Panama Papers Update October 8, 2017

More than eighteen months after the first publication, the effects of the Panama Papers continue to reverberate around the globe. In Argentina, where political partisanship is a blood sport, Mossack Fonseca companies have become electoral fodder.

For years, Argentinian prosecutors and journalists have hunted for ill-gotten gains belonging to former president Cristina Fernández de Kirchner and her late husband’s. Initially, some of the fruits of the couple’s corruption were suspected to have flowed through a series of Mossfon Nevada shell companies. You can read more about the remarkable tale of the search for those assets in my forthcoming book the Secrecy World. And today, the former president and her children are currently under indictment over separate corruption charges, which Kirchner claims are politically motivated.

Recently, Laura Alonso, the head of Argentina’s anti-corruption office, said that Fernández de Kirchner also owns more than 60 properties in Miami purchased through “dirty money.” The properties are linked to an aide, Héctor “el Gordo” Muñoz. The Miami Herald located 16 properties, including a CVS drug store in Little Havana, in the Panama Papers connected Muñoz. The paper found no evidence of Kirchner’s direct involvement.

Alsono works for Argentina’s current president Mauricio Macri, an archrival of Kirchner. Macri himself was connected to Mossfon companies. After the revelations came out, a judge investigated allegations the companies were involved in money laundering and exonerated the president.

In Argentina, it’s nigh impossible to separate the allegations flying around from their political context. Last month, Fernández de Kirchner won a Senate seat against a Macri-backed candidate in what many see as a precursor to a battle royale in the 2019 presidential election. Thanks to the Panama Papers and other leak investigations, the offshore holdings of the candidates will surely figure in the campaigns.

Meanwhile in Colombia, a slew of businessmen found in the Mossack Fonseca files were arrested in late September. They are accused of committing fraud and tax evasion, according to Colombia reports. At least fourteen major businesses, including a money-transfer company, are implicated in the investigation. Colombia’s financial crimes prosecutor alleged that Mossack Fonseca Colombia charged a fee between 2.5% and 4% for the value of assets held offshore.

Early Monday, Pakistan’s anti-corruption authorities arrested Muhammad Safdar, the son-in-law of former Prime Minister Nawaz Sharif in connection with corruption cases stemming from the Panama Papers. Sharif, his daughter, son-in-law, and his two sons all face charges over allegations the family held undisclosed assets abroad through secret Mossack Fonseca companies. The charges resulted in Sharif’s removal from office in July.

Transparency Key to Real Tax Reform

The final details of the tax plan that will emerge from this Republican Congress are still a ways off. Last week was only the first salvo. In the months to come there will be skirmishes and battles aplenty. Lobbyists are counting on it, so are politicians eager to fill their campaign coffers.

Some opine, perhaps a tad optimistically, that perhaps nothing comprehensive will pass. Since tax cuts for the wealthy have long motivated the GOP’s donors and anti-government ideologues, the odds are good something, even if not a sweeping rewrite of the code, will become law. Whatever does will have real-world consequences for the nation’s ability to invest in infrastructure, education, health care, environmental protection, public safety and the list goes on.

Tax policy will have an enormous role in determining whether income inequality in the United States continues to grow dramatically. At a basic level, everybody understands the issue. Polls consistently show a majority of Americans believe the wealthy and corporations already pay too little. The mere fact the president and Republican leaders are lying about who will benefit from their initial proposals is strong evidence they fear the sentiment.

Still, it’s easy to lose one’s way among the twisting turns of a tax policy debate – or fall asleep on the journey from sheer boredom. The more policymakers and tax campaigners bring the debate back to underlying principals the better off we will all be.

One key value to keep in sight is transparency.

For those involved in the Secrecy World – the offshore system into which trillions of dollars has disappeared – the most important principal is privacy. But a functioning and fair tax system demands its opposite.

Fortune 500 companies hold an estimated $2.6 trillion dollars offshore. By doing so, they avoid up to $767 billion in U.S. federal income taxes. This is a guestimate. Many multinational companies do not publicly report where they book profits or pay taxes. Their tax avoidance schemes are often disguised or highly opaque as’s Lux Leaks investigation showed. While information may be relayed to individual governments, it’s often not accessible to the public. The lack of detail stymies debate.

The FACT Coalition, an advocacy group promoting financial accountability and corporate transparency, has a good factsheet on the issue as well as ideas for how to reform the system.

Their conclusion is hard to impeach:

“Disclosing more information on where companies book profits, record revenues, and pay taxes would protect taxpayers by discouraging abusive tax avoidance schemes; protect shareholders by providing them with information about the risks associated with their investments; and inform policymakers as Congress considers overhauling the U.S. tax code.”