Panama papers not in the public interest
This article was written for and first published in International Accounting Bulletin, please view the article here.
CBW Tax Expert, Robert Maas, tax consultant at CBW, Accountants, Tax and Business Advisors (DFK International) questions the public interest agenda behind the release of the Panama papers and tackles the questions of secrecy, privacy and morality.
Privacy used to be a fundamental human right. Article 8 of the European Convention on Human Rights provides, “Everyone has the right to respect for his private and family life, his home and his correspondence”. There is an exception for public authorities so far as is necessary for, inter-alia, the economic well-being of the country. Of course the people who have released the Panama papers claim to be acting in the public interest. They are concerned about tax evasion and believe that secrecy is conducive to evasion.
But secrecy is the same thing as privacy. What is private to me is, by definition, secret from you. Surely it should not be for journalists to decide to deny people their fundamental right to privacy. If journalists are entitled to tear up one of the fundamental human rights, how long is it before they tear up the others. Is it going to become acceptable, say, for a journalist to assassinate a despot because he personally believes that such a person should not have a right to life?
I have no doubt that some people use Panama and other offshore jurisdictions to hide money illegally. However I suspect that the number of residents of the UK and USA who still do so are dwindling fast because both countries have introduced favourable disclosure opportunities and I suspect that most of their residents who have been hiding money overseas have taken advantage of those opportunities.
Having money overseas is not illegal or, indeed, immoral. But of course any taxable income and gains that it generates must be properly declared to the owner’s tax authority. There are also instances where the wish for secrecy is necessary because the individual lives in a country where the knowledge that a person has wealth is an invitation to kidnap or murder. I hope that those who seem to despise the privacy of others carefully consider the potential effect of the information they choose to release before doing so.
It also needs to be recognised that in an increasingly international world that can require international co-operation on major projects, businesses are prepared to pay tax to their own tax authorities but do not wish to pay tax to authorities of other countries, or even become involved in reporting requirements to other tax authorities. This inevitably creates a need for transparent vehicles based in a country which does not itself impose taxes. If David Cameron’s late father’s offshore fund wanted to attract investment from Americans or Europeans, he would have been crazy to form it in the UK, as his American and European investors would have been reluctant to invest through a UK vehicle. That reluctance does not stem from an aversion to paying tax; it stems from an aversion to paying UK tax as well as paying US tax (or tax wherever else the investor was resident). Although most countries have entered into double tax agreements to seek to avoid double taxation, these work imperfectly unless both countries regard the intermediate vehicle as transparent, which is often not the case.
It is wholly unrealistic to suggest that if a person lives in the UK, everything he does on an international level should attract UK tax even if the investors behind the project are resident elsewhere. The international community is capable of carving up tax rights between the competing demands of different countries. It is not reasonable for private individuals to seek to interfere with those nationally agreed decisions.
Personally I think the release of the Panama papers is depressing. I do not see any public interest in this – although I do not doubt that many of the public relish learning about how others live, but what is of interest to the public is a very different concept to what is in the public interest. I welcome the papers being passed to HMRC in case there is anything in them that unmasks tax evasion, albeit that I doubt that HMRC have the resources to plough through so much information. I worry though that the risk of hackers and journalists riding roughshod over people’s right to privacy is sooner or later going to make it very difficult to bring together investors from different countries in any venture.