In April 2013, the Offshore Leaks opened the doors of a secret world to the public. A world of hidden money, sweetheart deals between governments and multinationals, and shockingly low tax rates for companies.
From small, remote islands such as Panama and the Cayman Islands, to countries such as Luxemburg and Ireland, these places have represented tax havens for both individuals and corporations for a long time. In contrast with tax evasion, which is illegal, tax avoidance concerns “the arrangement of a taxpayer’s affairs in a way that is intended to reduce his or her tax liability”.
In the words of Tax Justice Network, tax avoidance “complies with the law, but it goes against the spirit of what our legislators intended”. Not only powerful individuals, but especially multi-national corporations have been using dodgy tax schemes to avoid paying the high rates of their country of establishment, and to store significant amounts of capital in tax havens.
These are countries which impose a low or no tax. Capital thus results being denied to the rightful hands of governments and public services. In the long-term, this has only worsened social inequality and provided arguments for less powerful enterprises and individuals to pay fewer taxes themselves.