The ongoing “Panama Papers” scandal is revealing that some of the world’s most prominent and wealthy figures set up accounts in foreign tax havens to avoid paying taxes in their home countries.
The list of figures includes the King of Saudi Arabia, the prime minister of Iceland, the presidents of Argentina, the UAE, and Ukraine; former political leaders of Georgia, Iraq, Jordan, Qatar, and Sudan; associates of Vladimir Putin, the family of China’s top leader, Xi Jinping; late father of British Prime Minister David Cameron, soccer player Lionel Messi, actor Jackie Chan and many others.
There are about 200 Americans mentioned, but so far no government officials or anyone more prominent than author Marianna Olszewski. Of course, the data breach includes an enormous number of individuals, and journalists are still looking identifying the figures involved.
The American system of finance, laws, and taxation has plenty of flaws. But compared to other countries, maybe it’s not that bad!
As Yahoo’s Rick Newman puts it:
Tax experts generally identify three categories of people who seek global tax havens: criminals; “politically exposed persons,” or PEPs, who enrich themselves while holding office and need to hide the money; and regular rich folk who want to conceal assets from family members, ex-spouses and the like. Many of the characters who turned up in the Panama Papers appear to be PEPs who are more interested in keeping cash from public view than minimizing the tax bills on legitimate income.
For wealthy Americans who just want to maximize the value of their assets, setting up a tax haven account isn’t very appealing. For starters, it’s expensive, requiring costly lawyers, accountants, trustees and other specialists who know how to pull all the levers. And instead of earning a return on your money, as most investors prefer, you pay hefty fees to foreign banks that offset any earnings.
We may yet still see some Americans or government officials named in this. But for better or worse, our “politically exposed persons” feel less need to hide their money in secret accounts; one could argue our “bribery” is out in the open. Federal law requires executive branch officials to recuse themselves from working “personally and substantially” on any matter where they have any “financial interest.” Most executive branch officials put their assets in a “blind trust” – meaning someone else handles their investments during the time they’re in office, with no input from the official. Where public officials really cash in is after they’ve been in office – when they’re considered valuable for their ability to reach out to subsequent officeholders and lawmakers.
Hillary Clinton left the White House, in her words, “dead broke” but got an $8 million book deal – days before she becomes a U.S. senator; a few months later, Bill Clinton negotiated a $10 million deal for his memoirs. The Clinton Foundation pays for the travel expenses of Bill, Hillary, and Chelsea Clinton – charter flights and first class. The Clinton Foundation periodically issues (and corrects) disclosures of who’s paying him $500,000 to $1 million per speech.
Most presidential candidates for the past thirty years have released their tax returns. Only 17 of the 535 members of Congress did so in 2012, although they are required to release financial disclosure reports that show which stocks and funds they own, where they have their accounts, and a general range of value of those investments and accounts.