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How the Panama Papers revealed our hypocrisy

Bassem Snaije By Bassem Snaije Published on April 6, 2016

A fantastical, unparalleled network of journalists spanning multiple countries and languages collaborated on a lead originated by a German newspaper.

All of a sudden the subject has gone viral and a number of well-known and respected dailies around the world are disclosing an unprecedented amount of information about the private financial affairs of international heads of state, politicians and public figures.

Virtual gasps can be heard throughout the global electronic network, shrill accusations are heard on television shows and accusatory op-eds are written every minute around the hour.

Our consciences are clear. We know right from wrong. The frontier between darkness and light is a given. Journalists from around the world have reminded us once again that good guys exist. The bad guys have been exposed: the emperors have no clothes.

Unfortunately, things are not as clear-cut as we would like to believe.

The majority of the practices that have been “uncovered” are probably legal.

Offshore companies located in tax havens are often created to hide the identity of the true beneficiaries of the investments they make, so that they can benefit from favorable tax treatment of their revenues or capital gains.

Trying to hide the identity of beneficiaries in itself is not illegal. It is suspicious but not necessarily illegal. Does suspicious mean illegal or guilty?

Trying to maximize the profits of an investment structure is a perfectly legitimate objective in the “free world”. It is actually the central objective on which the pillars of the philosophy and mechanisms of capitalistic economy and legal systems rest.

Again, the overwhelming majority of the structures leaked through the Panama Papers are probably legal.

So what have the Panama Papers unveiled?

For the moment, that a number of elected or unelected kings, presidents or heads of state are practicing wealth accumulation in a manner unbefitting of their position.

Why are we surprised and left gasping about the immoral financial practices of these heads of state?

What is the real scandal here?

We have tolerated, adhered to or looked the other way when it comes to the jurisdictions that allow and promote this type of legal practice in Panama and in other places where there are offshore companies.

Did we really think that Panama’s financial prosperity was based on an efficient and competitive banking system achieved by making loans to creative corporate and industrial ventures throughout the world, helping new technologies emerge, existing industrial companies to evolve and re-structure, by helping pension funds and life insurance companies protect and create value for their clients, creating jobs in many areas of the world?

Panama sounds distant and exotic. The name fuels images of piracy that add to the indignant global outburst we are observing.

But what about Luxembourg? Do we know how many “special purpose vehicles” or offshore companies exist there? Do we really not know that large global corporations “optimize” their tax liabilities and save at least tens of billions of Dollars or Euros under a legally negotiated treaty with the EU?

Let’s not even begin with Switzerland. And what about the state of Delaware in the US? More than half of the Fortune 500 corporations in the US have been registered there, many since the early 1900s. And yet we don’t have teams of journalists investigating and collaborating globally on that issue.

The real scandal is not what the Panama Papers reveal. It is more what it reveals about ourselves. Panama, Luxembourg, Delaware, Switzerland and other tax havens are based on a global network of legally approved treaties and agreements validated by successive pragmatic governments from a wide political spectrum.

It shows us the chasm between what citizens of democracies believe they live in and the reality of the legal and moral frameworks. This reality check has brought to light our illusions.

The Panama Papers show that we are all accomplices, validating these practices each day and making moral compromises to uphold these legal frameworks.

They bring to the fore the question of whether to challenge the agreements struck in our name, not only with Panama, but also with other countries.

Those governments which tend to give lessons of probity to the offshore centers throughout the world should also be held accountable regarding their own manipulations of legal and tax agreements which encourage opacity and unequal tax treatments between corporations and individuals and between the wealthy and their citizens who are less so.

What the Panama Papers actually reveal is the fact that we have delegated to officials who are not held accountable the crucial mission to uphold one of the founding principles of the American Revolution in the 1750s, which inspired so many democracies. The “No taxation without representation” principle is at the core of the debate.

By allowing this principle to be diluted and compromised we have all participated in damaging our core values. Blaming leaders and public figures with little democratic credibility will not solve the fundamental problem we have.

The Panama Papers undoubtedly contribute to necessary progress, but they shouldn’t become a painkiller that makes us all feel good for a short period of time while the legally organized unequal treatment of citizens and corporations within our tax systems continues to destroy the foundations of democratic societies and make them all smoke and mirrors.


Former banker, currently teaches at the Institut d'Etudes Politiques de Paris - Sciences PO. He appears regularly on France 24 in Arabic to speak about topics related to the economy.