Panama Pa­pers point to tax eva­sion

Pakistan Observer - - EDITORIALS & COMMENTS -

IT was quite a rev­e­la­tion when leaked doc­u­ments, made pub­lic in April, showed that Mos­sack Fon­seca, a Pana­ma­nian law firm, had helped 14,000 clients world­wide cre­ate off­shore ac­counts to con­ceal as­sets or dodge taxes. On Mon­day, a re­port by The Times found that there were at least 2,400 clients based in the United States over the past decade. Some clients are sure to ar­gue that the tac­tics used were le­gal forms of tax avoid­ance, not il­le­gal tax eva­sion. And in some in­stances that is true. Many of the trans­ac­tions ex­am­ined by The Times were not il­le­gal, in­clud­ing the use of off­shore ac­counts to set up a busi­ness overseas. But many of the trans­ac­tions are ex­tremely sus­pi­cious and de­mand in­ves­ti­ga­tion and, if war­ranted, pros­e­cu­tion by fed­eral au­thor­i­ties.

Un­paid taxes on for­eign ac­counts are es­ti­mated at $40 bil­lion to $70 bil­lion a year. Emails and other cor­re­spon­dence be­tween Mos­sack Fon­seca and some of its Amer­i­can clients dis­cuss ef­forts to con­ceal as­sets and evade taxes. In one ex­change, a cit­i­zen in Wash­ing­ton State asked the firm how to in­vest money in Panama with­out the United States govern­ment know­ing any­thing about it. In­stead of telling the po­ten­tial client that that would be il­le­gal, the firm wrote back that it had “ef­fec­tive solutions” for the prob­lem, in­volv­ing in­ter­lock­ing and anony­mous off­shore ac­counts, a pri­vate foun­da­tion and a shell cor­po­ra­tion. Those tac­tics ap­pear to have been aimed at evad­ing taxes on in­vest­ment in­come. The strate­gies be­came even more com­plex when the goal was to fun­nel money to chil­dren with­out pay­ing gift or es­tate taxes that are usu­ally prompted by large trans­fers. One of the mul­ti­mil­lion­aires de­scribed in the leaked pa­pers and in The Times re­port, Wil­liam Pon­soldt, used a foun­da­tion and eight shell com­pa­nies — of­ten with Mos­sack Fon­seca em­ploy­ees as of­fi­cers — in part to shift money to his two grown chil­dren. With­out see­ing Mr. Pon­soldt’s tax re­turns, it is im­pos­si­ble to know if he broke the law. The govern­ment has the au­thor­ity to au­dit the tax re­turns of the Amer­i­cans who ap­pear in the Panama Pa­pers, but it would need help from the Repub­li­can-led Con­gress to do so. Con­gress has long de­prived the In­ter­nal Rev­enue Ser­vice of ad­e­quate re­sources. Many of the au­dits would be rou­tine, be­cause the tax­pay­ers in ques­tion would have noth­ing to hide. But au­dits that find fraud and eva­sion would be bomb­shells. At stake is more than rev­enue to run the govern­ment; also at stake is faith in the abil­ity of govern­ment and its in­sti­tu­tions to en­sure a rule of law. — The New York Times

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