A Panamanian legal firm, Mossack Fonseca, was recently hacked and Sunday over 11 million of their confidential documents were posted on the Internet. This is significant because MF is the fourth largest global asset protection (tax shelter) law firm. These documents list many of the world’s most wealthy and powerful.
Why this is Such a Big Deal
Everyone has known for decades the super-rich and politically-connected can move money around the globe, without any tax implications. Politicians talk about it; books and articles are written about it; but, nothing is being done to stop it. In fact, many banks and heads of state appear to be creating and using this tax-evasion network. Whenever any complications arise, laws and tactics are quickly changed to protect the network.
The Facts are Undeniable
Until now, it was easy to gloss over the problem and deny this was happening on such a massive scale. Now, it’s virtually impossible to deny. It’s impossible to even downplay the size of the problem. The working class knows they’ve been paying an unfair share of the global tax burden and now they finally have the ammunition to do something about it. It will be interesting to see how it affects the elections.
Everyone is Implicated
- 12 Heads of State
- 150 Politicians
- 29 Forbes List Billionaires
- Dozens of Global Banks
- FIFA Officials and Players
- Drug Cartels and Dealers
- Arms Dealers and Nuclear Proliferators
- Companies linked to the CIA
The Fallout so Far
- The president of Iceland has stepped down
- The President of Argentina is under investigation
- Vladimir Putin called the leak an American plot
- The Prime Minister of England is under fire
- The President of France is under investigation
- CEO of Austrian Hypo Landesbank stepped down
- Swiss Federal Police raided the UEFA offices
- Police in El Salvador raided the local MF office
- Australia is investigating 800 listed taxpayers
- China has blocked MF related media and Internet
Evasion in America
There is a curious lack of Americans listed as MF clients. Does this mean it’s not happening here in the US? No, it just means Americans don’t move their money through Panama. There are three key reasons for this:
- The Panamanian Free Trade Agreement forces Panama to release information to American authorities.
- US law makes it easier to setup shell companies in the Caribbean and other tax havens.
- Recent US laws like the Foreign Account Tax Compliance Act (FACTA) make it harder for American citizens to hide their money abroad.
Don’t be surprised to see Americans implicated in future leaks.
The Bottom Line
The bottom line is that transparency is a good thing, unless you are breaking the law. International law is pretty murky and much of this may be legal, in some countries. But, evasion and laundering are taking place on a global scale.
“Corruption, money laundering, and tax evasion are global problems, not just challenges for developing countries.”
– Sri Mulyani Indrawati