Tax havens

Prime Minister Imran Khan in his virtual address to the World Leaders Summit Dialogue, organised by the United Nations Conference on Trade and Development (UNCTAD) last week, once again urged upon the world leaders for the return of stolen wealth to developing countries.

It is estimated that annually an amount of one trillion dollars flows from poorer developing countries to richer capitals and tax havens across the globe. This abominable phenomenon deprives the people of developing countries the right of building a better tomorrow. The leadership of many of the rich countries have been turning a blind eye to the plight of under-developed and developing economies.

There are around 40 tax havens around the globe of which 20 are top graded havens as per ranking of countries on two criteria: secrecy and global scale weight. They are spread across regions with nearly half of them located in Europe while the rest exist across the Americas and Asia. They include financial powerhouses like the US, Japan, British Overseas Territories or Crown Dependencies. None is located in poor developing economies.

"By definition a tax haven is a country that offers foreign businesses and individuals minimal or no tax liability for their bank deposits in a politically and economically stable environment. They have tax advantages for corporations and for the very wealthy with a potential of secrecy and tax avoidance schemes," stated the then US President, Barack Obama, in the wake of the Panama Papers revelations.

Addressing the American nation on the economy of the country, Obama said, among other things: "In the news over the last couple of days, we've had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem. It's not unique to other countries because, frankly, there are folks here in America who are taking advantage of the same stuff. A lot of it is legal, but that's exactly the problem. It's not that they're breaking the laws, it's that the laws are so poorly designed that they allow people, if they've got enough lawyers and enough accountants to wiggle out of responsibilities that ordinary citizens are having to abide by. Here in the United States, there are loopholes that only wealthy individuals and powerful corporations have access to. They have access to offshore accounts, and they are gaming the system. Middle-class families are not in the same position to do this. In fact, a lot of these loopholes come at the expense of middle-class families because that lost revenue has to be made up somewhere. Alternatively, it means that we're not investing as much as we should in schools... . So this is important stuff. And these new actions by the Treasury Department built on steps that we've already taken to make the system fairer. But I want to be clear: While the Treasury Department actions will make it more difficult and less lucrative for companies to exploit this particular corporate inversion loophole, only Congress can close it for good, and only Congress can make sure that all the other loopholes that are being taken advantage of are closed."

"When companies exploit loopholes like this, it makes it harder to invest in the things that are going to keep America's economy growing strong for future generations," the then president said at an earlier specially convened press conference at the White House, adding: "It sticks the rest of us with the tab and it makes hardworking Americans feel like the deck is stacked against them."

The then US President's above-mentioned remarks that he made six years ago are able to stay relevant in 2021 as well.

(The writer is a former President, Overseas Investors Chambers of Commerce and Industry)

Copyright Business Recorder, 2021