Cyprus Mail
CM Regular ColumnistOpinion

Pharisaic face of capitalism

File photo of the Mossack Fonseca law firm sign in Panama City

By Hermes Solomon

La presencia global de Mossack Fonseca & Co. permitirá que su empresa tenga un impacto en todo el mundo – tenemos una oficina cerca de usted.

The above internet ad translates from Spanish to English as: “The global presence of Mossack Fonseca Co will allow your company to have an impact worldwide – we have an office near you.”

Tax evasion and tax havens make fortunes for law firms, tax advisors, auditors, business consultants and accountants.

The ‘Big Five’ – Price Waterhouse Cooper, Deutsche Bank, KPMG, Ernst & Young and Deloitte are household names, but Mossack Fonseca (MF) is high on the second league list of moving money firms that number in their hundreds – Cyprus having its fair share mostly based in Nicosia and Limassol. And until such firms’ sanctimoniously hypocritical activities come under serious scrutiny, tax evasion, legal or not, will continue to proliferate.

The MF revelations could be the sprat to catch the ‘Big Five’ if investigations into ‘manipulations’ of tax laws become truly exhaustive. But where are the inspectors with the power to investigate? Our Inland Revenue is six years behind assessing tax returns. I received my 2009 assessment two months ago – what about the succeeding six years of returns completed and posted on time?

The hullaballoo surrounding the publishing of millions of MF transaction documents has sent the one per cent of ‘stinking’ rich that own 95 per cent of the world’s wealth into a tizz.

Why are tax havens necessary? Why do the rich need to transfer money into safe havens? Why are the poor unable to hide their puny wealth similarly? Should tax havens be closed down, forcing corporations which use them to be taxed at source and deposit their profits in the countries from which they profit, thus no longer ‘milking’ economies? The poor and powerless think so – the rich and powerful do not.

When money is mobile there will always be havens. But central banks ‘want’ to prevent this mobility hence the end of Euro 500 note stuffed into attaché cases illegally crossing borders. Until all major transactions become electronically transparent, cash, like cocaine, will find a way to desired destinations.

I was told by a UK Inland Revenue inspector, ‘We can’t tax the dead. So die with nothing in your name and you’re beneficiaries are off the hook.’ This is good advice to expats resident in Cyprus, whose beneficiaries endure months, nay years sometimes, of lawyer and Inland Revenue dallying at exorbitant lawyer fees (as much as 15 per cent of assets) to wind up a deceased’s estate, even though we are told there is no Cyprus Inheritance Tax.

UK Estate Duty, a former death duty levied on property from 1889, was replaced in 1975 by capital transfer tax and in 1986 by inheritance tax. The Downton Abbeys of this world were lost to the National Trust and their former owners became concierges living in an annexe showing day visitors the sights to survive – unsubtle expropriation rather than Marxist annihilation.

In France, hundreds of ‘lesser’ chateaux lie wasted due to inheritance tax laws which can charge as much as 45 per cent on total assets of the deceased. Inheritors/beneficiaries walk away rather than respond, leaving leTrésor Public sitting on a crumbling ruin.

Draconian inheritance tax laws lit the fuse for tax havens to mushroom. And let’s be fair, tax havens benefit the rich and those firms that deal with the rich, denying struggling government treasuries and the population at large.

Tax havens are a major cause of social inequality.

That wonderful ‘plump’ actor, Gerard Depardieu, moved across the border to Belgium to avoid French Inheritance Tax – then to Russia, first taking a close look at China before definitively choosing Russia, where he shares Putin’s ‘pain’ over Russia’s present economic hardship endured by millions, although Depardieu, unlike Putin, does not own five ‘rumoured’ Putin type yachts, two of them anchored permanently off Cyprus.

Jean-Claude Juncker has been president of the European Commission since 2014. He was prime minister of Luxembourg (a prominent tax haven) from 1995 to 2013, as well as minister for finances from 1989 to 2009, his tenure encompassing the height of the European financial and sovereign debt crisis. From 2005 to 2013 Juncker served as the first permanent president of the Eurogroup. Is his name on several tax haven lists along with those Cypriots in the know that moved their ‘stash’ just ahead of the 2013 bail-in?

Fair enough, tax havens are not in themselves illegal. But are they morally acceptable, given their disservice to struggling treasuries/economies and inaccessibility to the ordinary man?

The 50 largest US corporations keep 1.4 trillion dollars offshore – paper or electronic promises, though neither worth much if currencies collapse.

Money that should be in circulation is locked away, while governments print (QE) paper that will eventually become worthless.

Are we headed towards Germany 1928/30 and a million deutschmark loaf of bread? The world is not the same place it was 90 years ago – there’s too much at stake. Globalisation means all bread, not just German bread.

So are those corporations and extraordinarily wealthy individuals listed on the MF (Multiple Fiddling) Panama Papers as innocent of wrongdoing as those who employ the Big Five to ‘stash’ their wealth?

Extraordinary wealth and innocence do not sit well together.

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