It’s that time of year again: tax-filing season. Millions of Americans are probably downloading the latest version of their tax preparation software as we speak or picking it up at their local software store.
The Panama Papers is a treasure trove of information on the activities and clientele of a large, but not a typical law firm operating in an offshore financial centre. In this case, it is a firm called Mossack Fonseca, based in Panama. It follows a series of spectacular leaks by the International Consortium of Investigative Journalists, including the HSBC files and the Luxembourg leaks. Here are six things that stand out from the latest revelations.
1. Same old techniques
The Panama Papers leak sheds some light on the intricate ways in which the wealthy can exploit secretive offshore tax regimes. As well as charging minimal or no tax to residents and non-residents, the main characteristics of tax havens are their lack of transparency and effective information exchange.
As the leaked files of Panama-based law firm Mossack Fonseca show, these havens are used by individuals and companies to stash their cash away from the prying eyes of civilians or investigators. This is not necessarily because their money has been obtained illegally.
A great deal of attention has been paid to the obstacles African governments face in effectively taxing the profits of transnational corporations. African governments are frequently urged to widen their tax bases by reducing tax incentives for foreign investors. But what about Africa’s rich? Some Africans are very rich, and in many cases, they are not paying their fair share of taxes.
The current debate on tax reform in Australia is strong on rhetoric but largely devoid of hard evidence. Also missing are clear proposals from the government that can be assessed on their respective merits.
The purported benefits of reform centre on worthy outcomes such as a larger economy, reduced government deficits, more stable revenue sources, less complexity and a fairer system.
In the midst of the row about Google’s low tax settlement, former chancellor Lord Lawson came up with a radical proposal. In an era where multinationals can artificially shift profits around the world, he said that taxing those profits has “had its day”, and corporation tax should instead be greatly reduced and “bolstered” by a tax on companies’ sales – the total amount of money that a business receives from selling goods or services to its customers.
January is a busy month for tax in the UK as millions of people struggle to complete their tax returns before the January 31 deadline.
Meanwhile, HMRC, the tax agency, is dealing with public ire over its acceptance of Google’s complex – but perfectly legal – tax arrangements and it is trying to find a new chief executive to replace the incumbent, Lin Homer, who recently resigned and will step down in April. It is a tough time for the UK’s tax authority.
Globalisation – and the global economic crisis – have contributed to the erosion of national tax bases and in recent years some of the biggest multinationals, among them Apple, Vodafone, Amazon, Google, Starbucks and Microsoft, have been scrutinised for their aggressive tax planning practices. Using (among other techniques) transfer pricing, inter-company lending, royalty payments for licensing agreements, cost-sharing agreements and offsetting group losses, multinational groups can achieve very low effective tax rates.
Presidential primary season is ebb and flow, and no one knows for sure who the Republican nominee will be, but it is becoming all too apparent of who stands the best chance: Ted Cruz, Donald Trump or Marco Rubio. Rubio represents the establishment wing of the Republican Party, while Cruz and Trump compete for the grassroots conservative crowd that is tired of politics as usual.
With much anticipation and very little fanfare the Australian Taxation Office quietly released information about corporate tax entities with a total income of $100 million or more for the 2013–14 income year and how much tax they paid.
