Stop Enabling Corruption
Official policies make it possible for graft to thrive. Reform must start with government
Graft may always be with us, but governments can choose either to tolerate and even assist it or to confront it vigorously. One of the simplest and best ways to fight back is through sharing information. Letting the fruits of bribery, embezzlement, and tax evasion be hidden away enables the crime.
Ahead of the May 12 Anti-corruption Summit in London, more than 300 economists called on world leaders to restrict the use of shell companies and vehicles that conceal the ownership of assets. They make a good case. There’s nothing wrong with owning assets abroad, and investors are entitled to expect appropriate confidentiality—but that doesn’t justify a policy of hiding information from tax and law enforcement authorities.
Pressure on governments that offer such invisibility can yield results. For example, following the outcry over the so-called Panama Papers, Panama and four other jurisdictions promised to share information on nonresidents’ holdings of assets.
Yet tax havens aren’t necessarily poor or small. Real estate is one of the easiest ways to launder ill-gotten wealth, and in this regard, Britain has developed a reputation it shouldn’t want. More than 100,000 properties in England and Wales, and more than 44,000 in London alone, are owned by foreign companies. Prime Minister David Cameron has promised changes, such as making foreign companies that own property in the U.K. declare their assets on a public register. He’s also announced plans for an anti-corruption coordination center in London and tougher treatment for executives who fail to prevent fraud or money laundering in their companies.
The U.S. is another haven. “How ironic—no, how perverse— that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote a Swiss lawyer recently. The White House says it will act to restrict the use of shell companies. <BW>