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Editorial: Learn from Panama Papers

Published:Thursday | April 7, 2016 | 4:00 AM

Owning or holding one's assets in an offshore international business corporation (IBC) is neither of itself illegal nor evidence of corrupt intent. Indeed, they can be, and often are, legitimate and effective vehicles through which corporations and individuals can effectively organise their affairs and efficiently engage in global transactions.

But as the mounting revelations in the Panama Papers, leaked documents from the Panama City-based law firm Mossack Fonseca, reveal, these sometimes opaque shell companies can also provide cover, anonymity even, to their beneficial owners while they hide sometimes stolen assets, launder ill-gotten money, and avoid taxes at home. In other words, they can be particularly useful for people who have something to hide, including corrupt leaders and transnational criminals.

In the circumstances, the ongoing global drive - led largely by powerful countries that bear the brunt of transnational crime and are impacted most by offshore tax-avoidance schemes - for greater transparency in the hosts of IBCs and similar entities, is quite understandable. So, too, we appreciate the disquiet of the citizens of many countries when they discover that their leaders and cronies use, or may have used, these offshore schemes to hide their assets and escape tax liabilities.

In this respect, a significant fallout has already begun from the Panama documents.

On Tuesday, for instance, Iceland's Prime Minister David Gunnlaugsson resigned after it was revealed that he and his wife owned a secret offshore which had claim on some of the Icelandic banks that collapsed at the 2008 global financial meltdown. In Pakistan, in the face of suspicion of his own culpability, Prime Minister Nawaz Sharif has established a probe of his ownership by his three adult children of similar companies that own real estate in London.

In Britain itself, Prime Minister David Cameron is under pressure and being peppered with questions over whether he and his immediate family have benefited, or will benefit, from an investment company established by his late father, Ian Cameron, which by virtue of its Bahamas registration avoids paying taxes in the United Kingdom (UK).

 

HOLNESS' OFF-SHORE ACCOUNT

 

The implications of the debates churned by the Panama revelations won't have been lost on our own prime minister, Andrew Holness, who faced criticisms during the recent election campaign over the financing of an under-construction family mansion, owned through a St Lucia-registered offshore company. That vehicle was being used to facilitate his estate planning, Mr Holness explained.

This newspaper does not support a witch-hunt, but the Panama Papers, we believe, provides Mr Holness an opportunity to review his own situation and the broader formulation of integrity policy and legislation in the context of Jamaica's own situation. The anecdotal evidence, including the outcome of the election, does not suggest that Mr Holness is, or was, wrong to hold assets in IBC, whose existence came to light through a leak.

However, the perception of corruption remains high in Jamaica and is a drag on trust in the country. The Panama revelations could well exacerbate the public's perception of official corruption, further erode trust and make it harder to build societal consensus. The question of the citizens of the UK and elsewhere is why they should pay domestic taxes while their leaders and others in the elite avoid those, using murky foreign entities.

The Government is to reprise legislation from the last Parliament to overhaul the country's integrity arrangements. The Panama Papers, and the consequences therefrom, should help to inform the way forward.