We know that the Panama Papers are a record-breaking leak, revealing how money from bribery, arms deals, tax evasion, financial fraud and drug trafficking is hidden in tax havens. We also know that a little over a year ago, a similar global journalistic probe dubbed Swiss Leaks had expanded the probe into abetment of tax evasion by HSBC. But as citizens, how can we respond to these revelations?
Resigning to the defeatist idea that “nothing will change” is like allowing those who facilitate the system to carry on with business as usual. If citizens lower their guard, governments will continue getting away with inaction. Public knowledge and vigilance are often grossly underestimated. We need to focus our attention on where it really needs to be, so that we can ask the right questions.
Each time light emerges from these secrecy black holes, names of public figures surface and our attention is riveted. But these leaks shouldn’t just be about punishing the rich and famous. We must urgently acknowledge the systemic nature of the problem. If we stop at naming and shaming these celebrities, we will not get too far. It is the banks, law firms, trusts, intermediaries, legal structures and even governments that aid the machinery that should be in our crosshairs. Government-led investigations should show us what they are doing to trace and dismantle these structures.
The Financial Secrecy Index, which ranks jurisdictions according to their secrecy and the scale of their offshore financial activities, puts Switzerland at number one and Panama at number 13. An estimated $21 trillion to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world.
Jaitley’s claims
It’s clear from investigations carried out by the Indian Express in collaboration with the International Consortium of Investigative Journalists that Indians have money stashed in both Switzerland as well as Panama. There’s no reason to doubt that Indians are also sending money to other secrecy jurisdictions. Local Indian intermediaries are connected to a vast global network, which is hard to trace and unravel. Unless we start looking at “black money” not just as intriguing cases of a handful of secret accounts but rather as a colossal industry, we will fail to push for effective action from governments.
We must understand that laws that aim at arresting these activities will hardly achieve anything if another set of laws is simultaneously being designed for these financial crimes to thrive. The same lawmakers who promise to take action are also backing weak regulation.
Finance Minister Arun Jaitley, responding to Panama Papers, once again said that the international automatic information exchange treaty will solve all these problems. It’s a disingenuous claim. Panama is not even listed as committed to being on board this multilateral treaty designed by the Organisation for Economic Co-operation and Development. The treaty Jaitley talks about incessantly has dozens of loopholes that will work as escape routes for offenders. Besides, it’s naïve for anyone to imagine that a vast powerful industry of experts that relies on lobbyists and politicians working for them will vanish just like that.
The media should not take “we will take stringent action” as an adequate answer from the government or investigators. Such a statement should not even make it to the headlines unless there are clear answers to what exactly this action is going to be. The government needs to be grilled for its past failures with its laws made for optics and schemes designed to fail.
Nabbing a few culprits and letting the big fish go is often standard practice. If the ultra-rich and corporate giants don’t pay taxes, local economies will suffer and the gap between the rich and the poor will widen. Lynching a few businessmen and politicians is just token action. We should be ready to ask for more. Will the government come out clear on what it intends to do with the information that the Ambanis (HSBC) and Adanis (Panama) were named in these probes?
Legal, not ethical
Blaming ourselves for depravity and corruption is also not helpful. The biggest sharks of the offshore industry and the giant rogue banks are based in wealthy nations that we don’t generally perceive as corrupt. They actively woo potential clients from all over the world, including the poorest of nations, especially those in strife. They must share the blame. And we must cease to think that corruption is impossible to fight lest it become a self-fulfilling prophecy.
What’s confounding to many is that some of these activities can be technically legal. But what is legal is not necessarily ethical. In fact, when the law can be interpreted as “allowing” tax evasion, it creates confusion in public opinion, which in turn makes room for a culture of tolerance and impunity. We should question everything from the black money laws to RBI regulation.
When big leaks such as Panama Papers are made, civil society should make a big push for more transparency from governments on their promised action. If the government is fighting secrecy of tax havens, it’s plain hypocrisy if they are non-transparent about how they are carrying out investigations. If they blame international tax treaties that don’t allow them to be transparent, why don’t they negotiate harder for better treaties?
We often perceive the nexus between the political establishment and the rich and powerful in an abstract way. But these leaks are one of those things that give it concrete form. And this is the time we need to go out and hold them directly accountable.