Public outrage over trusted public figures exposed over the Panama Papers leaked data. “The result was the transfer of a staggering 2.6 terabytes of data from a Panamanian law firm, Mossack Fonseca, in 11.5 million documents, tracking billions of dollars over almost 40 years.” (Levy, 2016) Where citizens hard earned wages are taxed to fund government projects and pay of the governments large debt politicians, banks and influential businesses close to the financial sector beat around the legislative palace to find ways around tax evasion on a worldwide scale. We must distinguish between the legal and illegal criminals. “When tax rates are high, people have a greater incentive to work “off the books” to evade taxes.” (Mankiw, 2010)
It should be in the peoples best interests to pay as little amount of tax as possible, in this way the poorest in society are unhurt by the affects of taxation. As taxes are a means that misdirect resources and capital in society at the expense of one group to the more politically and financially centered special group. “”We shouldn’t make it legal to engage in transactions just to avoid taxes,” he added, praising instead “the basic principle of making sure everyone pays their fair share”.” (Obama in Smith, 2016) Though, the news and public speakers on the issue look at it from the wrong perspective. They see only what is immediately visible to the eye, and do not look at the secondary or unintended consequences of a given policy.
“Alternatively, it means that we’re not investing as much as we should in schools, in making college more affordable, in putting people back to work rebuilding our roads, our bridges, our infrastructure, creating more opportunities for our children.” (Obama in Smith, 2016) For a clearer and more logical argument on the free market see this Mises video, on Who Will Build The Roads?, here Source: (Block, 2013). “I think we’re heading towards a root to branch re-evaluation of how our market system works–and doesn’t work.” (Foroohar, 2016) However, this too is incorrect to the extent that economics teaches that the public market is as prone to market failure as much as or even greater than that of the private market. This argument against the private market leads to the ignorant conclusion that Capitalism leads to market failure. “After all, crisis seems to be an essential part of capitalism’s nature.” (White, 2016) The correct view, however, is that the more legal corruption lies at the heart of politics, that’s not to say all politicians are corrupt but assumes where crime is legal it is legal because someone must had to have signed the act into law. “The resignation of a handful of politicians may let off some steam, but it doesn’t solve the core problem: our world is being mismanaged by the hypocritical 1%.” (White, 2016)
This system repeats itself again and again, throughout history. Though, it is always wrongly blamed on Capitalism and not the select few who manipulate the monopolized banking system and legal system to their advantage. “Voters know at a gut level that our system of global capitalism is working mainly for the 1 %, not the 99 %.” (Foroohar, 2016) A particular case that the Panama Papers leaked and is gaining media coverage is the law firm Mossack Fonseca. “Panamanian law firm Mossack Fonseca is one of the big global providers of tax haven registry services” (Chenoweth, 2016). See figure 1 on the areas of which Mossack Fonseca operates worldwide, as reported by The Australian Financial Review.
Figure 1: Mossack Fonseca Worldwide Operations
Source: (Chenworth, 2016).
“The Prime Minister, Sigmundur Gunnlaugsson, is among those alleged to have misled voters and the nation, by failing to disclose a shell company owned by himself and his wife, and which gave him a seat at both ends of the table in the negotiations over the collapse of the Icelandic banks.” (Jonsdottir, 2016) People that are linked in connection to the centre of the world’s largest data leak are in a difficult position both in receiving negative publicity and the tax agencies that are clamping down as a result.
Reference List (American Psychological Association)
Mankiw, G. (2010). Macroeconomics. (International 3rd ed.). New York, United States of America: Worth Publishers.
Levy, M. (2016). ‘Interested in data?’: panama papers leak began with message from ‘john doe’. The Sydney Morning Herald. Retrieved [06/04/2016] from <http://www.smh.com.au/business/banking-and-finance/interested-in-data-panama-papers-leak-began-with-message-from-john-doe-20160405-gnzd0i.html>.
Jonsdottir, B. in Reykjavik. (2016). Iceland needs a new government after the panama papers scandal. Independent. Retrieved [06/04/2016] from <http://www.independent.co.uk/voices/iceland-needs-a-new-government-after-the-panama-papers-scandal-a6969436.html>.
Smith, D. (2016). Obama calls for international tax reform amid panama papers. The Guardian. Retrieved [06/04/2016] from <http://www.theguardian.com/news/2016/apr/05/justice-department-panama-papers-mossack-fonseca-us-investigation>.
White, M. (2016). The panama papers: leaktivism’s coming of age. The Guardian. Retrieved [06/04/2016] from <http://www.theguardian.com/news/commentisfree/2016/apr/05/panama-papers-leak-activism-leaktivism>.
Foroohar, R. (2016). The panama papers could lead to capitalism’s great crisis. Time. Retrieved [06/04/2016] from <http://time.com/4280864/panama-papers-capitalism/?xid=time_socialflow_twitter>.
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Copyright © 2016 Zoë-Marie Beesley
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