In­ves­ti­gate is the Right Thing To Do

Panama leak shows need for global co­op­er­a­tion

The Economic Times - - The Edit Page -

So, some 500 In­di­ans fig­ure among a list of names con­tained in 11.5 mil­lion files leaked from Panama-based Mos­sack Fon­seca, the world’s fourth-largest provider of off­shore ser­vices rang­ing from reg­is­ter­ing com­pa­nies in tax havens and run­ning them on be­half of clients to wealth man­age­ment. If files were to leak, ad­di­tion­ally, from this firm’s larger com­peti­tors, prob­a­bly we would have the names of a few thou­sand In­di­ans who own com­pa­nies in tax havens, along with sim­i­larly tax-averse mem­bers of the global elite. What does it add up to? The blind­ing in­sight that some In­di­ans hold their wealth through off­shore com­pa­nies? How much of this is il­le­gal is the ques­tion. It is wel­come that the gov­ern­ment has set up a multi-agency team to in­ves­ti­gate the mat­ter.

All for­eign ac­counts and for­eign-reg­is­tered com­pa­nies do not hold il­licit money or busi­ness. Some of them are le­git­i­mate in both spirit and the let­ter of the law. But many off­shore com­pa­nies serve pri­mar­ily to min­imise the bur­den of tax­a­tion, mostly through le­gal mea­sures de­vised by an ex­pen­sive ser­vice called tax plan­ning. The real chal­lenge is three­fold. One, to re­vamp the tax sys­tem to elim­i­nate high, ir­ra­tional tax rates that are an in­cen­tive to look for ways to avoid them. Two, har­monise tax prac­tices, rates, pol­icy and in­for­ma­tion ex­change across coun­tries, so that gov­ern­ments can col­lec­tively have a good idea of what their cit­i­zens earn and col­lect a rea­son­able share as tax. And, three, to cre­ate a Unique Le­gal En­tity Iden­ti­fier, so that the ul­ti­mate ben­e­fi­cial owner of any com­pany be­comes trans­par­ent. Bri­tain, which fig­ures dis­pro­por­tion­ately both as the na­tion of users of off­shore ser­vices and as the na­tion that ad­min­is­ters the max­i­mum num­ber of tax havens, will her­ald such trans­parency later this year.

It is a gain of glob­al­i­sa­tion that tax havens and dis­creet banks spring leaks and the re­sult­ing in­for­ma­tion gets spread across the globe. In­dia needs to strengthen its abil­ity to digest the data yielded by such in­creas­ingly fre­quent leaks and take ap­pro­pri­ate ac­tion.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.