Revelations of the extent to which tax avoidance takes place, through a leak at global Panamanian law firm, Mossack Fonseca, should not come as a great surprise. The last decade has been punctuated by greatly increasing income inequality that has only been exacerbated by the large sums of cash from corporations and the economic elite that are stored in tax havens around the world. The French budget minister, Jérôme Cahuzac, resigned in 2013 after admitting to twenty years of tax evasion. The European Commission recently accused Apple of avoiding more than eight billion dollars in taxes. Countries around the world including Brasil, Mexico and Italy have been wracked by corruption scandals and subsequent protests. Nonetheless, the Panama Papers are the first time that the public has been shown concrete evidence of the extent to which elites, including elected representatives, have defrauded their nations. The discovery sent shivers running down the spine of the global political establishment, claiming its first head in Iceland, where Prime Minister Sigmundur Davíð Gunnlaugsson resigned after evidence was came forth that he and his wife participated in the ownership of an offshore investment company.
The allegations have also hit countries with far less government accountability and political participation than Iceland, with China censoring all information about the Panama Papers after the leak provided evidence that President Xi Jinping was implicated. Putin, after seeing members of the government close to him implicated, called the Papers a ‘Western conspiracy’ against Russia.
Even in Britain, the government has been shaken by the scandal. Thousands gathered in front of 10 Downing Street calling for the resignation of David Cameron after he avoided questions surrounding his implication in the scandal for three days, before finally confessing to owning shares in Blairmore Holdings Inc., a tax avoidance firm. Some protesters have promised not to leave Whitehall until the Prime Minister steps down.
After dismissing a Guardian report in 2012 detailing how Cameron’s inherited wealth was built on offshore investments by his father, Downing Street’s attempt to remain tight-lipped until the new allegations disappeared, backfired. Some MP’s are rightfully calling for his resignation and the greatest travesty is that more are not. The Conservatives have publicly claimed that Cameron would not discuss the topic for fear of ‘sullying’ the name of his late father, closing ranks around a story that seems more like political mockery of the situation than anything else. Consequently, Labour leader Jeremy Corbyn’s approval ratings have surpassed those of the Tory Prime Minster for the first time. Corbyn was elected leader of Labour by running a campaign deriding Tory austerity and the power of Britain’s financial elite.
Tax evasions by wealthy individuals has never been higher, with 8% of household wealth (not including corporate wealth) held in tax havens. According to Gabriel Zucman of UC Berkley, after the G20 declared an end to ‘banking secrecy’ in 2009 the amount of cash in Switzerland increased 18% to 2.3 trillion dollars by last year. The irony of the situation is, of course, that members of the G20 are implicated in the scandal, or take political donations from individuals who are.
And while the UK follows only Hong Kong as the nation with the most banks, law firms and other middlemen who were implicated in the Panama Papers, conservative pundits like to claim that this is not tax fraud, only ‘legal tax avoidance.’ Despite that, the loopholes in tax codes around the globe, which legalize tax evasion, are put there by politicians who change the tax code while at the same time receiving thousands of dollars in political donations. The Mayfair Loophole alone, has allowed executives at British private equity firms to escape 700 million pounds in taxes per year.
It is perhaps Cameron who speaks for himself best, stating in May 2014 that, “we should be very clear – tax evasion is illegal, and for that you can be prosecuted, you can go to prison.” While no one is under the impression that Cameron will be incarcerated for his crime, the clamor for his resignation is increasing and it is the right of the public to hold the feet of any elected representative to the fire, Prime Minister included.
There is perhaps some irony in seeing Cameron implicated after having ordered all parliamentary candidates to reveal their tax affairs, calling out tax evaders by saying that it wasn’t fair to hard-working men and women who paid their taxes. “Frankly some of these schemes where people are parking huge amounts of money offshore and taking loans back to just minimize their tax rates is not morally acceptable.”
What is more, the Prime Minister is not simply a parliamentary candidate nor one of the wealthy Brits to whom he was referring. When he entered the doors of 10 Downing Street his affairs became public affairs and his opinions, morals and policy became a reality for many of his citizens as he and the Conservative Party went after the National Health Service, welfare and Britain’s place in the European Union. By defrauding the United Kingdom and bringing shame to his office, he has broken the social contract he signed onto when he was twice elected by the public.
Cameron is a Prime Minister whose career has been built on large sums of inherited wealth and privilege that comes with being born into a family of stature. For the thirteen million people (1 in 5 people) in Britain who live below the poverty line, his clear defrauding of the public good is a travesty and a betrayal of any remaining trust that they may have had in government, and particularly in the Tories.
The massive schemes carried out by the global financial elite and their lawyers have generated controversy for some time, and if Cameron would truly like to see an end to the tax avoidance that he has stringently derided, then his resignation would serve as the greatest warning to be issued yet. The resignation of a British Prime Minister would serve to shake the foundations of global tax havens and the centers of global corrupt capitalism from Hong Kong to the Cayman Islands, and Delaware to Zurich.