Currently, there’s a growing clamor to put an end to the financial secrecy that enables many prominent personalities to hide their wealth from tax authorities. The outcry is a result of the report released last October 03, 2021 (Sunday) by the International Consortium of Investigative Journalists (ICIJ) that exposed how the world’s richest people, prominent public officials and other well-known personalities used offshore investments to dodge payment of billions of taxes over the past twenty-five years or so.
Dubbed as the “Pandora Papers,” the expose` also pointed to the tax havens and wealth managers as the enablers of the tax evaders who deprived their respective country trillions of dollars of funds that could have helped governments build infrastructures to fight climate change and to reduce poverty levels.
Will the “Pandora Papers” Spur Tax Reforms Similar to the G20 Global Tax on Corporations?
While there is currently a move launched by the G20 coalition to end the international tax competition being leveraged by tax havens, the outcome will affect only corporate organizations that transfer half of their profits in offshore accounts. G20 by the way is also known as the Group of Twenty but comprised by more than 20 countries as the organization includes the members of the European Union,
In July of this year, the group passed a resolution to implement an international tax reform of instituting a minimum global corporate tax of 15%. The purpose of which is to eradicate the low tax rates used by tax havens in attracting big corporations to transfer huge portions of their profits in offshore accounts.
The Revelations of the “Pandora Papers” Have Broader Implications
The revelations of the “Pandora Papers” have broader implications as they unraveled long time perpetuation of tax evasions involving an assortment of prominent personalities. They hide their true wealth in offshore accounts and investments by using shell corporations. The calls for actions not only pertain to tax reforms but also include demands for investigations, explanations about the sources of undeclared and unexplained wealth and where applicable, resignation from current position as political leaders.
Actually, massive documents supporting the “Pandora Papers” have been leaked as proof of how politicians, internationally famous celebrities, prominent religious leaders and even drug dealers, use shell companies in hiding their wealth. The shell companies are also used in keeping their identities secret when placing their hidden wealth in high return investments .
The most popular are rhe investments offered by hedge fund firms operating in tax haven jurisdictions; usually in the form of real estate properties like mansions and summer villas located in exclusive beachfront areas, yachts and other assets like precious metals and foreign currencies.
One of the reforms put forward by critics is the maintenance of a global wealth registry to defeat the purpose of using shell companies in hiding wealth not only for tax evasion purposes. It would also put to light the undeclared wealth of politicians and questionable sources of funds linked to religious leaders.
University of California, Berkeley economist Gabriel Zucman who delves in the study of disparity of income and taxes, recommends one simple solution, which is that of banning shell corporations that are distinguishable as entities with no economic substance whatsoever,
According to federal policy director Steve Wamhoff of Washington D.C.’s Institute on Taxation and Economic Policy, the “Pandora Papers” is all about exposing individuals using tax havens for the sole purpose of evading taxes.
That being said, such individuals malign the integrity of offshore investments as viable investment diversification options as a means of reducing the volatility of investment portfolios.