The stunning revelations that have emerged from the trove of documents known as the Panama Papers keep coming — and the explosive aftermath has rippled across the world.
Millions of pages of confidential material, which came from files of one Panama law firm, were leaked to a German newspaper and then reported on by the International Consortium of Investigative Journalists. The documents indicate that wealthy private individuals and public officials stowed money in offshore shell companies to avoid taxes in their home countries.
It’s a complicated web that may seem irrelevant to those of us filing our tax returns ahead of this year’s April 18 deadline or waiting for small refund checks. But it’s not irrelevant, because it deprives our government of funds.
Much of the effort to evade taxes is legal. That’s the problem. It’s a world where wealthy individuals and corporations do all they can to avoid the taxes that should take a chunk of their wealth each year. They use “havens” and “shelters” — words associated with safety and comfort, but instead are protective devices for the rich and sometimes-famous to keep money hidden from view.
There’s plenty of tax avoidance in the United States. Hundreds of thousands of firms incorporate in or establish shell companies in states like Delaware to avoid a big tax bill. Then there’s the legal practice of corporate inversions, when U.S. firms acquire smaller foreign-based ones and move their addresses on paper to avoid the tax impact here. President Barack Obama recently made inversions tougher to do through new Treasury Department rules. They had an immediate impact, squashing Pfizer’s $160-billion plan to merge with Ireland-based Allergan. But they limit only parts of the activity.
Real change requires congressional action. Political candidates talk of closing loopholes. It must be more than an applause line. Laws and regulations must be tightened, and corporate inversion and other methods of evading taxes must end. Then, we hope, tax avoiders will have nowhere to hide.