Closing Pandora’s box
Once again, a gargantuan trove of leaked financial documents has revealed the extent to which the accumulated capital of Earth’s wealthiest people has found its way into networks of obscure legal entities in tax havens, keeping it out of sight from tax collectors, regulators and investigators. Once again, governments around the world say they’ll act to close gaping loopholes. Once again, we have hard-earned cause for skepticism.
The so-called Pandora Papers, an investigation organized by the International Consortium of Investigative Journalists, consist of more than 10 million documents establishing the flow of assets to friendly jurisdictions, like water seeking its own level. This time, U.S. authorities don’t have the luxury of shrugging their shoulders and pointing outwards, as it turns out that one of the preeminent global destinations for hiding funds is South Dakota.
Many of these shell games are legal, though the line between what constitutes clean money and lawful avoidance and what is ill-gotten and fraudulent blurs significantly when considering that officials including some heads of state are utilizing these financial webs. As overseers of the planet’s most powerful economy, U.S. regulators must take a tough look at the source of funds flowing into dynasty trusts and real estate, requiring managers to collect more data on their customers and take active measures to avoid the skirting of international tax laws. President Biden’s request for tens of billions of dollars to strengthen IRS audits of high-earners is a fine place to start.
More generally, it’s high time for a global consensus and joint efforts to stop the outflow of massive amounts of untaxed capital to hidden financial vehicles. Turning growing support for an international minimum corporate tax rate of 15% into real policy is imperative, though insufficient.
No country should act as a black hole for parking dark money. The world’s richest people not only have an obligation to the nations they call home to pay their fair share. They have an obligation to the planet — provided they’re not all building rockets and leaving it behind.