Dictators worldwide are using offshore tax havens to hedge against potential revolutions, while Western business and political leaders use them to dodge taxes. Will the latest revelations bring about meaningful change?
It is hard to believe that it has been half a decade since the Panama Papers made a lot of the super-rich nervously do their best to avoid answering comments about their tax affairs.
The revelations at the time even led to the car bomb assassination of one the journalists who shone a bright light on the dark underbelly of tax-dodging billionaires.
The Panama trove of leaked documents implicated a number of high-profile individuals and organisations who used the law firm Mossack Fonseca to create shell companies and corporations registered in overseas tax havens to avoid paying taxes in their home countries.
Of course, and despite it all, not much changed, and this was once again brought into stark focus by the Pandora Papers leak reported over the weekend.
Business tycoons, royals, celebrities, current and former political officials, and hundreds of others continued to abuse lax tax laws, loopholes, and utilised other legal trickery and obfuscation tactics to hide their fabulous wealth from the eyes of the public who have had to face austerity measures since the 2008 financial crash, and more recently during the global recession caused by the coronavirus pandemic.
But is anyone really surprised anymore that the super-rich and powerful decided, long ago, that there ought to be one rule for them and another for the common folk they lord over?
Arab kings stashing money is no surprise
While this latest leak weighs in at an incredible 11.9 million documents and is no joke, it is undoubtedly not “news” to anyone.
It is also highly likely that, once again, and despite the egg on their faces, nothing will get done beyond a small measure of satisfaction that they had been exposed.
For example, surely no one is surprised that Arab dictators, monarchs, and oligarchs stash money abroad and invest capital in financial structures outside the territories they control?
King Abdullah of Jordan, who features prominently in the leaks, is a classic example. The Hashemite monarchy is not an organic product of Jordanian history, much like Jordan itself is not an organic polity emerging from the region it inhabits (which applies to every other Arab state as their perfect, ruler-straight borders aptly illustrate).
King Abdullah’s family were installed onto their thrones in the aftermath of the First World War by the British Empire, and they maintain close ties to not only the British but also their imperial successors in the Middle East, the United States.
This relationship keeps these inorganic monarchs in power, ensconced and protected from the masses who, despite their dictatorial control, have recently been protesting and demanding more rights.
A structural part of that relationship is the intrinsic attachment to Western power, including financial power. This not only secures the rule of client monarchs but further keeps them loyal to those who control their purse strings. It also means that the king of a small country like Jordan does not need to flash his opulent wealth in full view of his subjects who face an ongoing financial crunch.
But King Abdullah is not unique in this regard. As the Panama Papers showed, Arab (and other) rulers have vast amounts of wealth stockpiled abroad, despite the fact that these rulers are not beholden to their own countries’ tax systems.
They are, after all, dictators wielding absolute power and authority that, barring a few scant examples, none would dare challenge or question on pain of death, torture, or forced disappearance.
Arab dictators are not “hiding” wealth abroad per se as they do not need to fear their own taxation authorities. After all, these are the same rulers who provide favourable tax conditions for, usually, European and American economic migrants (better known as “expats”, a more acceptable term for a more acceptable kind of migrant) to come to their countries and provide professional services, largely in the finance and banking sectors.
Instead, Arab sultans, kings, and presidents calculatingly move wealth abroad in order to ensure their dynasties and families stay wealthy and privileged, even in the rare event that they are ousted by a revolution, a coup, or any other “disaster” such as the Arab Spring. It is quite obvious that it is not because they want to avoid paying taxes in countries they have absolute control over.
The globe’s elites all act the same
However, it is not only Arab, African, and Middle Eastern despots who have featured in the Pandora leaks, but the politicians of allegedly “clean” countries like the United Kingdom. Having established democracies, particularly ones that are normally quite keen on lecturing other countries, feature in the leaks is cause for quite a lot of embarrassment.
While not having committed any legal wrongdoing, former Labour Prime Minister Tony Blair managed to avoid paying stamp duty tax on a central London townhouse worth millions that regular Britons could never get away with.
A few years earlier in the Panama leaks, his Tory counterpart David Cameron argued that his tax arrangements were a “private matter” when he was implicated in dodging his own country’s taxes, despite promising to close tax loopholes when he ran for office.
Even countries that do not necessarily enjoy a sterling reputation as being open and transparent like Russia have been implicated, with President Vladimir Putin’s inner circle facing scrutiny in hiding riches in places as far-flung as Monaco. But, whatever the case may be in Russia, Western democracies are in no position to sling mud considering their own murky tax affairs.
What this all aptly demonstrates is that, for the longest time, the world’s super-rich and elite have always considered themselves not necessarily above the law, but owners of the law itself so that they and their comrades can exploit its malleable instruments.
However, those instruments lose all flexibility when the manual labourer forgets to file a tax return or intentionally fudges a self-assessment, and hefty punishments are meted out for the slightest infraction against so-called “benefit cheats”.
In essence, the poor must subsidise the nations controlled by the rich.
The rich reap all the benefits while paying in very little, short of a feeble defence of “our capital provides jobs”. This unethical global system will continue to perpetuate so long as the elites are intertwined with the financial system they benefit from, and if the fraudulent Tory donors exposed by the Pandora Papers are anything to go by, this system is alive and will continue to thrive for many years to come.
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