Brooke Harrington: “No magic bullet for tax havens”
- What can I say? The legal impunity of the ultra-rich is extraordinary. When the Paradise Papers were leaked recently, I was sure that there would have been reactions. But it just came and went, like it never happened, comments Brooke Harrington and continues:
- It’s been 18 months since the Panama Papers were leaked, and only India has started to attempt prosecuting on the basis of them. And tax avoidance is just the tip of the iceberg – there’s also not paying back your debts, or not paying fines. Wealth managers can simply hide the money where it cannot be touched, so even a government that can remove terrorist leaders in distant countries with drones can’t collect from a two bit con man Kevin Trudeau.
According to the professor, the Danish state is internationally acknowledged as a very efficient machine for collecting taxes – and even in Denmark 300 of the richest people have 40 percent of their wealth hidden off shore. She points out that when Sanjay Shah defrauded the Danish tax department of DKK 12.6 billion, he immediately squirreled it away off shore, and so the Danish state has no hope of getting the money back.
Immense political clout and very vindictive lawyers
In Brooke Harrington’s opinion, elite sociability is something that needs to be explored – the economic elite are in an ongoing social interaction almost exclusively with each other, sending their children to the same international schools, going to the same holiday retreats. They have more in common with each other than with the ordinary citizens in their own countries.
- But in their own countries they have enormous political clout, and in countries where political careers are based on political donations, even a sense of ownership from the ultra-rich to their politicians. Also we are seeing the economic elite becoming the political elite – as with Donald Trump and Mitt Romney, explains Brooke Harrington and points out:
- That means that the people with the power to stop the loopholes are the same people who have an interest in maintaining them. So the politicians either can't or won't do anything about it – take British Prime Minister David Cameron: he wagged his finger at tax havens and publically demanded of the G13 that an offshore registry should be established, but the Panama Papers showed that he had offshore accounts himself, so it becomes difficult to believe that he was really interested in anything being done.
The other hindrance is that the economic elite have very vindictive lawyers, and their private economic dispositions can only be made public by illegal means.
- The punishment for going public with this kind of information is severe. The man behind the Swiss leaks had to go underground, and the guys behind the Luxemburg Leaks will be going in and out of court for the rest of their lives. They were made examples of – and wealth managers have lives and families to protect, stresses Brooke Harrington.
Breaking the secrecy – anonymously – may change things over time
The breakthrough was the Panama Papers. The fact that they were made anonymously, that no one knows who was behind it, and that even entities like the Danish parliament – with Denmark famous for wagging its finger at others for buying stolen info – ended up buying a chunk of them.
- It is paramount to both the wealth managers and their clients that it never becomes too blatant just how rigged and wrong the system is. Secrecy is the name of the game. The more leaks that happen, and the more these kinds of practices are exposed, the less attractive it becomes, says Brooke Harrington and continues:
- What we are not seeing is formal prosecutions, but for the ultra-rich – if you can leak anonymously, there's no safe places to hide. Who can they trust? For the wealth managers, the exposure is demeaning to their public image. There is no magic bullet for tax havens, but if the battle is fought from the other end and leakers are encouraged to leak, I think something is going to happen. It’s going to be slow, but the more difficult and expensive things become, the more people will just find it easier and cheaper to pay their taxes.