It is, perhaps, the largest public-interest leak of documents in history – more than 11 million documents leaked from Panamanian-based Mossack Fonseca – the world’s fourth largest provider of offshore legal services.
Together, these papers have implicated world leaders, major companies and wealthy individuals in a web of secret companies and untraceable transactions. The Prime Minister of Iceland has resigned because of his links to offshore companies, and British Prime Minister, David Cameron, is facing uncomfortable questions relating to the tax arrangements of a family trust located offshore.
While there may be legitimate business reasons for offshore companies and transactions, the leak has revealed that Mossack Fonseca provided advice and shell companies that allowed many individuals and corporations to commit unethical or illegal acts. Some of the schemes revealed include avoiding tax, securing funds against bankruptcy or divorce proceedings, hiding the proceeds of bribery or other financial crimes, and even breaking international sanctions against Syria.
When the wealthiest individuals and companies can avoid tax and engage in questionable or criminal practices, everyone loses. The poorest people lose out most spectacularly. The International Monetary Fund estimates that developing countries lose around $200 billion each year due to multinational tax dodging. This is substantially more than the $140 billion developing countries receive in aid.
In one case, a company selling a prospective oil field in Uganda used Mossack Fonseca’s services to avoid paying $400 million in taxes. In a country where around one in three people live on less than $1.25 per day, the amount of tax this company avoided is more than Uganda’s annual health budget.
Closer to home, the Australian Tax Office has confirmed that it is investigating more than 800 Australians whose names feature in the leaked Mossack Fonseca files.
Why should this matter for Christians?
It matters because we have an interest in integrity and transparency at all levels of society, and particularly among political leaders and businesses. We worship a God "who is not partial and takes no bribe, who executes justice for the orphan and the widow...” (Deut 10:17-18) and we expect to see our businesses and leaders act with integrity.
We worship a God "who is not partial and takes no bribe, who executes justice for the orphan and the widow...” (Deut 10:17-18) and we expect to see our businesses and leaders act with integrity.
It matters because when companies and wealthy individuals avoid paying their share of tax, the rest of us pay either by contributing more tax to make up for what others are avoiding, or we pay through more limited and lower quality government services.
It matters because companies, trusts and foundations that dodge tax, or hide dodgy deals through shell companies are abusing the public trust. They operate because the legal system and resources of government grant them a licence to exist and operate. The reciprocal obligation surely must be for them to up front about their activities.
There are a few steps which governments could take to crack down on the kind of behaviour revealed in the Panama Papers. Australia, for example, does not have a register of the people who truly own or benefit from companies and trusts. This makes it virtually impossible to determine who is truly in control of, or benefiting from, anonymous shell companies operating tax havens. Requiring a public register of the true owners and beneficiaries of companies, trusts and foundations, would go a long way to improving transparency and integrity.
Finally, the Government should legislate to ensure that all multinational companies operating in Australia are required to report publicly on their operations for each country in which they operate. That way, dodgy deals with tax haven subsidiaries would come under greater scrutiny.
These shady practices will continue – and we will all continue to lose out because of them – unless we shine a spotlight on them and demand that our governments and businesses put an end to them.
Click here to email your local MP and urge him/her to increase efforts to overcome multinational tax avoidance and help overcome poverty.
Ben Thurley is the National Coordinator of Micah Australia.
This article was first published by Sight Magazine.