On the Panama Papers and Illicit Financial Flows
The recently leaked Panama Papers all the more confirm what we already know about illicit financial flows – that there are massive sums of money stashed away in financial secrecy jurisdictions with the purposive intent to avoid and evade tax obligations and hide stolen wealth.
The recently leaked Panama Papers all the more confirm what we already know about illicit financial flows (IFFs) – that there are massive sums of money stashed away in financial secrecy jurisdictions with the purposive intent to avoid and evade tax obligations and hide stolen wealth. What is more important is that the Panama Papers confirm that there is in fact enough money that can and should be made available to increase workers’ wages way above minimum, secure universal social protection for all, undertake urgent economic policies such as comprehensive agrarian reform and support services, finance climate programs and the rapid, just transition to renewable energy systems.
Illicit financial flows in Asia has consistently stood out significant, comprising over US$3 trillion or almost 39% of the “developing” countries total from 2004-2013. Asia also showed the highest annual growth rate, averaging 8.6% over the same period. The Philippines is one of 20 countries with the largest average illicit financial flows (Global Financial Integrity).
Tax havens such as Panama clearly play a key role in hosting mailbox companies that hide illegally or fraudulently earned gotten wealth from public scrutiny and accountability. Other tax havens are even more secretive with their transactions than Panama, with centers of operation based in rich countries such as Switzerland, the US, Luxembourg, Germany and the city of London.
Banks and financial intermediaries equally play vital parts in this shadowy web. A number of them such as HSBC, Credit Suisse and UBS have been implicated in the Panama papers for aiding and abetting tax evasion, corruption and other criminal activities. From the Panama papers and previous exposés, these entities continue to exhibit a blatant willfulness in refusing to exercise due diligence of their clients’ activities.
The Panama papers comes as the latest charge against a fundamentally flawed international tax regime and extremely unjust global financial system that allow huge financial resources to be siphoned away while billions of people are barely able to survive, struggling daily to meet food, water, health and other basic needs.
Massive financial resources are spirited away by multinational corporations not just through illegal means but through also through legal means. They promote and exploit liberalized policy environments of investments and trade and tax regimes biased towards corporations, in order to get away with paying very little taxes. Many states have largely been complicit. Many public officials themselves have been abusing positions of power for personal gain, and using tax havens to hide stolen wealth.
Tax regimes and financial systems – in their international and national articulations – has evolved into complex architectures riddled with inhuman, irrational and unjust logic, policies and practices. Even as these must be completely transformed, they cannot be made just and fair unless the economic order they emanate from and support is also changed.