In early October, the International Consortium of Investigative Journalists, along with a number of media partners, published the Pandora Papers, which revealed a slice of the trillions stashed away in tax havens by politicians, officials and celebrities, in particular.
These leaks tell us, once again, that financial secrecy is at the heart of the global economy and runs like poison through the veins of our political systems. This institutional corruption does not make progress impossible, but it does mean that responses to the growing public anger about the revelations in the leaks will only be successful if they are precise and forensic. Policymakers must deliver measures that ensure ongoing accountability for the leading actors in these abuses – including themselves.
The hidden assets and secret incomes now being disclosed represent only a small part of what is in the near-3 terabyte cache of documents from 14 different professional services firms around the world. And the documents in total touch on just a tiny fraction of the estimated $11 trillion in undeclared assets held offshore globally, generating annual tax losses of $182bn.
The individual names and the specific cases may do more to grab public attention than these unthinkably large numbers: 35 world leaders, past and present; more than 300 public officials from nearly 100 countries; more than 100 billionaires, plus a scattering of celebrities.
The Pandora Papers have returned public and media focus to the shameful issue of financial secrecy.
Each previous leak (including LuxLeaks, the Panama Papers and Paradise Papers) created a similar spike of interest. And, while that spike then passes, the underlying level of public engagement and policymaker concern has remained higher each time.
The challenge is to convert that engagement and concern into comprehensive action. As researcher and writer Zuhumnan Dapel put it, what can we do “when those in charge of the tools – the policies and the willpower of government with which to thwart the network of dirty money – seem to be among the primary beneficiaries of the status quo?”
The last two decades have seen substantial shifts in the international policy context. When the Tax Justice Network was established in 2003, we began to lay out the policy platform known as the ABC of tax transparency.
A is for automatic exchange of financial information – so that each tax authority will be informed of the foreign bank accounts of their own taxpayers, making simple tax evasion much less pervasive.
B is for beneficial ownership transparency, requiring public registers of the warm-blooded human beings behind companies, trusts and foundations, to end the damage done by anonymous ownership.
And C is for country-by-country reporting, a simple measure to ensure that multinational companies publish data that can reveal the extent of profit shifting.
Each element was originally dismissed as utopian and unrealistic. But changes in attitude started with the efforts of the global tax justice movement and the impetus for progress following the 2008 financial meltdown. The summit of the G8 group of countries in 2013 gave broad support to the three elements in principle, and practical steps were taken towards the introduction of each.
Since 2012, the High-Level Panel on Illicit Financial Flows out of Africa, backed by the African Union and the Economic Commission for Africa, has worked to build political support to end these abuses across the continent and beyond. The panel’s final report established the scale of illicit flows and the damage to governance that they can do. It also confirmed the centrality of the ABC measures and laid the grounds for the adoption of a global target to curb illicit flows as part of the UN Sustainable Development Goals.