I suspect this will end up fizzling out and not resulting in very much.
From the Guardian articles it's becoming clearer that Mossack Fonseca is not some sort of mafioso outfit. Even the Guardian's own coverage has to admit that they do have compliance staff, do perform due diligence and do report things to the authorities. And they did close down operations when they got wind of illegal doings. So any stories have to become arguments about specific cases and debates about whether they could have done more in those cases, rather than the more juicy story they clearly want, implying that MF is some sort of criminal nexus that is being taken down by the journalistic establishment.
If we look at the Swiss banking leak from a few years ago, there were thousands of account details leaked to the UK government which assigned hundreds of tax officers to investigate them. And it turned out that about two thirds of them had paid exactly the right amount of tax all along. Of the rest, actually proving criminal intent turned out to be impossible, so of the original 1000+ account holders, only one case was ever actually taken to court. The others were cleared up through fines. The resulting amount of revenue was trivial at only £135 million, probably the costs of the investigation itself consumed most of that. This wasn't UK specific, other countries also ended up finding the data was useless for prosecutions.
The same was true of another case, when the Swiss authorities agreed to start sending tax information to the UK. The government thought it was in for a windfall and wrote the expected amounts into the budget. Red faces followed when the actual amount of unpaid tax turned out to be much lower than hoped for.
Maybe the Iceland angle will result in a few heads rolling, who knows, but I'm willing to bet that most of these revelations end up having very little impact: the worst cases are all in places where the local law enforcement is too weak to prosecute presidents and other heads of state for corruption.
I think you're downplaying this more than you should. I got a very different impression listening to Nicholas Shaxson (author of [1]) on the BBC. Most if not all the world leaders involved in this leak are VERY likely trying to hide personal money from their own country, that alone is a huge deal.
Looks like Shaxson is a guy who writes books arguing for more financial regulation, talking to a media organisation. So that's two entities who want the story to be big.
The worst offenders like Poroshenko are already known by their people as being corrupt. It is unlikely these cases will significantly change anything for them. Perhaps there will be more cases like Iceland, although it's a little hard to know how much benefit those politicians really got from their companies.
I restate my case: the most impressive cases of corruption are in places where nothing will happen, and the cases in the west will turn out, on deeper investigation, to reveal not much of legal interest ... gaming of vague rules, at best.
I think you're misunderstanding why so many people are shocked/upset at this. I think Glenn Greenwald puts it well in his article [1]: "The deeper scandal is what's legal, not what's not."
It's the same reason why people are so angry about the NSA scandal. You can have rubber stamp courts declaring everything you do legal all day; the point is that most people don't think what's happening is ethical.
And I think you're misunderstanding my posts. Where did I argue people would not be shocked or upset?
I do not think this is comparable to the Snowden leaks. Those revealed secret courts, secret interpretations of laws and showed that spy agencies are effectively above the law. Many people had no idea what those agencies had become capable of or the lengths they were going to.
But the fact that tax laws allow for offshore companies is not news. The fact that there are lots of them is not news either, these things exist in public registers. The story here is not that these things exist or that they work - which everyone knew already - it's who is using them.
Exactly, why is Cameron's holding offshore stuff? Now he's dead and Cameron has picked up his assets, no doubt having avoided inheritance tax, is he holding these now?
Why do normal people pay these taxes yet these guys do not?
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to the poster below as HN throttle messages when UK corruption is raised:
I think he was mocking the UK's corruption as law.
The last part is a nod to Private Eye, the only remaining free press in the UK.
Re: Cameron Sr & Blairmore holdings use of the Panama firm.
All of this is a perfectly legal tax avoidance scheme for the rich.
The company, legitimately, never paid a penny in UK taxes because it was run by various Bahama Islanders & decision making was done in Switzerland at a ski resort.
The Guardian article suggests there is evidence that the decisions & meetings were held in the UK - if that is true then Cameron Sr. illegally evaded millions in UK taxes.
According to the Guardian, David Cameron has answered these claims by stating: 'This is family business'.
Many will recognise this classic rejoinder from the Godfather movies.
Now we are told the firm is being run from Ireland, where Google and Facebook were working the, perfectly legal, 'Dutch Irish Sandwich' tax avoidance scheme - that David Cameron rightly criticised and both tech firms apologised and paid up.
So once again this is all perfectly legal.
Perhaps a bit hypocrital given Cameron's 'tough' stance on tax avoidance and trying to put the blame on comedian Jimmy Carr.
Of course, as before, if decisons were still being made in the UK, then the company would owe many millions in UK taxes and fines for evasion - but no-one is suggesting that.
Jimmy obviously should have used the Cameron Family firm.
The, probably perfectly legal, tax avoidance scheme for the super rich is called Blairmore Holdings.
It is named after the ancestral Cameron family estate which recieves tons of money from Europe simply for the amount of land it contains.
All perfectly legal, a sort of welfare for the gentry.
If this all paints a picture of corrupt toffee nosed twits
spouting lies about the poor while filling their offshore coffers then...
shurely shome mistake.
David Cameron is fully expected to give back the millions he inherited from all these decades of tax avoidance - cough or not.
Completely agree. While I'm very interested in the data and I'm sure there is a significant amount of implied evil deeds going on, I think notion that there is a conspiracy to protect the 1% is sophomoric enthusiasm at best (and idiocy at worst).
People move money around for a variety of reasons. Tax fraud, sure. Capital flight for protection of assets from instability or fears of nationalization (Cyprus, for example) is another completely valid reason and I don't see anything wrong with that. At different scales of wealth, a shell company isn't that different from hiding cash in the mattress.
Now, if you're talking about dictators in resource rich banana republics siphoning off riches of their country, then by all means, let those be prosecuted... But how likely is that?
As far as tax law is concerned all tax havens are essentially the same - money that's in one tax haven is the same as money in another tax haven. Someone who wants to minimise their tax can choose any tax haven and get the same end result.
What that means is that if someone has chosen a Swiss bank, which are relatively open and willing to comply with the tax officials from around the world, then they're not hiding anything.
On the other hand, if someone choses Panama, a country that has completely opaque privacy standards and is totally unwilling to comply with requests from tax officials, police, governments, etc then they are very likely to be hiding something they want to keep secret.
This has the potential to be a much bigger story than the Swiss banking leak.
£135 million is a lot of money. Hundreds of tax officers to investigate them is not actually that much. Averaging 6 months from ~300 people @ £80k /year = £12million netting £123 million.
Further discouraging this type of activity likely has indirect effects dwarfing that initial £135 million.
PS: A more realistic estimate is less than 300 people for ~15-90 days to do a quick assessment and rapidly dropping to ~10 people a year out.
You have to include all the overheads, like office space, pensions, payroll taxes (does HMRC pay tax to itself? hmm), administration costs, travel expenses etc. I have been told in the past that these things roughly double (rule of thumb) the cost of an employee over their salary costs. I don't know if that's true, but that's what I was told.
But yes you're right. I exaggerated when I said most of the collected revenue would be spent on overheads. It's just some of it.
If the true overheads are more like 24-25 million, then you get a bit more than 100 million recovered, which is about 0.1% of one years deficit. Profitable but not going to shift the needle in any noticeable way.
Overhead really depends on the type of work. But, HMRC is not forced to be located in high cost areas which really brings down costs.
Anyway, you should get into the right ballpark just looking at there budget. From: https://en.wikipedia.org/wiki/HM_Revenue_and_Customs
£4.09bn budget, 56,000[1] FTE = ~£73,000 per FTE including all overhead except possibly unfunded pension liabilities.
Far as I've seen they're a typical offshore consultancy that gets paid well to obstruct anyone poking around (see Nevada incident). It doesn't necessitate that their clients were doing illegal stuff, but it does heavily suggest it.
It does seem like very little will come of this in the western world, and I do agree with your last sentence.
A conspiracy theorist would note the curious timing of this high profile but low impact leak - immediately after the unaoil release implicating a lot of multinationals, even though SZ originally acquired these documents a year ago.
From the Guardian articles it's becoming clearer that Mossack Fonseca is not some sort of mafioso outfit. Even the Guardian's own coverage has to admit that they do have compliance staff, do perform due diligence and do report things to the authorities. And they did close down operations when they got wind of illegal doings. So any stories have to become arguments about specific cases and debates about whether they could have done more in those cases, rather than the more juicy story they clearly want, implying that MF is some sort of criminal nexus that is being taken down by the journalistic establishment.
If we look at the Swiss banking leak from a few years ago, there were thousands of account details leaked to the UK government which assigned hundreds of tax officers to investigate them. And it turned out that about two thirds of them had paid exactly the right amount of tax all along. Of the rest, actually proving criminal intent turned out to be impossible, so of the original 1000+ account holders, only one case was ever actually taken to court. The others were cleared up through fines. The resulting amount of revenue was trivial at only £135 million, probably the costs of the investigation itself consumed most of that. This wasn't UK specific, other countries also ended up finding the data was useless for prosecutions.
The same was true of another case, when the Swiss authorities agreed to start sending tax information to the UK. The government thought it was in for a windfall and wrote the expected amounts into the budget. Red faces followed when the actual amount of unpaid tax turned out to be much lower than hoped for.
Maybe the Iceland angle will result in a few heads rolling, who knows, but I'm willing to bet that most of these revelations end up having very little impact: the worst cases are all in places where the local law enforcement is too weak to prosecute presidents and other heads of state for corruption.
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