Home » Breaking News » Money Laundering or Tax Avoidance? All are Anti-Developmental

Money Laundering or Tax Avoidance? All are Anti-Developmental

In April 2016 the world was hit by one of the biggest scandals the hit the Global financial sector. The Panama Papers! This scandal seemingly happened far away from the shores of Ghana, this may be going on far away from our shores but we are usually the most losers, because we are usually the most exploited in this global race for power and control.

The Panama papers

The Panama Papers is a classic example about how resources are not equitably shared around the world. Therefore, if there is to be any gain in exposing these scandals, it’s correct to say that, most developing countries such as Ghana stands to gain more than some of the rich countries where these monies are usually hidden away!

The Panama Papers was about 11.5m files of data from the world’s fourth biggest offshore law firm Mossack Fonesca. A team of 370 journalists spent months combing through the data and found that hundreds of businesses, celebrities, sports stars, politicians and their families have been using offshore tax havens to protect their riches.

The revelations went all the way up to the highest levels of governments, and linked to some world leaders including: Russian president Vladimir Putin; Kofi Annan, Prime Minister of Iceland Sigmundur David Gunnlaugsson who resigned on Tuesday 5th April 2016; the late father of David Cameroon, the Prime Minister of UK; and many more including former President Kufour’s family. One that it proves is that, the global elites are not playing by the same rules like the rest of us! They prefer to stash away their wealth from the countries that make them.

Tax Avoidance or Tax Evasion

It has been said that the ‘Panama Papers’ transactions may not be illegal. And that is, if it was about only tax avoidance. But also that’s usually a contested view among many people.  Civil Society Organisations all over the world campaigning on tax issues have often had issues with that assertion, that tax evasion is illegal but tax avoidance is not (You may please google the Thabo Mbeki African Report on Illicit Financial Flows).

There is an issue of fairness here, we are often told to go to hell with fairness because morality in this case, has no place; and that is to say, in legal parlance, ‘follow the letter but not the spirit’. President Obama reiterated this confusion when he waded into the issue. Obama said, “There is no doubt that global tax avoidance generally is a huge problem, the problem is that a lot of this stuff is legal, not illegal. We shouldn’t make it legal to engage in transactions just to avoid taxes, the basic principle of making sure everyone pays their fair share”. By this statement, Obama reiterate the confusion by saying avoidance is actually legal but thinks it’s not fair. His statement therefore negates the cloak that ‘tax avoidance’ is legal and ok.

If taxes are a social contract or by Adam Smith’s words a ‘badge of liberty’, why would those most able and covet our power, doing everything to avoid it? Let’s look at it another way; is it an inconsequential coincidence that, it is usually the rich that engages in these schemes? Can we conclude that these high value rich individuals and corporations want to use tax havens or secret jurisdictions like Panama for two supposedly innocuous reasons: To manage their tax liability like any normal person will like to do?  Keep people away from peering into their wealth?

But the issue is this, if it’s about managing one’s tax liability, then it is about paying as less taxes as possible. And if a high value net worth individuals and corporation have a reason to want to pay as less tax as possible, who else will do the paying on their behalf for any development at all?

The moral conundrum

Secondly, if these high values net worth individuals and corporations who usually are societal kingpins, either as leaders of countries or successful businesses or huge corporations with much to spare, have so much to hide away from their people, then what is their justification to want to be society’s front bearers? That’s an absolute immorality that we have all looked away on, for years.

It means they don’t believe in transparency yet that’s what they will readily press down the throat of everybody else. Above all, their wealth is not made from the outer space but within countries and most times from very poor communities. Yet they find a reason to keep their wealth out of reach. They see hunger, gory poverty, decadence, death and hopelessness around them all the time, yet all they do is, keep so much away from humanity. It is honourable to be rich but it is even more honourable to be generous, let alone fair. Like the old Bible says, “to whom much is given much is expected.”

It’s been estimated by the Global Financial Integrity that between $21- $31tn may be hiding in these secret jurisdictions around the world, outside the taxing rights of Governments. What that means is that less and less money is available to Government to spend on development projects or even boost developmental activities that can provide jobs for the majority of people around the world.

This apart, for most businesses especially local businesses in developing countries like Ghana, they are unable to compete against their counterparts which use these tax managing destinations. Tax managing means these corporations are able to make excessive profits therefore can produce cheaply and become even more competitive. If this anomaly didn’t exist, there would have been greater transparency in the global financial system. Corporations and individuals will have been paying their taxes or their due in countries where resources are generated and where profits are actually made.

What can be fairer than this? This also means most developing countries would have gained a lot from greater transparency. Governments or countries would have more money to spend on health, education, food, jobs etc., to give people a better life everywhere on our planet, especially developing countries.

It is therefore important that this issues is not swept under the carpet again like has been done over the decades. Surely because it involves the rich and powerful in society, there are dangers that we may not be able to go far enough. However, this is an opportunity to push for a change in the global financial system and developing countries like Ghana has a lot to gain from this. Our Governments should  push for a greater change in the global tax system, such as reiterating the call for a UN tax body for our benefit, overall.

By: Bernard Anaba (Tax Justice Coalition)  [email protected]

 

 

 

x

Check Also

IMF confirms Ghana’s intention to conduct debt restructuring in 2023

The Internal Monetary Fund (IMF) has confirmed that the government of Ghana has declared its ...