Panama Papers: Inside the shady world of tax havens - Counting the Cost

hello I'm Kemal santamaría this is counting the cost on al-jazeera your weekly look at the world of business and economics this week fear and loathing in tax havens we're taking a look at the Panama papers behind the headlines of who's hiding water amounts of money where lies a much bigger issue because what the biggest data leak in history showed isn't the legality its the scale of it all tax havens are a much bigger phenomena than you may have realized the reason millions of dollars go unaccounted for in the real economy every single year and don't think this is just happening on luxury Caribbean islands or in European boltholes we'll go to Calcutta India to see how small businesses barely making a profit or paying their taxes and also hear from one of India's biggest multinational businessmen who was named in the papers as the tax fury mounted the u.s. bought a new tax rules ones which have unraveled what would have been the biggest drugs company deal in financial history America's Pfizer and Ireland based Allegan formally announced they're scrapping their 160 billion dollar merger we'll look at why the US is now chasing its tax dollars so our look at these scale and impact of the so-called Panama papers which were released this past week actually starts back in January when the anti-poverty charity Oxfam published a startling report you may well remember this it claimed the richest 1% of people on earth now have as much wealth as the rest of the world combined but it also estimated the amount of money being hidden in tax havens around the world amounts to trillions of dollars so we knew there was a serious amount of untaxed money floating around out there but what the panama papers' has done has really lift a lid in a massive way on the methods used by the rich and the powerful to conceal their wealth for the past four decades because secret tax havens and convoluted tax structures are nothing new there where you park your wealth in order to escape the rules back home and there is in fact a whole system set up to support them for example you don't even have to put your wealth itself in the tax haven instead of owning say a mansion directly you could own it via a shell company in a tax haven and the thing is these shell companies are completely legal and incredibly easy to set up it only becomes illegal if used for criminal purposes what you're doing is creating a kind of Russian doll ownership scheme in other words it becomes really hard to find out who actually owns what within the whole scheme which is the keys are hiding money legally you'll need help of course that's where the likes of Panamanian law firm mossack fonseca come in it specializes in offshore companies and although headquartered in central america lists 37 global offices on its website for the record mossack fonseca says it has never been accused or charged with criminal wrongdoing and there are the bank's offshore banking now constitutes a sizable portion of the international financial system the Panama papers name around 500 banks including HSBC and Credit Suisse two of the biggest wealth managers in the world they allegedly created thousands of shell companies for their customers through mossack fonseca but both firmly deny any allegations of wrongdoing and then there's panama itself where the government says it will cooperate with any stations following the leak but it's also threatened to tank action against moves by France to put the country on a list of uncooperative tax havens atom rainy starts things off for us from Panama City that threat from France was a step too far from Panama it responded immediately gasoline in the case of France or any other country that includes Panama on a grey list the national government will have to analyze the situation and take a series of measures which of course could include reciprocal measures against the country that includes us on a gray list what that threat means though is unclear regardless of what steps Panama takes the attention to the country's financial sector is unwanted regarding the French threat former diplomat and banking lawyer Carlos Gonzalez says domestic politics really only left Panama with one choice they have to respond because there was a political pressure a grassroots political pressure to defend national interests since Sunday's publication of the so-called Panama papers the government has been on a mission to tell reporters how much it has reformed the financial system making it stronger and more transparent it's a sector that has spurred growth and brought in billions of dollars it's also long been known to attract criminals laundering money and rich investors seeking complex tax shelters just two months ago the country was removed from a global grey list of money-laundering countries only to now face the threat of being put back on such a list it's a shame this news story comes out at the moment we want to show the world that they are complying with banking norms they talk about us like with some specialists in money laundering despite banking reforms and more transparency many leaders around the world just don't by the Panamanian government's claims that it's cleaned up its act and they're pushing for the government to take more drastic steps and we're going to discuss what steps could be taken not just in Panama but really all over the world throughout this program you know some experts believe as much as half the world's capital flows through offshore centers which again illustrates the scale of what the papers revealed that stocks to Alex Cobham about this Alex's director of research at the Tax Justice Network in London Alex the as I say the scale of the Panama papers is extraordinary and clearly a lot of work has gone into it but news that rich and powerful people are hiding their money that's not a surprise is it I think what is striking is how it lays it bare for the public who are necessarily particularly engaged with this and there's a sense that there's a real anger now a real demand for greater transparency and accountability and the question is where the policymakers can deliver the level of measures that will really make a difference now okay so let's start with the policymakers where you are in the UK because there are a lot of British Crown Dependencies or overseas territories as they know which are implicated in the papers the British Virgin Islands at the Caymans and Bermuda and the likes of that is it up to the government in Westminster in London to regulate this better I know that David Cameron has talked about this a lot in the past the UK is an interesting moment in the that David Cameron has been something of a leader since the 2013 g8 on international transparency measures but at the same time the UK sits at the center of the biggest global financial secrecy Network made up of those overseas territories and Crown Dependencies the UK is hosting an international anti-corruption summit in May now the only way I think they can come out of that with any credibility is if they require all of the overseas territories and all of the Crown Dependencies to follow the measure that the UK has just put in place which is to have a public register of the beneficial owners of every company and to make some commitment to extend that also to trusts and foundations which which may not be explicitly in the Panama papers but we know a very much part of the same problem so you're talking about greater transparency so that we all know who's got what where and who's involved with watts but that doesn't change the fact that a lot of this tax avoidance is quote unquote legal well actually it is legal in many cases loopholes are found can you stop that happening well it on the country a lot of what's in the Panama papers is almost certainly not legal you know we're seeing the hiding of money for major international criminal gangs we're seeing some politicians at least appearing to have had what would be potentially criminal conflicts of interest that they've hidden and we certainly seen cases of tax evasion now there is also some tax avoidance and there are people who've just chosen probably regrettably now to use secrecy jurisdictions when they didn't actually have much to hide and I you know I think one thing will come out of this is a lot of people will be much more careful about using secrecy jurisdictions like Panama and secrecy vehicles like anonymous companies if they don't actually have to use them there's no good reason not to know who you're doing business with in any context so getting rid of that possibility will only make markets work better quick thought perhaps on the law firms involved the mossack fonseca's of this world again they would just argue that they're simply doing their jobs what their clients want but they are the ones who are facilitating this taxable and something the real difference is not that they became able to reach clients globally it's that some of the biggest major international financial institutions like HSBC and Credit Suisse Bank decided they wanted to market these services to their wealthy customers these players who are in every country in the world through a high street names in many cases are actually the main drivers of the the system of financial secrecy alex Cobham from the Tax Justice Network they're great talking to you thank you great thank you let's get the flip side of the argument now which Stuart pattern joining us via Skype from Belize City it is a so-called tax haven and Stuart as a US tax attorney Stuart when the Panama papers dropped what did you think as a person in your profession in a tax haven like Billy's what was your initial reaction yeah you know I really wish the offshore industry was even half as exciting as the icy IJ scene it seems to think it is but really the offshore industry is made up of pencil pushers and paper shufflers that are just trying to make a living and we deal with really boring stuff you know I'm a tax attorney I deal with us tax and then you know it's it's unless you're also a tax attorney you probably won't find what I do all that exciting and that's the same for all other participants in the offshore industry you know 95% of the people involved in the offshore industry both as service providers and as clients are simply people trying to accomplish their legitimate business or investment goals and you know have no intention of engaging any any wrongdoing whatsoever no not wrongdoing but because this has been a big part of the Panama papers what's legal and what's not but I guess there is a whole moral issue here the idea that you're doing your job so that others don't have to pay their taxes that they otherwise would have to is that not an issue it's just perfectly okay to arrange your affairs in such a way that you pay as little tax as possible and that's what I help people do you know it's not okay to to arrange your affairs in a way to make it appear that you're doing thing that you're not doing or to simply hide the fact that you're not paying tax that you are legally required to pay and that's not what I do and that's not what 95% of the of the service providers in the offshore industry do okay so what sort of fallout do you anticipate now you've said that your world of taxes is not nearly as exciting as the paper suggests however it has brought the issue of transparency at the very least into the spotlight and and I think there's going to be a bigger push towards more transparency in the tax world what sort of impact will that have on a place like Belize and on your profession the general public just simply does not have the right to look into the affairs of anyone else and you know it's interesting there's no public's attitude towards privacy there's kind of two sides to it people seem to not want others to know what websites they visit but as soon as the person you know gets a few zeros and their bank account balance suddenly people seem to think that they deserve to know everything about that person's financial affairs but but that's simply that's simply not the case so it's perfectly fine that there's no transparency from the general public to the offshore industry because there is complete internal transparency so that regulators can obtain the information that they need to get to to catch the 5% or less of people who are using the offshore industry to to do wrong very interesting to get your thoughts Stewart Patton joining us from Belize City thank you thank you and we've still got more pieces of the Panama papers puzzle to fit together in this edition of counting the cost like the distinct lack of US billionaires and companies named in the leaks we look at how the world's biggest economy is actually a functioning top tax haven itself right now though we're going to head around the world and look at the global impact of these Panama paper leaks because it's not just about the tax havens themselves or indeed the world's big financial capitals behind these gates in the hearts of Kolkata is the residents of one of the 500 Indians named in the Panama papers industrialists and politicians shishir Raj Oriya is listed as a beneficial owner of haptic BVI limited a shell company set up by mossack fonseca last year I don't even know this company so let me just elaborate and tell you when I replied giving the newspaper all the details of my corporate holding in Isle of Man and my personal holding in Isle of Man including dates when monies were emitted how they were emitted everything because both are aboveboard as far as the laws of India are concerned according to the IC IJ investigations Majoris residents and passport details were found as proof of identity linking him to haptic BVI he shows us an email from the first names group a corporate service provider in the Isle of Man which he admits he has accounts with they wrote back to me saying we know haptic BVI but you are not connected with them in any shape or form Jay Mazumdar is part of the alien Express newspaper team that led the investigation he has been corresponding with majora before the reports was released as reporters we have access to certain data and after due diligence after talking to the persons we found we are putting out those reports now what is vegan what is illegal and what's in between that's what the agencies and the regulators to decide the Panama papers have evoked much reaction among the public in the country where 20% of the population live below the official poverty line since the reports released the issue has been on the front pages of almost every paper daily there is a big reach for gap exists in our country so to win this we are taking advantage of all these things by keeping their money part of it of course to some other countries to have or the Texas they need it it hurts hurt and that is a worry for sure but Georgia a spokesman of India's ruling Bharatiya Janata Party in West Bengal estates now in the process of Elections Prime Minister Narendra Modi and his bar Thea jonatha party came to power and promises to crack down on tax evaders and punish those who try to hide illegal wealth abroad though they're launching an investigation the Panama papers come at a time when the BJP is trying to win over voters in five states where they've never had a foothold before and this might make it even more difficult it is as far as you can imagine from Iceland to the British Virgin Islands by the attempts by the Prime Minister here to help hide his wife's wealth there have finally caught up with him Anna runs an ice cream parlor her new sell outs is called win trous named after the shell company the p.m. and his wife established through Panama Lots it leaves a sour taste in the mouth yeah like we all feel today do you is that how you feel about all this yeah I'm sad then I am ashamed like I'm ashamed to be an Icelandic mr. gunnerson having walked out of the interview which confronted him with his part in the tax dodge had spent Monday saying he wouldn't resign and in Tuesday saying he would if his coalition partners wouldn't stand by him for now it's a standoff but opposition groups believe he won't last until her plans no confidence vote on Thursday there is no no meetings in the Parliament snow chamber meeting so committee meetings because people just feel that the Parliament cannot function in this state of crisis so we have like a full-fledged political crisis that needs to be solved and everybody except the Prime Minister himself recognized that this is doing tremendous damage to the reputation of Iceland in the international context the furious protests overall this reflects a sense of betrayal among the people since Iceland recovered from the Bank crash stalled construction projects have restarted as the economies picked up yet the country's banks remain weak and government impose capital controls mean a limits on how much Icelanders can even take out of cash machines in that context the idea that their Prime Minister has been helping his wife to hide tens of millions of dollars so far away is for many people absolutely infuriating so win turists has become part of the language of protest here in mis quoted Shakespeare on the t-shirts in the shops and this one reads not my Prime Minister now finally and as we mentioned earlier this seems to be a lack of us names on these Panama papers James Henry is joining us from Palm Beach in Florida to talk about that and if it's even a factor or not James I guess I want to start with your perspective from within the United States there because there seem to be a lot made of the fact that there weren't so many u.s. names on the list I mean did you make anything of that in particular I don't think we have many kleptocrats and secondly Americans have the ability to go to places like Delaware and hide assets there's no beneficial ownership registration in Delaware or in 13 states that now offer asset protections trusts so this is really an onshore industry here but I think the big deal is that you're not going to get people like Putin or you know the Chinese polar Bureau to put money in Delaware they're looking for most of the cases in this instance the BVI which accounted for about half of the companies set up by Mossadegh fonseca a third of them from China so you know a lot of those shell companies that are then channeling assets back to first world investments you know are providing offshore protection that's a little bit more secure from the standpoint of so I'm not surprised that there's not many u.s. names here but you know stay tuned we may have some surprises can we just go back to what you said about onshore a little bit early because I think for our international audience would probably think of tax-free havens such as you know Caribbean islands or certain parts of Europe they wouldn't necessarily think the United States but you talked about Delaware and others and and the United States is listed as something of a tax haven can you explain that a bit more for us the offshore industry originally now consists of about 91 havens when I first started studying this issue about 20 30 years ago there were only ten havens of any signet significance we knew all about it for a very long time and at that point it was largely offshore but since then under competition you've had you know in the United States for example lots of states get into the business of offering corporate trusts and shell and shell companies where there's no well you know where the financial secrecy as is as ironclad as in Panama or Cayman Islands or the BVI or any of the other offshore havens now so it's really been a very disturbing to see this global haven industry grow you know exponentially since the 1970s so then what to do about it all because this is the the question that keeps coming up over and over again that so much of what we're talking about is in fact legal well legal is in is a judicial determination it's up to journalists to present this data and you know this is another tribute to the role of whistleblowers and independent journalists what do you do about it there's lots of transparency that has to be added we could have beneficial ownership registrations so we know who owns these companies but we could also have a tax on all the anonymous capital out there that's sloshing around while we wait for more transparency we could also have tougher sanctions for the enablers in the industry the worldwide banks law firms and accounting firms that are behind all of this that are operating across borders you know this one law firm in Panama is only the end of the operation and what sort of road is the United States heading down again for our international Vince to understand how seriously the issue of tax avoidance is being taken in the United States and whether this administration is moving towards tightening things up progress has been very slow because this industry is very influential but the US has actually been leading the way in terms of anti-bribery laws we do 94 percent of the world's bribery prosecutions you know and we've been actually a pretty positive force there's a lot of work to do in terms of things like country by country reporting where the United States is lagging Europe and the you know the the OECD's recommendations but you know I think we're now seeing a turning point there's now across many countries not just the United States a global consciousness about this problem and I think we're gonna take advantage of that and see some real reforms I must say it's about time because I'm thoroughly sick of this issue fair enough then James Henry there with the view on the Panama papers in the US thank you for your time you're quite welcome now as we talk there about changes in the US tax laws here's a timely reminder that such changes can have an impact your strug's giant Pfizer was forced to scrap its 160 billion dollar merger with Irish rival Allegan because the US Treasury Department wants to limit the ability of a company to shift profits out of the u.s. in short the second biggest merger deal in history fell apart because of tax Debra Elizondo has more a collapse of a merger of two pharmaceutical giants and a win for those pushing for more corporate transparency and regulation Pfizer one of the world's largest pharmaceutical companies and the maker of such well known drugs as xanax and viagra announced last year a hundred and fifty billion dollar merger with drug developer allergen maker of such drugs as Botox the proposed merger known in the industry as inversion was meant to allow Pfizer to relocate and avoid paying US taxes Pfizer is based in New York allergen is based in Ireland right now Pfizer pays roughly 35% in corporate taxes in the US with the merger Pfizer would relocate to Ireland where their corporate tax rate would be estimated at 12 percent that would have meant vizor avoid paying billions of dollars in corporate taxes but now with the new US Treasury Department rules banning corporate inversions vizor will be staying right here in New York and that's a victory for those who are fighting against corporate tax loopholes on Monday Barack Obama called out corporations on there sometimes murky tax maneuverings I am very pleased that the Treasury Department has taken new action to prevent more corporations from taking advantage of one of the most insidious tax loopholes out there and flame the country just to get out of paying their taxes the tax game Pfizer and Allergan were playing was an old trick used by other companies as well US companies stashed about two trillion of profits abroad they don't want to have to bring home for tax purposes so this is one way to get out from under it the other issue is they want to make it easier to avoid paying tax in the US and US business activity so they figure they can have more fun and success and lowering their US tax bills even and stuff they actually do in this country if they can invert Pfizer and Allergan say the tax scheme after the merger would have been perfectly legal but that now they're being unfairly targeted for the roles to be changed after the game has started to be played is a bit on American but that's a situation we're in a situation now where the richest corporations in America will have one less Avenue to try to avoid paying their share of taxes and that is our special edition of counting the cost on the Panama papers more for you online they were down to zero dot-com / CTC that takes you straight to our page with individual reports links and entire episodes for you to catch up on you can also get in touch with us by tweeting me at kamal aj ian do use the hashtag a JCTC when you do or just drop us an email counting the cost of al jazeera dotnet is the address that is it for this edition of counting the cost i'm Kemal santamaría from the whole team thanks for joining us the news on al Jazeera you

Channel: Al Jazeera English

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Keywords: financial corruption, bradley manning, tax havens, News, mossack fonseca, Al Jazeera English, david cameron, al Jazeera, countingcost, Panama papers, capitalism, jazeera, corruption, James S Henry, Sigmundur Davio Gunnlaugsson, belize city, Edward Snowden, Alex Cobham, Vladimir Putin, Stewart Patton

Id: f0Snucy3boA

Length: 26min 0sec (1560 seconds)

Published: Sun Apr 10 2016