Paradise Papers leak exposes cracks in tax laws
Publish date: 09 November 2017
Issue Number: 587
Diary: Legalbrief Forensic
The huge Paradise Papers leak naming individuals implicated in allegedly cheating governments out of billions of dollars in tax revenues has sharpened the focus on international tax laws, writes Legalbrief. Oxfam has called on the world’s governments to institute a plan of action aimed at curbing large corporations from what it described as ‘cheating’ impoverished countries out of more than $170bn in tax revenues every year. A report on the IoL site says the comments by the confederation of charity organisations come in the wake of the Paradise Papers scandal which has exposed how some of the world’s wealthiest companies, government leaders as well as public figures in the entertainment, politics and sports sector who have secretly used offshore accounts to hide their money and dodge tax systems. Several SA companies have also been implicated in the scandal said to be the biggest since the Panama Papers leaks (see report below). This follows a global investigation by the International Consortium of Investigative Journalists. Yesterday (Wednesday), Oxfam launched its briefing paper titled, Stopping the Scandals, which assesses why international tax reforms have failed. The paper also offers solutions to the Paradise Papers leak, which exposes tax dodging on an industrial scale.
The revelations exposed the feebleness of attempts to prevent tax evasion, Oxfam said this week. Susana Ruiz, tax policy adviser for Oxfam, said that the Paradise Papers – 13.4m leaked documents – showed how lacking governments’ policies to curb tax evasion were, according to a report in Business Report. In a statement, Ruiz said that politicians’ tough talk had translated into weak reforms under pressure from big business and the super-rich. The report notes Ruiz said: ‘Political leaders must put the interests of the public over corporates and the super-rich. They must work together to shut down tax havens by establishing a global tax haven blacklist; end tax secrecy so that its clear if corporations and the super-rich pay their fair share of tax; and kickstart a new round of tax reforms that rebuild the tax system in the interests of the majority and not the few.’ Ruiz said that governments should also establish national public inquiries into the allegations made by the Paradise Papers to identify how national laws can be tightened or reformed to prevent tax dodging.
High-profile South Africans and local institutions are flagged in the biggest tax leak since the Panama Papers, which a BusinessLIVE report says is set to cause ripples among many who have stashed their wealth in offshore tax havens. Most of the 13.4m documents – which emerged from more than 19 ‘secrecy jurisdictions’ – relate to law firm Appleby, with offices in offshore jurisdictions across the globe, and its corporate services provider Estera, which operated together under the Appleby name until 2016. This leak highlights damning cases of tax abuse and questionable practices involving multinational companies, politicians, celebrities, wealthy executives and royals. It includes previously hidden details of corporate registries from countries infamous for ensuring high levels of secrecy. Appleby’s long list of international clients include multinationals and high net worth individuals with links to SA – such as the largest JSE-listed commodities company, Glencore, and the country’s largest bank, Standard Bank. The report adds South African banks that have offices in several secrecy jurisdictions, including Investec, will have to deal with the fallout from client records possibly being compromised in the leak. The Paradise Papers include references to Shanduka – the company in which Deputy President Cyril Ramaphosa held a stake until 2014 – and a number of Glencore’s South African-born executives, including CEO Ivan Glasenberg.
The material was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with partners including The Guardian, the BBC and The New York Times. Meanwhile, notes a report in The Guardian, multinational companies are shifting a growing share of profits offshore – €600bn in the last year alone – the leading economist Gabriel Zucman reveals in a study published this week.
EU finance chiefs are working on a blacklist of uncooperative tax havens amid growing public concern about widespread tax dodging by multinationals and the wealthy. But Finance Ministers meeting in Brussels remain divided over how and where to tax online companies that operate across the EU, ABC News reports. European Commission Vice President Valdis Dombrovskis said on Tuesday the Ministers are preparing a blacklist of non-European tax havens and pushed for sanctions to ensure it’s ‘credible and meaningful’.
EU-level efforts to crack down on tax avoidance appear to have generated few results. The Paradise Papers revealed loopholes that member states like Germany refuse to close in EU Bills currently under talks, notes an euobserver report. It quotes Carl Dolan, who heads Transparency International’s EU office, as saying: ‘EU governments such as Germany have been standing against the rising tide of financial transparency.’ Dolan says EU capitals have yet to sign up to two European Commission proposals aimed at shedding light on money laundering, tax evasion and avoidance. The report notes that EU states have balked at plans to set up public registries to identify the real owners behind shell firms, trusts and similar legal structures.