Structural studies of the global networks exposed in the Panama papers
doi.org
doi.org
OK, I get that. What are the insights?
In the Summary it says:
> We iterate that, while we certainly did not expect small-world phenomena to emerge in all networks, the fact that it did not emerge in even a single network, and also that the distribution of connected components (as a function of size measured in terms of number of nodes) seems to follow a clear and consistent trend throughout, suggest a similar fundamental difference compared to small-world networks.
Um, what does that tell us about corruption and tax evasion? Can somebody please explain in layman's terms?
So there is no „illuminati“ to go after to solve this. Studies try and see how problems can be solved - if there was a single organizing entity like a mafia boss, it would be simpler to tackle the issue but there isn't, so its Marder than first expected.
As to tax evasion, id posit the question „so why are these people evading? Is it the law itself? Can they be otherwise somehow incentivized to invest in their Communities rather than evade? And how big is the contribution here? Is it worth pursuing?“
That is most certainly not what the study means. If you were going to extrapolate, you might be able to get away with corruption is basic rich people behavior, but even that is going way further than what the study is actually saying.
Corruption is incredibly widespread globally across all demographics. It tends to show up the least in WEIRD places, and be most obvious in poorer countries, but it's everywhere and every level of society.
What do you mean by that?
Thus corruption can be found on any system, no matter the scale, and regardless of the shape and form of the gain that may be attained.
This definition implies that hypothetical cases such as a college professor using his right to park free of charge on campus to store his car collection, or a secretary using the company's printer to print out fliers, might surprise people who believe that corruption is the fruit of sinister morally and ethically empty sociopaths who are super wealthy and very powerful.
I like this question. It makes me wonder what society would look like if we had micro community councils that operated this way, where residents “donated” parts of their wealth and those donations gave them some sort of stake, naming right, or voting power in community projects.
I wonder if we’d get the same sort of donations we get by wealthy families to get hospital wards named after them etc.
I suppose it requires a shift in what we value as humans, perhaps we could work toward a society where the amount you’ve given away gives you the most social credit or prestige, rather than how much you’ve amassed. Is it too naive and childish to think this sort of society is possible and could be an improvement over the current one?
but then they get called lobbyists when this happens.
So here's a smaller community where the majority is fine with high taxation in exchange for freely available health care, higher education etc.
Family funds exist here (e.g. Novo Nordisk is 25% owned by a humanitarian fund, Mærsk) but are less important than US.
Yes, but it's not the majority that runs offshore companies in Panama, but those rich enough that it makes sense for them to go through the trouble of setting offshore companies up.
And IMHO the problem is in simple psychology of how humans compare between themselves. We don't compare in absolute means, but relative to people around us. If you're a middle class and you pay the same taxes as everyone else around you, you might grumble a bit, but in the end you'll except it as a part of life, because, well, everybody does it. If you make a lot more money than others and thus have to pay a lot more taxes, you'll perceive it as an injustice, being punished by mediocrity for your success. And you'll have a much less of morale dilemma should you try avoid paying it.
The higher taxation not come about because "people were fine with it". It was the consequence of a political and social momentum caused by the cold-war era where workers were able to extract concessions from the haves under the threat of a socialist revolution if they did not agree, in turn the result of historical proximity to the revolutionary movements in Europe in the 19th century as well as the geographical proximity to a powerful socialist state for the most part of the 20th century. This momentum is now slowly being eroded by the whole political spectrum on the right, paradoxically including what is left of the Scandinavian social democracies.
The welfare state will likely be a historical parenthesis between the laissez faire economy of the mid 18 hundreds and the new economy where the billionaires once again dictate the whole playing field. Unless a new situation arises where the haves once again willingly will agree to contribute towards funding a welfare state for some reason. I don't see it happening anytime soon however.
The correlation of high taxes = better quality of life doesn't hold much strength when you consider that there are plenty of countries doing well without it, and plenty of countries with high taxes that have a poor quality of life.
In terms of model healthcare, Australia is not the system you want. Our health system grossly underfunded and ineffective with lots of waste from years of private sector health insurance.
Re: healthcare, you won’t realise how good you have it until you try to go to a Swedish hospital with a torn ACL only for a nurse to diagnose you with a cramp, direct you to take paracetamol and refuse to let you see a doctor. Or when you try to have a blood test done and realise it’s not a 24 hour turn around, but a 24 day turn around if you’re lucky with 1-2 years minimum to see a specialist.
Why IKEA’s profits are mostly tax free https://www.afr.com/policy/tax-and-super/why-ikea-s-profits-...
Legal loopholes make Sweden a tax haven https://www.dn.se/nyheter/sverige/legal-loopholes-make-swede...
Siem Offshore Fined NOK 5 Mln in Tax Evasion Case https://www.offshore-energy.biz/siem-offshore-fined-nok-5-ml...
the issue is less how much tax _individuals_ pay. Tax avoidance on behalf of individuals is tiny and absolute "small-fry". The biggest cheaters that can afford it on a massive scale are companies.
one of the biggest problems is that if you want to compete in a global market space you're kind of forced to use legal (but dirty) tricks (tax optimization such as transfer pricing etc). The strategy is always to squeeze the consumer end (e.g. the retail) and supply side (production/manufacture etc) and this is where you're losses are while you scoop the profits from the middle (a tax haven). It's cool to talk about Cayman and Switzerland in silly Hollywood movies but some of the biggest tax havens are actually the US (Nevada, New Mexico, etc), Luxembourg, Netherlands, UK ... as long as we don't clean up this rigged global financial system we shouldn't even consider discussing about whether the average Joe has been taxed enough.
There is a great book that links the emergence of this offshore industry with the dissolving of the empires (e.g. Gabon is laundering the money for the French elite in the same way as BVI, Caymans have been used by Brits) ...: "Treasure Islands: Tax Havens and the Men who Stole the World (2011) " https://en.wikipedia.org/wiki/Treasure_Islands:_Tax_Havens_a...
Even we clean up all our structures in the West there will be plenty of opportunity to move capital to Bahrain, Dubai or uhm ... Japan https://fsi.taxjustice.net/en/
If I can give my tax money to someone of my choosing, I think it may incentivise people to feel better about where the money is going.
To be clear, not making your tax payments less, but rather choosing where it goes. Of course, if you have a network of nonprofits, this become a bit grey. In the USA I have gotten the impression that people do try to game the idea of nonprofits.
>To be clear, not making your tax payments less, but rather choosing where it goes.
Giving to charities reduces your tax burden, at least in the US.
In fact, you can generally deduct up to half your income[0] based on charitable contributions.
Does that meet your desire to better direct your tax dollars?
[0] https://www.irs.gov/charities-non-profits/charitable-organiz...
But... I don't live in the US. We pay tax and received no services in return.
You cannot forsee the possibility that the ability to purchase voting rights might result in another "natural" problem?
... I think the challenge is if concrete power such as votes, etc, is given based on financial contribution, then, it's not a democratic process.
If it were based on expenditure, there'd be no avoiding.
Not OP, but I assume he/she means something like a consumption tax[0].
However, given that poorer people tend to spend more of their income than wealthier ones, unless such a tax is appropriately calibrated, it can be quite regressive.
Spending tax means that, no matter who you are, you will pay your taxes if you want to purchase something, whether its a commodity or product or service.
The rich will still be able to be rich - in fact, there will be more rich people - but they won't be encouraged to spend any of it without sharing it in the form of taxes.
Also a version of that already exists in most countries, in Europe you pay around 18-25% of VAT in every purchase you make but income taxes tend to apply only if you make X amount of money which effectively means poor people don’t pay income tax.
People still need to eat and live their lives. They'll have more revenue for doing that if they don't automatically have to give half of it to government.
Taxing spending removes a repressive socio-economic influence on people among different classes of economic status.
Poor people stay poor because that way they don't have to give away half their income. This has a much bigger socio-economic impact than most middle-class taxpayers are willing to admit.
Opaque segments of the global financial networks enable Black Ops. No need to drag in Weishaupt and his worshipful brethren here, correct? So let's just discuss the "secret services" of the "big powers". Are they using the "tax havens"? I think the answer must be "Surely you jest, old boy!"
The impression I got was not that they found nothing useful, but that they didn't find broadly interconnected networks within the data.
If that's the case, it's likely that the transactions in the data aren't tightly linked.
Which is useful, in that it tells us that those involved in such activities are not a cabal of evil elites, rather they're disparate groups with little in common except their desire to avoid taxes/hide assets.
That conclusion certainly implies that addressing these activities will be more difficult as they are decentralized and widespread, but it's certainly not useless IMHO.
That seems to agree with what the parent said. It sounds to me like if a broadly interconnected network was found, that would be a failure on the part of the people trying to facilitate the tax avoidance schemes - the closer to homogenous noise the graph looks, the harder it is to trace. Based on that, I'd say that there's no utility in trying to prove the negative, i.e., that larger networks do not exist.
If the people hiding their assets actually did their job well, they would expect and hope that you (as an outside analyst) would come to exactly the conclusion that you have come to.
It leaves room for tons of other network analysis and data analysis.
As the paper's abstract says: "In recent history, the Panama Papers have comprised one of the largest and most influential leaks detailing information on offshore entities, company officers and financial (and legal) intermediaries, and has led to a global exposé of corruption and tax evasion. A systematic analysis of this information can provide valuable insights into the structure and properties of these entities and the relations between them. Network science can be applied as a scientific framework for understanding the structure of such relational, heterogeneous datasets at scale. In this article, we use an existing, relational version of the Panama Papers to selectively construct various networks, and then study the properties of the underlying system using well-defined analytical methods from network science, including degree properties, country assortativity analyses, connectivity and single-point network metrics like transitivity and density."
This is an attempt to make some sense out of this using the tools of Network Science[0].
Eventually you get to level up to the place of tax deferral that is infinite. You can do it onshore you can do if offshore. It is only hubris for some people to think some governments of their own choosing should have a piece of that. We are talking about the distinctly non corrupt activities.
It's stupid to play in the race to the bottom of governing power versus concentrated wealth. It's something captured/self-interested regulators do, not honest ones.
Revenue services are not worried with how much you pay them, they are only concerned with compliance.
It is not hubris. It is pragmatics. Moving to another county does not fully avoid contributing to the community where you live; you aren’t leaving the state, so state taxes still apply. The point is that rich people should pay their fair share of taxes and not be able to just buy their way out of it with fancy lawyers and accountants, thereby depriving governments of billions in taxes. This analogy just isn’t on the same order of magnitude.
However, I think our philosophies are too different for you to accept my argument because it rests on the premise that rich people should pay taxes, which I don’t think you believe. It seems to me that you believe that individuals can and should avoid contributing to their communities through taxation as much as they possibly can. No matter that this money is often used for social services and other non-profitable activities that help people in need.
I think the atomized, “I got mine” attitude meshes deeply with the “temporarily embarrassed millionaire” attitude that tries to justify the Panama Papers stuff as on the same order of magnitude as getting cheap gas in another county. The concept of community doesn’t exist in this mindset; only a group of dragons sitting on their hoards whose sole interactions with each other are business transactions exists. I hope that changes.
To me the argument is “I’m mad we arent getting hosed equally” and rationalizing a phantom role of the state as if the state’s revenues would really improve and as if they would fund that infrastructure properly and that the infrastructure really had a meaningful effect on that wealthy person’s ability to do business reliably - or even keep the area safe and productive via improved social services. To which I would say thats all overestimated, and the state’s revenue sources should be reevaluated.
I disagree that people couldn't understand the panama papers, we don't because we don't try. People like J.C. Sharman spell it out for us what's going on.
http://www.internationalaffairs.org.au/australianoutlook/rea...
we just don't read it. I've got his book. I haven't read it. But in the time that I've had it I've watched multiple garbage sci fi series.
It might be easy to underestimate how tectonic papers like this are.
IMHO, if your net worth is over about 250k (or lower if you have a high risk profile) your assets should probably be held in an offshore LLC, trust, or foundation. This makes them effectively untouchable by lawsuit, divorce proceedings, seizure, etc.
If you are concerned that your will provisions will be contested or that a lawsuit between siblings is likely when you die, offshore estate management also makes those things impossible.
Since in only costs 1-3 thousand US to set up effective offshore asset management, and maintaining it is 200-1200 a year, it's a small price to pay for peace of mind.
Footnote 5 of the paper in the submission provides a link to the data used. For your convenience, that link is: https://offshoreleaks.icij.org/pages/database
I look forward to reading your paper when it's complete.
'Most' of the problems are in regimes where everything is nicely hidden i.e. Dubai, Moscow, anywhere in China.
Why would anyone do banking in Dubai, where there are absolute Monarchs who can do whatever, whenever, with their money, finances information, when they can go to US/UK/EU and have full legal protections? Because 'no transparency'. And that's it. Billions of USD intended for Afghanistan investment end up in bank accounts there etc..
What we really need are the 'Dubai Papers'.
And Dubai, definitely, is the place to keep dirty money.
If it can be cleaned, and someone has legit cover for their money, they can keep it in the West.
That’s the most generous and ethical explanation for the continued support and existence of offshore judication. The unpopular reason is that offshore countries offer lower taxes and favorable regulation. As someone who believes in the smallest possible state and enjoys the benefits of offshore countries (as do Facebook, Google, and Apple which use a combination of the Netherlands, Ireland, Bermuda, and Cayman in complex corporate structures) I am sympathetic to this argument. Although my friends say I am a corporate stooge!
This is definitely not it. The largest entities with the most IP at stake don't duke it out in the Cayman islands.
Moreover, Cayman - and any other offshore - does not have nearly the sophistication to handle complicated disputes.
'Sound rule of law' is one thing, but when laws are not very clear or complex, without a lot of historical rulings, without a sophisticated judicial + participants ... then it's not going to be part of the value add.
If you're really concerned about 'rule of law' then you want to be in EU/US/UK, possibly Canada, Australia, Switzerland and you don't even want it to touch other jurisdictions.
Edit: FYI your 'Bermuda' argument doesn't help make your point re: 'neutral ground IP law'. The reason companies exist 'offshore' is to avoid taxation and scrutiny, which is why they are there.
--> primarily for tax and regulatory avoidance.
The less power the state asserts, the more is left for the biggest corporations to use, throwing their weight around, dominating everybody smaller.