The Panama Pilferage

April 11, 2016 at 5:15 am Leave a comment

Panama Papers 1

It used to be that Switzerland was the place to hide money. Now, apparently, Panama is the place.

A week ago Sunday, a massive cache of some 11 million financial documents from the Panamaniam law firm, Mossack Fonseca, was leaked to the media. These files contained information about an “extensive worldwide network of offshore ‘shell’ companies – including ones with ties to Russian President Vladimir Putin – that allow the wealthy to hide their assets from taxes and, in some cases, to launder billions in cash.”[1] Several world leaders are implicated in this leak including the prime ministers of Iceland, Argentina, Ukraine, Saudi Arabia, and Iraq, and the former prime ministers of Georgia, Jordan, and Qatar. According to Lexi Finnigan of The Telegraph, the files “also contain new details of offshore dealings by the late father of British Prime Minister David Cameron.”[2]

Some of what has happened in these offshore accounts may be legal. As Ms. Finnigan explains in her article:

There is nothing unlawful about the use of offshore companies. However, the disclosures raise questions about the ways in which the system can be used – and abused. More than half of the 300,000 firms said to have used Mossack Fonseca are registered in British-administered tax havens, which Mr. Cameron has vowed to crack down on. And in one instance, an American millionaire was apparently offered fake ownership records to hide money from the authorities.

What has happened here is certainly troubling, even if it is not, at least for me, particularly surprising. Giving to Caesar what is Caesar’s may be a biblical mandate, but it is not a pleasant experience – even, as it turns out, when you happen to be Caesar. Nobody wants to pay taxes.

It should be reiterated that, in some instances, what appears to have happened with some of these accounts is little more than tax sheltering, which is legal and, according to many accountants, advisable. Others, however, have crossed a line into tax evasion, which is a crime. Still others have out and out used offshore accounts to try to launder dirty money.

Most world leaders are certainly not poor. So why would such a number of them be so allergic to paying the very taxes that ensure their gainful employment and continued power that they would engage in shady offshore deals? Perhaps it’s because Solomon was right: “Whoever loves money never has enough; whoever loves wealth is never satisfied with their income” (Ecclesiastes 5:10). Even a lot of money is never enough money when a person loves money.

Lust for more, of course, is not only a problem for world leaders, it is a problem for many people. Studies have shown that, proportionally, those who have higher financial means give less, as a percentage of their income, than those who have lower financial means. As Ken Stern reports for The Atlantic:

In 2011, the wealthiest Americans – those with earnings in the top 20 percent – contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent –donated 3.2 percent of their income. The relative generosity of lower-income Americans is accentuated by the fact that, unlike middle-class and wealthy donors, most of them cannot take advantage of the charitable tax deduction, because they do not itemize deductions on their income-tax returns.[3]

Just because a person has more doesn’t mean he will give more. Indeed, oftentimes, the more a person has, the more a person seems to think he needs, so the less he gives.

Perhaps we should keep in mind what Solomon says about money and the love thereof right after he explains that people who love money always want more money. He writes, “This too is meaningless.”

The love of money may be tempting, but it is not meaningful. It is not fulfilling. It is not worthwhile. This is a lesson, I fear, that these world leaders may have learned too late. May their folly be our warning.

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[1] Greg Toppo, “Massive data leak in Panama reveals money rings of global leaders,” USA Today (4.5.2016).

[2] Lexi Finnigan, “What are the Panama Papers, who is involved and what is a tax haven?” The Telegraph (4.7.2016).

[3] Ken Stern, “Why the Rich Don’t Give to Charity,” The Atlantic (April 2013).