The release of the Panama Papers last April certainly ignited a firestorm of controversy and made for some sensational headlines. However, chances are that not everything you’ve heard about this now-infamous leak is true. Here, we’ll help you to separate the fact from the fiction by busting four common Panama Papers myths. Let’s take a look.
The Myth: Offshore financial services are only used by criminals who want to get away with something.
The Reality: While it would be naïve to think that people who want to launder or hide their money for nefarious purposes don’t use offshore legal and financial services to do so, the reality is that there are plenty of good people taking advantage of these legal services for good reasons. The fact that corrupt politicians have used the services of Mossack Fonseca and other firms like it to hide and launder money doesn’t mean that they are the only people using them.
The Myth: Tax havens, like Panama, cause billions of dollars in lost taxes.
The Reality: When people put their money offshore, they inevitably pay less in taxes to their home government than they normally would. However, to say that this results in billions of dollars of lost taxes is an egregious exaggeration, and there is no evidence to support this kind of claim.
The Myth: Tax avoidance and tax evasion are the same thing.
The Reality: Tax avoidance and tax evasion are not synonymous — it’s important to distinguish between the two. Tax evasion is a crime, plain and simple. When someone deliberately tries to evade his or her tax obligations through illegal means, that’s tax evasion, and it could very well land that person in jail. Tax avoidance occurs when individuals exploit legal means to reduce their tax burdens. That could be anything from claiming a tax deduction that he or she is eligible for to using an offshore account to minimize inheritance tax. Although tax avoidance is legal avoidance, tax evasion is very clearly illegal. The ethical implications of both can be debated, but it is crucial to note that these two terms don’t mean the same thing.
The Myth: Leaking private financial and legal information is OK because it serves the public good.
The Reality: It’s true that leaking private financial and legal information can serve the public good, especially if it exposes a corrupt politician or a criminal group. However, leaking this kind of information indiscriminately isn’t always a good idea, and it certainly doesn’t always serve the public good. A good majority of Mossack Fonseca customers hasn’t actually done anything wrong or illegal, and yet a whole trove of their sensitive financial documents and confidential and legally protected communications has been leaked, which is a huge infringement of their privacy. Many of these people have followed all applicable tax laws, and there is no public right to individual financial information. After all, does anyone try to accuse you of trying to hide your money when you opt not to broadcast the balance of your savings account?
In conclusion, it’s important to have the facts straight regarding the Panama Papers scandal and offshore jurisdictions. With all of the misinformation swirling out there, it’s key to separate fact from myth.
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