Kapok: Legality vs. responsibility

Since the public unravelling of the Panama papers on Sunday, my nights have been significantly shortened. My, my! This is truly a gripping story!
First, because of its sheer size, as the wizardry of eye-catching data journalism and colourful infographics have made it clear: 11.5 million documents — including 4.8 million emails! — representing a massive 2.6 terabytes of data, and implicating 214,488 offshore structures as well as more than 14,000 banks and other intermediaries, over a period of roughly 40 years! That’s 10 times more than the 2013 Offshore Leaks and 1,500 times more than the 2010 Cablegate/Wikileaks!
Second, because although it originated from a single Panamanian law firm, Mossack Fonseca, the so-called leak has a global reach: it involves companies, banks and individuals across the seven seas – more than 200 countries and territories, and threatens people with varying degrees of accountability all over the world – 140 politicians and public officials, including 12 current and former world leaders. Equally global and hefty is the mobilisation of more than one hundred media partners and 370 journalists, working together under the umbrella of The International Consortium of Investigative Journalism, of which the first press outlet originally approached, the German newspaper Suddeutsche Zeitung, is a member.
And third, because at a time of ever-growing gaping inequalities, it allows to expose the hidden wealth of the rich and powerful, thus stigmatising the imperfections of our system of capitalist wealth generation. Hypocrisy and double standards are made obvious, and beyond the issue of legality/criminality emerges the one of responsibility – social, economic and political, in effect much more open to interpretation. The trial of failing oligarchies is thus set to start.
Yet, if size matters, not all documents are equal, and ultimately one has to be cautious in the exercise of finger pointing at high-profile tax evaders — President Putin and his 2 billion worth of hidden assets as the opening piecemeal — or nations — China, Hong Kong, Russia, the United Kingdom and Switzerland leading the pack if the sample from Panama is to be trusted. As an economist friend pointed out to me, the level of tax evasion should actually be “proportional” to GDP. And if one follows the 2015 study published by Gabriel Zucman about “The Hidden Wealth of Nations,” it is actually some 8% of the world’s financial wealth that is being held offshore. And Zucman is thus able to demonstrate that half of the foreign profits of US firms are booked in tax havens (the Netherlands topping the list!), and that the effective rate paid by US corporations has been reduced by one third since the late 1990s.
Yet again, most of these forms of tax mitigation, planning or optimisation are legal and somehow legitimate — secrecy has its virtues when it comes to industrial intelligence, for example. But clearly, the borders with tax avoidance or tax evasion (here, I am not even considering money laundering or criminal dealings with financial transactions from dubious origins) are blurry and ever-shifting. In China, up to 2011, tax evasion was actually one of the 68 crimes that was punishable by death, and in line with a Marxist perspective, the idea of “robbing” the people of their collective wealth was considered one of the most serious “substantial” offences.
One of the key findings as far as our region is concerned is that the country with the greatest number of Mossack Fonseca’s offices was China and that the Hong Kong office was the busiest of all: at the end of 2015, 29% of the companies Mossack Fonseca was collecting fees for had been incorporated through offices in Hong Kong and China, and Hong Kong was home to the highest number of intermediaries in operation. Family members of China’s Communist party elite have been exposed, and if there is now a total blackout on the Panama papers at large in China proper, trust over the genuine intent behind the anti-corruption campaign launched by Xi Jinping in 2012 is being tested. Will utter rejection or a mere claim to legality be enough?

Published in Macau Daily Times, April 8 2016