Can we ever weed out wiles of the rich?
From the Panama to the Pandora papers, the veil of secrecy around international transactions remains a problem.
In an age of widening inequality and the perennial squeeze on low-income and middle-class citizens across the globe, the question of fairness is an ongoing social conversation. The age-old patterns of capital and wealth accumulation with a fraction of society, sometimes referred to as the 1%, commanding an extraordinary share of global income and wealth has always attracted criticism and derision.
The instruments of equalisation, which seek to channel the windfall of the few for the benefit of the multitudes, are a matter that policymakers have to continuously engage with to maintain some semblance of social order. The tax system, being the most universally applied system of redistribution, requires many variables to work for it achieve equity and efficiency.
Unfortunately for all of us, the sense of autonomy each country enjoys in setting its tax policy and the globalisation of the world of business mean the ability to track whether each citizen of means pays a fair share to the society where their wealth is primarily generated remains an elusive exercise.
The existence of tax havens countries where the tax rates are so low they attract individuals and businesses across the globe to “invest” their resources there only amplifies the challenge of ensuring equity. Governments with relatively advanced tax systems, like SA, have made great strides in being able to track the fortunes of their citizens using a range of tools. However, even such sophisticated systems do not seem to have cracked the great Pandora’s box of tax malfeasance the use of complex company structures.
Under complex company webs, individuals are able to create ownership and shareholding structures that make the link between individuals, assets and tax profiles difficult to track. This is, of course, more intentional than accidental. The underlying hope is that by making the process of linking company resources to ultimate individual beneficiaries impossible to crack, the instruments of detection will fail to pick up the links. This enables the masterminds to continue to amass wealth that eludes tax systems.
The fact that those in a position to do this are the remarkably wealthy widens the income and wealth divide, and the unfairness is only amplified. In recent years, the discovery of how pervasive the practices of using fancy instruments to hide the true state of wealthy affairs has been through the work of whistle-blowers. The most prominent sources of the data the Panama Papers, the Paradise Papers and recently the Pandora Papers have provided insights into the web of intricate corporate and quasi-corporate structures and the enablers of the deceit across the globe.
ENABLERS
In a not altogether surprising twist, the papers tend to reveal that even those in public office, whose job it is to design and implement systems that facilitate equity and transparency, are not averse to using the current systems to stash vast amounts of wealth.
A possible approach to untangling the web would be to find a way of piercing through the networks of companies and identifying the ultimate owners of corporate structures.
On the one hand, that would enable regulatory agencies and citizens to better understand the flows of resources among the elite. That should anecdotally make it easier to identify citizens whose ways of living are at odds with what is known about their wealth.
Unfortunately, as we have come to learn throughout history, by the time we get anywhere close to a globally enforceable transparency regime, the wealthy and their enablers would have found even more sophisticated ways to escape scrutiny. And the great gap between us and them will remain glaringly large.