The ‘Panama Papers’ leak has revealed some very interesting and juicy stories. From politicians’ undeclared offshore trusts, to a potential global network of money laundering and tax avoidance. But there is also a more mundane story we would do well to consider. One that doesn’t require any leaked information – the morally bankrupt practises of the super wealthy, which are routine all over the world.
By in large, the services that Panamanian law firm Mossack Fonseca provide are entirely legal. Many other firms around the world, including in New Zealand, provide similar services.
One of the primary services Mossack Fonseca provides is, essentially, to help clients circumvent their local tax regulations. Mossack Fonseca, and firms like them, assists the super-rich to structure their wealth and assets to minimise their tax and regulatory obligations. This is all very common practice.
The reason that these firms exist is due in part to the complexity of tax and trust law. Complexity leads to ambiguity, exceptions and loopholes. Clever lawyers and accountants study for years to gain experience in exploiting these loopholes. For a significant fee, the rich employ these shrewd operators to structure and obscure their substantial assets. This allows people – already wealthier than any of us ordinary plebs could ever imagine – to use their wealth to minimise tax liability and maximise gains.
It is only the super wealthy who actually have any reason for using these tax avoidance services (not to mention they alone can afford the exorbitant hourly rates). The rest of us wage slaves have no such option – we all pay our fair share of income tax, usually automatically. Any meagre investments we can scrape together, after expenses, do not end up obscured in offshore accounts or buried in complex trust systems.
This should not be interpreted as an attack on rich people. Good for you if you’ve made a lot of money. Everyone should be free to enjoy the fruits of their labour, intelligence or simple plain luck.
However, it is morally disgraceful that any wealthy person would utilise legal loopholes and offshore accounts for the sole purpose of avoiding paying tax. How obscenely greedy and ethically bankrupt you must be to go to such great lengths just to cling on to a little more of your fortune. Do you really need those extra cents on the dollar? Is your life going to be dramatically affected if you cop your full tax liability?
Our law enforcement agencies put great resource into targeting welfare fraud. And beneficiaries are recurring scapegoats for politicians come election time. However, welfare fraud and the meagre weekly payments made to beneficiaries are minuscule amounts compared to the tax evasion figures the wealthy get away with every year.
I wonder if these super rich tax dodgers ever reflect on their publically funded education, or the taxpayer-funded infrastructure they use to operate their businesses. I wonder if they recognise their hypocrisy as they bleat on about entitled welfare dependents – while they feverishly hide their assets from taxman. Assets that are often built on the back of taxpayer funded government subsidies for their businesses and investments. Businesses and investments that have benefited from taxpayer funded politicians and officials lobbying on their behalf to gain access into overseas markets. Who was the welfare dependent again?
Imagine if all these wealthy people stopped trying to exploit tax loopholes and took the simple route of paying their full tax obligation, without trying to obscure assets in trusts. How many frontline public services would benefit from all that extra tax take?
In New Zealand, we’ve had it ingrained in us to detest bludgers and free riders. The biggest bludgers in our society are those members of the super-rich who, in their mist of greed, ignore their moral duty to pay back their full tax obligation.