territories in 2012 after reaching a bilateral agreement on precisely that issue. President Barack Obama, on the other hand, recognizes that most of the activities reported in the stolen pages are legal. As such, he wants to do something that might be even more radical than what France has done. He proposes making it illegal to legally reduce one’s tax burden. Falling back on some generic and zero-sum concept of tax fairness, he told reporters that we “shouldn’t make it legal to engage in transactions just to avoid taxes” and that he wants to enforce “the basic principle of making sure everyone pays their fair share.”
So France wants to punish Panama, even though Panama already has agreed to help enforce bad French tax laws. Meanwhile, President Obama reflexively wants to punish taxpayers who have the temerity and gall to not voluntarily over-pay their taxes (an issue where Donald Trump actually said something sensible).
As an economist, Veronique highlights the most important issue (assuming, of course, one wants more prosperity).
If you want more global trade and more global investments, international bureaucracies such as the Organisation for Co-operation and Economic Development and governments around the world shouldn’t make it harder to operate international businesses and engage in cross-border investment and business.
Then she looks at discouraging developments from her home country.
For years, France has punished its entrepreneurs and businesses with high taxes and terrible laws. As a result, last year alone, some 10,000 French millionaires called it quits and moved abroad. However, rather than reform its tax laws and streamline its government, it wants to put its grabby hands on some cash… But it won’t work in the long run. France and other high-tax nations can try very hard to destroy tax competition, financial privacy and the sovereignty of countries with better tax structures, but they still won’t be able to afford their big and broken welfare states. …That’s the real financial scandal.
Amen. This is a simple matter of math and demographics.
The Wall Street Journal also has opined on the controversy, wondering about the fact that some folks on the left are fixating on legal tax avoidance.
The papers…purport to document the dealings of the Mossack Fonseca law firm, which appears to have helped wealthy clients establish shell companies in Panama, a rare remaining bastion of bank secrecy. …The fact that an individual created such a company, or opened bank accounts in Panama, is not proof of any wrongdoing… That’s not stopping the media from jumping to conclusions, many are oddly focusing on tax avoidance.
There’s a reason for the fixation on tax avoidance, of course. Politicians realize that they need to demonize legal tax if they want to impose big tax hikes by shutting down loopholes (both the real ones and the fake ones).
In any event, the editors agree that the real issue from Panama Papers is the presumably dodgy accumulation of assets by politicians.
The mistake now would be to narrow the focus prematurely, zeroing in on tax avoidance that is a hobbyhorse of the political class but in this case is a distraction. The real news here are the incomes and far-flung bank accounts of the political class.
The WSJ is right.
I touch on that issue in this interview with CNBC, explaining that it should be a non-story that international investors use international structures, but hitting hard on the fact that politicians so often manage to obtain a lot of wealth during their time in public “service.”
The bottom line is that if we’re going to have a crusade for transparency, it should focus on government officials, who have a track record of unethical behavior, not on the investors and entrepreneurs who actually earn their money by using capital to boost growth.
I should have dug into my files and provided a few examples of the hypocritical American politicians who have utilized tax havens. Such as…ahem…the current Secretary of the Treasury.
Speaking of hypocrisy, Seth Lipsky of the New York Sun identifies another strange example of double standards, in this case involving privacy.
The New York Times…defended Apple when the iPhone maker refused to help the FBI break into the iPhone that had been used by the Islamist terrorists who slew 14 innocent people in San Bernardino. It even praised Apple for refusing to help. Yet it’s joining in the feeding frenzy over what are coming to be known as the Panama Papers…calling for major investigations into money laundering and tax evasion.
I was sympathetic to Apple’s legal argument, even though I also wished the company would have helped the FBI (albeit without giving the government any details that could have been used to create a backdoor into all of our iPhones).
But Mr. Lipsky is right that the privacy-loving defenders of Apple have a remarkably inconsistent approach to the issue.
Where were most of the do-gooders…when the FBI was frantically trying to gain access to the infamous iPhone? It might be able to tell us to whom the killers had been talking and whether they were planning more attacks. …Apple…got cheered by all the right people. The Gray Lady…praised Apple for refusing to help. …So why are the do-gooders who are so protective of iPhone data when it belongs — or relates — to terrorists nonetheless so delighted about the disclosure of data when the data belong to the rich? Or relates to their property? Property rights, it seems, just don’t interest the do-gooders. They don’t believe individuals have a right to property or to due process before their stuff is taken.
This is a great point.
What it basically shows is that leftists (“do-gooders” to Seth) have more sympathy for medieval butchers who kill innocent people than they have for over-burdened taxpayers who actually want to preserve their money so it is used to promote prosperity rather than to fatten government budgets.
By the way, I can’t resist sharing another excerpt.
…tax havens can serve a benign purpose. They put pressure on law-abiding governments to keep taxation within non-abusive limits, something that is increasingly rare in the age of socialism.
Bingo. This is why everyone – especially those of us who aren’t rich – should applaud low-tax jurisdictions.
Just imagine how high taxes would be if politicians thought all of us were captive customers!
Let’s look at one final interview on the topic. But I’m not sharing this BBC interview because I said anything new or different. Instead, I want to use this opportunity to grouse about media bias. You’ll notice that I was out-numbered 2-to-1 in the discussion (3-to-1 if you include the host).
But I’m not upset I was in the minority. That’s so common that I barely notice when it happens.
What did irk me, though, was the allocation of time. Both statists got far more ability to speak, turning a run-of-the-mill example of bias into an irritating experience.
On the other hand, I did get to point out that the OECD bureaucrat was staggeringly hypocritical since she urges higher taxes on everyone else when she (like the rest of her colleagues) gets a tax-free salary. So maybe I should be content having unleashed that zinger.
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