There’s nothing so gratifying about the way democracies are run as when national politics influences public policy because of an outburst of public anger. Here Julian Dixon, CEO of Fortytwo Data, expresses his thoughts on the challenges of confronting issues of clarity in the reporting of events such as the Paradise Papers leak.
So it is a little unnerving to find such a muted response to the Paradise Papers data dump.
When the scandal’s predecessor – the story of the Panama Papers – broke with disgusted headlines around the globe, people actually took to the streets.
There has been no such outpouring of rage this time around. And that’s because people just don’t get it. But, it’s got less to do with the current revelations and more to do with what happened after Panama.
People take their cue from other public mishaps. They remember similar headlines during the MPs’ expenses scandal. And then they remember the (ex) MPs going to jail.
It was a public hanging of Westminster’s dirty washing, the likes of which we had never seen. Then, in the wake of the Panama Papers, the public also expected justice and change.
They didn’t get it, although the similarities are obvious. The amount of information disclosed in the cases of the Panama and Paradise Papers was similarly grand. It touched on many public figures. And in the reporting, the significance of the leaks was billed as equally earth-shattering.
So where are the prosecutions?
Yes, some politicians lost their jobs within days of the Panama Papers story breaking but that was politics. They weren’t departures that resulted from the considered response of prosecutors.
“The difference between illegal tax evasion and legal tax avoidance is as clear as mud”
Having been promised blood and justice for all, it all appeared to fizzle out.
This is how tax avoidance is a story without an ending. People are destined to relive the public-spirited angst that makes each data dump newsworthy, without the satisfaction of seeing real change. And there is one reason for this – bad laws.
To the average person on the street, the difference between illegal tax evasion and legal tax avoidance is as clear as mud. The public feel unable to ask for change because they cannot clearly see what is broken. And this confusion bleeds into the authorities’ response.
Google media reports of ‘Britons being charged with criminal offences in light of the Panama Papers’ and you find nothing.
Misleadingly, many of the reports carrying headlines cite appalling tax avoidance.
Even relatively sophisticated journalists don’t know where ‘avoidance’ ends and ‘evasion’ begins.
If people are to have faith in the system, then they need to see the authorities acting on tip offs and bringing prosecutions that live up to the hype.
My suspicion is that much mean-spirited behaviour is not criminal – but it should be. However, as the law stands now, the difference needs to be explained clearly to those not wealthy enough to need offshore accounts.
It is no small irony that just like fast cars and expensive watches, if you need to ask how much tax avoidance costs, you can’t afford it. It shouldn’t be this way.
While this confusion reigns, the country is doomed to a vicious cycle that results only in growing public disquiet. People know they should be angry about something, they just can’t quite put their finger on it.
Hysterical reporting of offshore banking becomes a distraction. Politicians relax when it turns out what people are doing is legal. Instead, they should be asking the question ‘shouldn’t it be illegal?’
Accusing people of wrongdoing just because they bank offshore is unhelpful. There are many legitimate reasons why people do it and it’s not all about avoiding tax.
But there are just too many ways offshore tax rules can be legally exploited by people who just want to avoid paying their fair share.
You must be wondering by now why a guy like me who helps banks and others hunt down money launderers is that bothered about the tax affairs of a financial elite.
In our business, you can have the smartest computer in the world capable of identifying money laundering in vastly complex webs of transactions. But if you have millions of dollars being moved by thousands of transactions into dozens of offshore locations, that hide behind complex legal frameworks, it’s worthless.
As these transactions happen offshore – and, we as a species, are naturally hostile to the opaque nature of overseas financial centres and tax havens – it would be better if they were reduced and made more transparent.
If most forms of tax avoidance (not evasion) are wrong – as everyone seems to agree they are – I see the criminalisation of much tax avoidance as our best hope of being able to properly enforce the law in sheltered jurisdictions.
Clarity and a proper public, political debate that doesn’t just act as a smokescreen seems to be all that stands in our way.