Paradise Papers show need for toughest possible legislation to fight super-rich tax dodging

A new leak was disclosed yesterday by the International Consortium of Investigative Journalism (ICIJ), revealing 13.4 million records from two offshore firms, Estera and Appleby.

As had already been revealed in the Panama Papers, lawyers implement tax avoidance schemes in order to create offshore accounts that enable the beneficial owners to move the money around unseen and untaxed. They help with all the paperwork in that process, including the creation of the blank powers of attorney that allow beneficial owners to designate representatives without the knowledge of even those lawyers that grant such legal powers.

The European Parliament’s Panama Papers’ Inquiry Committee has already questioned in its report and recommendations – voted in Committee on October 18th – the role of these enablers and promoters of tax evasion, tax avoidance and money laundering, the self-regulation that they go by, their lack of compliment with customer due diligence (CDD), and the impressively low amount of suspicious transaction reports (STRs) that legal advisors report to the Financial Intelligence Units (FIUs).

In this respect, some of GUE/NGL’s amendments which have been included in the Committee’s report on the role of legal advisors voted in favour were:

• Notes that banks, wealth managers, auditors, and tax and legal advisors, in particular remain insufficiently regulated in EU law, and in Member States’ and third countries’ national laws; finds that the multinational nature of their services provides a particular challenge for correct and proper monitoring and sanctioning of their activities;

• Notes that legal advisors have excluded themselves from legal obligations by invoking ‘professional secrecy’ in order to avoid performing CDD, even when they have not been acting as lawyers but as providers of financial services;

Appleby and the offshore magic circle provide a wide range of legal services for companies and high net worth individuals who have been found include Queen Elizabeth II, Bono and 120 politicians from around the world, as well as multinational companies such as Glencore, Nike, Apple and Uber, among others.

The impact of offshore tax evasion and avoidance has been the object of different researches, including one performed per request by the ‘Panama Papers’ Inquiry Committee, which resulted in a loss of tax base of EUR 88 billion as a result of base erosion and profit shifting from the schemes revealed by the ‘Panama Papers’ in the 8 countries included in the sample; and an equivalent of the EU 28 member states would mean between 109 and 237 billion Euros lost in tax base.

Patrick Le Hyaric, GUE/NGL co-coordinator on the Panama Papers Inquiry Committee said of the Paradise Papers leaks: “Given the number of leaks in the past few years and the depth of the scale disclosed, we hope that all political groups in the Parliament will support the recommendation for creating a Permanent Committee of Inquiry into such tax dodging as recommended by the ‘Panama Papers’ Committee”.

His fellow co-coordinator for GUE/NGL, Matt Carthy, commented: “We need the toughest possible legislation on regulating the enablers and promoters of tax avoidance and tax evasion schemes.”

“The EU, which is currently working on such a proposal, needs to take note of where similar legislation has been put in place and failed, and avoid similar mistakes.

“In the EU, we need the swift and full implementation of all aspects of the Fourth Anti Money Laundering Directive (AMLD), and for member states to support strengthening the requirements on beneficial ownership and trusts in the fifth AMLD currently under negotiation. Beneficial ownership registries which name the flesh-and-blood owner of the account need to be public.”

“I also fully support the call from the Tax Justice Network in response to the ‘Paradise Papers’ for a UN global summit to be urgently convened in order to deal decisively, and at a global level, with the problem of tax avoidance and tax evasion by the world’s wealthiest individuals and corporations,” he concluded.