The remarkable Panama Papers leak — disclosing schemes that tycoons, crooks and politicians use to stash wealth overseas — is generating a righteous dose of outrage.
While other countries might flush government officials tainted by these revelations, America should use this energy to press for an overhaul of the leaky tax code.
The U.S. has relatively strict controls on individuals moving money abroad and has pressed for more transparency in places like Switzerland. But it continues to let American companies use all sorts of tricks to benefit from offshore tax havens.
“We’re doing a better job of going after people but we also are great sinners, particular on the corporate side,” said Robert McIntyre, director of Citizens for Tax Justice, a public-interest group in Washington, D.C.
A welcome step came Monday when the U.S. Treasury Department announced new rules to limit corporate inversions. That’s a trick mercenary companies such as Pfizer and Johnson Controls are doing to move headquarters abroad — by merging with a foreign company — to avoid U.S. taxes.
Broader reforms are clearly needed.
The Panama Papers provide an opening for presidential candidates to discuss how they will close loopholes and fix a skewed system that’s creating opportunity mostly at the top while millions struggle. This has created a wave of disaffection that’s propelling the leading candidates.
The trove of documents was leaked from a Panamanian law firm that helps clients create shell corporations to hide wealth and evade taxes in locales with lax regulations.
Hundreds of journalists are using the information for stories that have already led to the resignation of Iceland’s prime minister. He and his wife used the Panamanian firm to set up a Caribbean shell company. He then avoided having to declare a conflict of interest in official dealings with the company, which held interests in failed Icelandic banks his government was overseeing.
The biggest scoop is that the firm helped Vladimir Putin’s cronies stash fortunes worth hundreds of millions of dollars outside of Russia.
Yet how indignant can Americans be when they enable their richest corporate citizens to stash much of their earnings — tens of billions — overseas?
Using subsidiaries in places like Ireland and taking advantage of porous tax laws, companies like Apple, Google, Facebook and Microsoft avoid paying billions in U.S. taxes.
Meanwhile, their home country can’t afford to fully fund schools, cities and infrastructure that produced and sustain the companies and their employees.
That’s not to equate U.S. companies with smart lawyers with the scoundrels revealed in the Panama Papers. But they are all enabled by nations creating weak regulations that allow powerful entities to hopscotch borders with their wealth, sidestepping taxation.
How would your presidential candidate make this right?
The above editorial appeared in The Seattle Times.