Panama papers: a haven for financial speculation

19.04.2016 - Santiago, Chile - Paola Parra

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Panama papers: a haven for financial speculation

Recently, the amount of money that hidden in tax havens has come to light through the “Panama Papers”.  This money has been invested through “offshore” companies, a reference to the fact that the majority of these places are island countries.  What characterises these companies is that they have no productive activity, so these places are a haven for financial and speculative capital.

But why call them tax havens?  Because they are countries where very little tax is paid.

According to the Chilean tax authorities, in the year 2015 there were approximately 400 Chilean tax payers who had US $11 billion invested offshore.

Some quick comparisons:

11 billion dollars equates to an average of 27.5 million for each one of those 400 individuals.  Contrast this with the Chilean per capita GDP for 2015 of US$ 23,564.  In other words, each one of the 400 people investing their money in tax havens (with the only aim of paying less in tax) represents the GDP of 1,100 Chileans.

And if we make a comparison with the national budget which is currently around US $60 billion, we can say that this offshore money represents 18% of public money spent in Chile for 17 million people.  It’s not surprising that these 400 have so much influence over parliament and that laws are passed to favour their businesses (Fishing laws, mining royalties, tax reform, etc.)

On the other hand we hear many arguments such as, “If that capital was not ill-gotten (i.e. not the product of drugs, the arms trade or other illegal business) the owners can do what they like with their capital,” just like Aunt Jane can decide to keep her money under the bed.  The only problem is if this money is ill-gotten.

Let’s remember that the profit that those 400 obtained was not just as a result of the capital that they invested, but also the result of people who worked in their companies, the roads that were built so that they can transport their goods, the support that they received from the state through subsidies, consultancy and tax exemptions.

Profits must be invested in the country where they were obtained, and above all must be reinvested in the company that earned it.  Capital must give the maximum productive return.  It should generate new jobs and be directed towards the company’s expansion and diversification.  If this doesn’t happen, that capital ends up in circuit of financial speculation.[1]

[1] See the Document of the Humanist Movement (Letters to my Friends, chapter 6), Silo, Complete Works volume 1, Latitude Press, 1993.

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