Do the rich and powerful really dodge taxes?
They do. The “Panama Papers” – 11.5 million or so documents leaked from a Panama law firm specializing in tax shelters of various kinds and degrees of ingenuity – are shocking, however, not only to the naively innocent but to seasoned observers who took that sort of thing for granted without appreciating quite how widespread it is.
The damage so far includes the resignation in disgrace of Iceland’s prime minister and blackened reputations for such implicated world leaders as – to name just a few – Russia’s Vladimir Putin, Britain’s David Cameron and China’s Xi Jinping.
Japan’s political elite is so far untouched by the scandal. Its economic elite, on the other hand, may find itself with some awkward explaining to do. Not, be it noted at the outset, that it is necessarily illegal to avoid paying taxes at home by stashing wealth overseas in places like Panama, the Virgin Islands, the Cayman Islands, the Bahamas and so on, where tax laws are notoriously lax. Still, it doesn’t look good if it comes to light – as Iceland’s ex-prime minister, David Gunniaugsson, learned the hard way.
Josei Jishin (May 3) helps us understand why. Based on expert estimates – unproven, however – of how much Japanese money is likely hidden away in offshore tax havens, the magazine claims that the tax revenue which that wealth is failing to generate would solve some of Japan’s most pressing and festering social problems.
First, the numbers. Otsuma Women’s University economics professor Kaoru Tozaki calculates that Japanese corporations and individuals have salted away some 55 trillion yen in Panama, 65 trillion yen in the Caymans, plus an additional 80 trillion yen in various other tax havens. The total – some 200 trillion yen, is a lot of money. It’s more money than most of us can imagine. Here’s a figure that puts it into some kind of perspective: it’s more than twice Japan’s entire annual national budget, which is 96 trillion yen.
Now if this money was in Japan being taxed like the modest incomes of much less wealthy people, it would generate, Tozaki estimates, 60 trillion yen per year.
What could Japan’s government do with 60 trillion yen a year? Consider this, Josei Jishin hears from tax accountant Mayuko Suzuki: Raising the consumption tax 2%, from the current 8% to 10%, which the government under pressure of an ailing economy and an upcoming election has recently postponed doing, though it claims the hike is necessary, would generate 4 trillion yen a year.
No wonder ordinary Japanese citizens are angry, the magazine fumes. Lately the anger has coalesced around an anonymous blogger venting her rage at being unable to place her child in daycare – there aren’t enough openings; and as a result she, a single mother, faces having to quit the job that is her and her child’s sole support.
With 60 trillion yen the government could finance daycare, plug leaks in the pension fund, strengthen the social safety net, improve services to the elderly.
We’ll know more about who’s stashing how much where on May 9 when the Panama Papers are due to be published in full. Meanwhile, illegal or not, tax havens are revealing themselves as an ugly and socially corrosive fact of commercial life.© Japan Today