Pandora Papers: new secretive tax havens are emerging, putting Covid-19 recovery at risk – warns FTC
October 6th, 2021
October 6th, 2021
WASHINGTON, D.C. – The Pandora Papers reveal a shadow financial system whereby the rich and powerful play by a different playbook from the rest of us to avoid taxes, yet no meaningful action is taken to resolve this crisis, warns the Financial Transparency Coalition. The investigation led by the International Consortium of Investigative Journalists revealed that hundreds of public officials in 90 countries used shell company schemes to hide wealth offshore and avoid taxes, but this is just the tip of the iceberg.
Matti Kohonen, director of the FTC, said: “The Pandora Papers provide a glimpse into systematic tax abuse by powerful individuals, with the assistance of major global banks and law firms who enable this abuse. Such abuses lead to poverty, rising inequality and lack of public trust in government. In total, $7 trillion of private wealth is being held in secrecy jurisdictions and haven countries, according to the UN. Yet despite the scale of this crisis countries keep blocking meaningful action at the United Nations, refusing to agree to public registries of real owners of companies and trusts.”
He added that, “there has been some progress in the European Union, Argentina, Ghana and the United Kingdom advancing public beneficial ownership registries. However, little has been done to prevent tax abuses since the Panama Papers were published five years ago. We’re seeing a cat and mouse game, whereby some tax havens like Bahamas increase reporting requirements, whilst new ones like the US state of South Dakota gain popularity as a means to hide assets and which the EU just failed to add to its tax haven blacklist. The US for one should immediately mandate public beneficial ownership registries for all companies and trusts.”
As FTC Director Matti Kohonen said: “Tax abuse and money laundering are not just technical offences, they are human rights abuses. Some say it’s ‘perfectly legal’, but often once revealed they lead to tax and anti-corruption investigations or clamping down on legal mismatches and loopholes. We call for greater ownership and corporate transparency and fair and effective taxation to enable desperately needed public resources to be spent on social protection and basic healthcare in countries grappling with the Covid-19 pandemic.”
The FTC warns that new territories from South Dakota to the Nairobi and Kigali International Financial Centres and Casablanca Financial City are being established that roll back financial transparency gains by giving lawyers new tools to hide money for their clients. The risks of welcoming secretive shell companies in your back yard are made plainly clear in the Pandora Papers as they erode the rule of law and lead to less taxes being raised.
Meanwhile, the IMF and World Bank are not committed to support public beneficial ownership registries which are key to end tax secrecy, while financial transparency remains low in the agenda of the G20 summit happening later this month.
The FTC calls for an end to financial secrecy to enable the authorities to tax capital income arising from all types of assets and ownership, by putting ownership on a publicly accessible registry in all jurisdictions and working towards a standard of a Global Asset Registry (GAR) that anyone can consult to see who owns what. This should go hand in hand with strengthening of the regulatory capacity on financial regulators and tax authorities. Only these changes will enable countries to raise enough taxes for the Covid-19 recovery efforts and prevent an estimated 160 million people from falling into extreme poverty by end of 2021, as predicted by the World Bank.
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Notes to Editors
The Financial Transparency Coalition (FTC) is a global civil society network, operating as a collaborative coalition of twelve civil society organisations based in every region of the world. The FTC works to curtail illicit financial flows through the promotion of a transparent, accountable and sustainable financial system that works for everyone.
The members of the Financial Transparency Coalition are the Asian Peoples Movement on Debt and Development, Centre for Budget and Governance Accountability, Christian Aid, European Network on Debt and Development, Fundación-SES, Global Financial Integrity, Global Witness, Latin American Network on Debt, Development and Rights, Pan-African Lawyers Union, Tax Justice Network, Tax Justice Network Africa, and Transparency International.