Time for a new approach to global tax?
Christine Lagarde, head of the International Monetary Fund (IMF) has said it is time to ‘think outside the box’ on global tax, but has cautioned against proposals by British-based charity Oxfam to rush into the creation of a UN global tax body which she believes could face insurmountable obstacles.
The public desire to see multinational companies brought to book over their tax-avoidance strategies has been thrust back into the spotlight following the publication of the Panama Papers. The documents leaked from Panamanian law firm Mossack Fonseca show how trillions of dollars of cash is stashed by savvy companies in fiscal havens, where it escapes the scrutiny of tax authorities and governments around the world.
EU strengthens resolve to target multinationals
Since the publication of the Panama Papers at the beginning of April, there have been growing calls for increased transparency in the tax affairs of politicians and multinational companies across the globe in a bid to quash efforts by some businesses to engage in elaborate tax-avoidance schemes that rob governments of important contributions to the public purse.
In the latest chapter of the unfolding global drama, European Union (EU) regulators have announced proposals to force multinationals, including subsidiaries of non-European organisations, to disclose profits earned and taxes paid in Europe’s 28 member states, as well as in tax havens.
Panama is only part of the story
In the wake of the publication of the Panama Papers – the largest leak of offshore interests in history – one of the surprises is how few US citizens have been exposed. But rather than revealing a higher national sense of obligation towards tax payments, it’s more likely that it’s because creating a shell company in the United States is a simpler option for many than stashing assets overseas.
Only around 200 accounts with US addresses have shown up as Mossack Fonseca clients, which compared to countries such as Russia, China and Switzerland is relatively small. This could be due to a system that makes it easier to create a way of hiding money and masking identity on-shore, rather than trusting it to traditional tax havens such as Belize, Panama or Luxembourg.
The secret’s out
In what surely must qualify as the biggest-ever global information leak – dwarfing those previously facilitated by Wikileaks and Edward Snowden – the secret wealth of a selection of the world’s highest-profile politicians and celebrities has been unceremoniously unmasked. The emergence of millions of documents, obtained from the internal database of law firm Mossack Fonseca – and collectively known as the Panama Papers – has brought into sharp focus the use of tax havens by the super-rich to guard their assets.