A week ago, HK01, a Hong Kong-based Chinese online newspaper cooperating with The International Consortium of Investigative Journalists revealed that our Chief Executive, Fernando Chui Sai On, and his legislator elder brother, Chui Sai Cheong, had been closely connected to an offshore company, Yee Shing International Limited, registered in the British Virgin Islands, for about two decades. As a subsidiary of Hopewell Holdings Limited, a major infrastructure and property firm listed on the Hong Kong Stock Exchange since 1972 (with revenues of HKD6.64 billion in 2015), this offshore had in effect been co-founded by Chui Sai Cheong together with a long-term executive of Hopewell.
The Chief Executive was only director of the tax-free company for two short years, starting in 1997, and resigned from his directorship on July 30th 1999, shortly before it was announced that he would become, after the December 19 handover, the new Secretary for social affairs and culture. His brother, on the contrary, was only out of Yee Shing for a short spell in 1994 and was still listed as a director in 2010 when Mossack Fonseca, the now rather infamous Panamanian law firm, lost the custody contract for the offshore. HK01 consequently wondered why this function had never been enclosed in Chui Sai Cheong’s declaration of assets, the one all senior officials are supposed to divulge since a more stringent law on such matters was passed in January 2013—more than six years after the arrest of Ao Man Long, better late than never…
Interestingly enough, both brothers came up with a public explanation, and of course these were in line with the responses aired back in April when the so-called Panama papers, of which 29 percent of offshore firms were incorporated either in Hong Kong or China, started to unravel: why the big fuss, when all this is legal?! Chui Sai Cheong gave an interview to the ever-zealous and pro-establishment Chinese newspaper Macao Daily revealing that he had actually resigned from the director position in July 2012 (spoiler!), and that he, therefore, acted in accordance with the new asset declaration law. And then, Chui Sai On’s Spokesperson’s Office made it publicly known that by resigning from all business-related positions prior to his nomination to senior public posts he had been “strictly following the Basic Law of the MSAR”. And things simply went back to normal: silence!
I already argued earlier this year that governing is not only a matter of legality, and that responsibility in politics requires slightly more than being law abiding in grey areas—and the Panama papers are raw diamonds in that respect. The time when traditional paternalistic elites could profess “do as I say and not as I do” is coming to an end, and unfortunately not necessarily pointing to a reassuring future, whatever the setting, democratic or less so—think US, the Philippines, China, etc.
What these offshore leaks have revealed for Macao is well established: paragons of virtue and patriotism, even the ones representing Macao at the CPPCC or the NPC, are the ones practising “tax evasion” on an industrial scale while holding dual nationality. But for the Chui, dysfunctions are of another nature: what is the exact purpose of holding an official position? The younger Chui resigned 12 days before being nominated Secretary and the elder Chui resigned from Yee Shing right in the middle of the revision of the new asset declaration law (passed in 2013, but introduced in December 2011)? In finance, that would be called “insider trading”! And then what about the separation of powers: the two brothers played musical chairs in the very same business! Moreover, Chui Sai On was supposed to champion social and economic housing, both as a legislator starting in 1992 and as a Secretary afterwards, while his brother, now a legislator, was helping Hopewell ripe the full benefits of luxury real-estate programs such as Nova Taipa and then Nova City?
Promiscuity is a powerful excuse on a tiny territory that has a multi-secular tradition of opacity, but still, this is too big to go unnoticed.
Published in Macau Daily Times, September 30th 2016
Showing posts with label tax evasion. Show all posts
Showing posts with label tax evasion. Show all posts
Friday, September 30, 2016
Friday, April 08, 2016
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
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
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