Facing rampant tax evasion, Pope condemns death’s monopoly on certainty
July 9th, 2009
The Group of Eight* (G8) summit commenced yesterday amongst the rubble of the devastated Italian town, L’Aquila, which had been crushed by the Abruzzo earthquake on April 6th. Images of the leaders from the world’s eight biggest economies convening amongst smashed buildings provide a fitting metaphor for the world’s still caving economy. Unfortunately, it seems my brilliant solution—closing my eyes tightly and violently shaking my head—has not made it all go away.
Much like devastating effects of the Abruzzo earthquake, the world’s economy continues to crumble, exposing the fault lines in our global financial system, which were easy to ignore when profits were only leading to even higher profits. And as the crisis has unfolded, leaving profits, jobs, and housing prices collapsing around us, the world has finally sat up and taken notice of one line underlining the system, whose fissure has deepened the crisis worldwide.
This crack is the epidemic of secrecy and corruption that plagues the international financial system, which has enabled irresponsible and criminal practices to run rampant. For example, Bernie Madoff (who we can now officially label a convicted criminal!) stashed hundreds of millions of dollars into offshore tax havens. This fact has made the money hard to trace and even harder to recover. Also, as GFI has pointed out, this system of opacity has worsened the withering credit market, as the quality of assets held by banks and other financial institutions are more difficult to appraise. Finally, in developing countries, as much as $1 trillion in illicit financial flows is shifted abroad, hurting economic growth and causing massive losses in tax revenue.
Even Pope Benedict XVI has joined in the condemnation of these cracks in the financial system—I imagine out of fear that executives, jubilant on their success in evading taxes, might look to him for advice on how to tackle death next. In his letter to the G8, the Pope addressed corruption and illegality, also noting that while finance is not necessarily bad, it can be harmful with “man’s darkened reasoning.”
Yesterday, standing amongst the rubble, the G-8 leaders strongly affirmed their commitment to close the crack in international finance. In a joint declaration they affirmed they cannot “continue to tolerate large amounts of capital hidden to evade taxation,” which is particularly important given the extraordinary government spending packages which have been “adopted to stabilize the world economy.” We cross our fingers that such a strongly worded conviction will translate into real change.
The last event of the G-8 summit will be a meeting between President Obama and the Pope tomorrow. If I were in Obama’s place, I might ask about the afterlife. But given the current situation, I suppose I’d be more inclined to ask about the after-meltdown.
Notes:
* The G8 includes: The United States, Canada, the United Kingdom, Japan, Germany, Italy, France, and Russia