Reinforce global cooperation to eliminate offshore evasion of taxes: The Yomiuri Shimbun

Several issues of the German daily Sueddeutsche Zeitung dated April 4, 2016, titling on the so called "Panama Papers".
Several issues of the German daily Sueddeutsche Zeitung dated April 4, 2016, titling on the so called "Panama Papers". PHOTO: AFP

In its editorial on April 11, the newspaper reiterates the importance of eliminating evasion of taxes.

The leak of documents revealing the use of tax havens by world political leaders is sending shockwaves around the globe.

The so-called Panama Papers show that a great number of politicians - as well as their families, relatives and aides - have connections to offshore companies in the British Virgin Islands in the Caribbean Sea and other tax havens. The long list of names contains former and current world leaders.

In tax havens, tax rates are set at very low levels, prompting companies and wealthy individuals to use them to reduce tax payments. They are also known for their negative aspects, including being hotbeds for illicit activities such as tax evasion, money laundering and window dressing.

Even if their involvement in tax havens is not illegal, world leaders can be held morally responsible for avoiding tax obligations in their countries, where they should have paid taxes in the first place. They must provide explanations for every tiny detail.

The documents are called the Panama Papers because they came from a law firm in Panama. After being obtained by the German newspaper Suddeutsche Zeitung, they are now receiving multifaceted scrutiny from the International Consortium of Investigative Journalists.

Iceland's Prime Minister Sigmundur David Gunnlaugsson was forced to resign for not disclosing ownership of an offshore company, and British Prime Minister David Cameron has his back against the wall after admitting he had invested in a Panamanian trust set up by his late father.

Judicial authorities in European and Latin American countries, including Germany and Panama, have begun investigations to determine if there were any legal violations connected to the scandal. As a matter of course, it is important to bring any tax evasion or other illicit activities to light.

It is also essential that the international community make concerted efforts to make tax havens more transparent.

Last year, the Organisation for Economic Cooperation and Development and the Group of 20 countries and regions compiled international rules to prevent multinational corporations from evading taxes under the name of fictitious business deals.

From the viewpoint of preventing money laundering and tax evasion, it is important to urge tax haven countries and regions to cooperate to establish such effective measures as sharing bank account information.

The response of China to the Panama Papers is questionable. The names of relatives of three top Communist Party leaders - including President Xi Jinping -emerged in the papers. The Xi administration not only flatly refused to offer any explanations but also tightened control on the Internet in an attempt to contain the spread of information.

China is the chair of this year's G-20 summit and as such, it should take a leading role on measures against tax evasion. Given that, shouldn't the behavior of China be considered inappropriate?

Russian President Vladimir Putin also faces suspicion in connection with financial transactions conducted by a friend. The Russian president put forth a conspiracy theory, saying, "They are attempting to rock us." But that is unpersuasive.

Tax evasion measures will be a key agenda item at the Ise-Shima Group of Seven summit meeting to be held in Japan. The G-7 nations should come up with a clear message on this issue.

* The Yomiuri Shimbun is a member of The Straits Times media partner Asia News Network, an alliance of 22 newspapers.