OPINION: Put The Panama Papers Into Perspective

Panama

A large number of the documents that were leaked by the Panama Papers case were from decades ago, whereas now we are in an unprecedented period of transparency and disclosure, and have been for years.

In light of recent events, we explore the flip-side of the Panama Papers situation.

While moral outrage continues to be the global reaction since the Panama Papers case came to light, the allegations made do not represent the wider international financial services industry.

The worldwide indignation is, of course, not unexpected, since the 11.4 million leaked documents within the 2.6 terabytes of data from the world’s fourth-largest offshore law firm, Panama-based Mossack Fonseca, suggests that tax evasion on a grand scale was taking place.

Of course, tax evasion is illegal and a serious global issue that must be tackled more forcefully. That said, the so-called Panama Papers case is not an accurate portrayal of the offshore financial services sector of today.

The overwhelming majority of the international financial services industry provides services that are wholly compliant and used by clients to legally achieve better returns and take advantage of more investment options and greater flexibility.

In addition, a large number of the documents that were leaked by the Panama Papers case were from decades ago, whereas now we are in an unprecedented period of transparency and disclosure, and have been for years.

The concept of a ‘tax haven’ is somewhat outdated. These days, financial data is automatically exchanged with tax authorities globally, so it is almost impossible to hide money. People are no longer able to stockpile assets on so-called ‘treasure islands’ and not expect to be caught out.

As such, and since the Panama Papers case was revealed, it must be highlighted that the offshore financial services industry plays a fundamental and hugely beneficial role in the global economy.

However, this is usually overlooked by the media.

Naturally, there are some questionable motivations as to why certain individuals may want to use an offshore account, as is so often sensationalised by the media. Although, in my broad experience, within the industry working with expatriates and international investors, who have, characteristically, far more transient lifestyles, offshore accounts are preferred purely for convenience.

They offer secure, flexible and international access to funds, regardless of where the individual may relocate to in the future. They also provide a much wider choice of multi-currency savings and investment solutions.

For those who qualify to do so, offshore financial institutions provide legal, bona fide, global investment products to make up a strong, sensible financial planning strategy.

There are other significant benefits too, such as they prevent businesses from getting taxed twice on the same income, and offer legitimate financial refuge for clients who are based in countries where economic and political chaos is rife, perhaps with an exceptionally volatile currency and confiscation of assets.

For instance, business people located in Russia and Ukraine habitually place assets in offshore accounts to protect them from criminal raids, while other people may opt for an offshore structure for inheritance and estate-planning motives.

Nonetheless, even though so-called tax havens are now far better regulated, transparent and accommodating, and provide a much-needed and in-demand service for clients worldwide, the Panama Papers claims highlight that there is still more to be done.

As such, these latest allegations should act as a chance to further increase the efficiency and value of international financial centres and the industry as a whole, particularly as it is forecast to grow more than ever in years and decades to come, as both individuals and organisations become ever-more internationally focused.

Recommended For You

Related Articles