The International Consortium of Investigative Journalists (ICIJ) has posted a vast quantity of details from the Panama Papers -- a trove of more than 11.5 million confidential documents from a Panamanian law firm detailing how companies and moneyed individuals use tax havens around the world -- to the internet. We hope this unparalleled release will shine a brighter light on exactly what is going on in these tax havens, and lead to effective measures to combat tax evasion.
The person who first leaked the Panama Papers to a German newspaper remains anonymous. In a written explanation of their motivations, the source stated that income inequality was one of the greatest problems confronting modern society, suggesting a deep anger over the world's wealth gap.
Wealth disparity and tax evasion are especially serious in developing nations. The British government is hosting an international anti-corruption summit on May 12 in London. According to an open letter signed by more than 300 economists from around the world and addressed to the leaders set to attend, poor countries miss out on a total of some $170 billion in tax revenues every year as a result of tax evasion.
It is estimated that if all the monies sent to tax havens was subject to appropriate taxation in their countries of origin, and the revenue applied to medical care and other health-related programs, it could prevent some 4 million child deaths in Africa every year.
Capital pools in tax havens because of low local taxes and the promise of anonymity. What the Panama Papers revealed was how shell companies were set up in these havens with the help of banks and law firms -- shell companies designed to channel funds into real estate, financial products and other investments while hiding the identities of the beneficiaries.
The Panama Papers revealed who those shadowy beneficiaries are. What's desperately needed now is for each nation to set up a central database of information on the shell companies' actual owners, and an international system to allow the legal and tax authorities of other countries to use these databases freely. As ICIJ points out, a system should be considered to allow anyone to inspect what is going on in these shell companies.
There are also tax havens in the United States and Europe. Some of the major shelters are territories administered by Britain. It is essential that wealthy nations take the lead and make bold moves to address this problem.
More than 300 residents in Japan and Japanese companies appear in the Panama Papers information released by the ICIJ. Just because they are using an offshore tax shelter does not mean they are breaking the law. However, we would like to see Japan cooperate with authorities in other nations in a thorough investigation to discover whether any of these offshore financial arrangements are related to tax evasion or other crimes.
It may be impossible to completely eliminate all illicit use of tax havens. However, it is vital that governments continue doing their utmost to eradicate this behavior, simply to raise public confidence in the fairness of the tax system and help reduce the wealth gap. The leaders at the coming Ise-Shima G-7 summit in late May should also take an important first step in this direction.