WASHINGTON: US President Barack Obama on Tuesday called for international tax reforms to prevent tax evasion like those reported in the Panama Papers.
“There is no doubt that the problem of global tax avoidance generally is a huge problem,” he told reporters at the White House. “The problem is that a lot of this stuff is legal, not illegal.”
President Obama noted the leak from Panama showed the tax avoidance was more widespread than estimated and involved Fortune 500 companies and ran into trillions of dollars worldwide.
“We shouldn’t make it legal to engage in transactions just to avoid taxes,” he said while emphasizing the need for “making sure everyone pays their fair share.”
President Obama said the rich and the influential reported in Panama leaks did not break laws because they had enough lawyers and accountants to “wiggle out of responsibilities” by exploiting ‘loopholes.’
On April 3, the International Consortium of Investigative Journalists leaked more-than 11 million documents, dating back to four decades. The documents list over 214,000 offshore companies typically used as structures to evade taxation connected to people in over 200 countries. A Panama law firm Mossack Fonseca was managing these companies.
Russian President Vladimir Putin, Iceland Prime Minister Sigmundur Gunnlaugsson, Ukrainian President Petro Poroshenko, FIFA and Lionel Messi and Ian Cameron, father of British Prime Minister David Cameron, were among those identified in these documents as the owners of some of these offshore firms.
President Obama said his administration had already introduced new rules to close corporate inversions, by which companies move overseas to avoid taxes. He described the practice as “one of the most insidious tax loopholes out there”.
Mr Obama made a rare unscheduled appearance in the White House press briefing room to speak on this subject.
Hours before his appearance, US officials told reporters that they were reviewing the international offshore law firm, which helped the wealthy and powerful avoid US sanctions against regimes in Syria, North Korea, Russia and Iran. “We are aware of the reports and are reviewing them.
While we cannot comment on the specifics of these alleged documents, (we take) very seriously all credible allegations of high-level, foreign corruption that might have a link to the United States or the US financial system,” said Peter Carr, a spokesman for the US Department of Justice.
The Tax Justice Network, an organisation working for tax reforms, reported in 2010 that between $21 trillion and $32 trillion were invested in these shell companies. In the same year, the World Bank estimated the Gross World Product — adding up the GDPs of all countries — at about $62.2 trillion.
The lower half of the global population possesses barely 1 per cent of global wealth while the richest 10pc of adults own 86 pc of all wealth. The top 1pc account for 46 per cent of the total.
Tax havens offer confidential bank accounts and help create companies with anonymous or opaque ownership structures.