Leak-Driven Lawmaking

Shu-Yi Oei
Hoffman F. Fuller Professor of Law, Tulane Law School

Over the past decade, a steady drip of tax leaks has begun to exert an extraordinary influence on how international tax laws and policies are made. The Panama Papers and Bahamas leaks are the most recent examples, but they are only the tip of the leaky iceberg. Other leaks include (in roughly chronological order) the UBS and LGT leaks; the Julius Baer leak; HSBC “SwissLeaks”; the British Havens leaks; and the LuxLeaks scandal.

These tax leaks have revealed the offshore financial holdings and tax evasion and avoidance practices of various taxpayers, financial institutions, and tax havens. In so doing, they have been valuable in correcting long-standing informational asymmetries between taxing authorities and taxpayers with respect to these activities. Spurred by leaked data, governments and taxing authorities around the world have gone about punishing taxpayers and their advisers, recouping revenues from offshore tax evasion, enacting new domestic laws, and signing multilateral agreements that create greater transparency and exchange of financial information between countries.

Thus, it is clear that leaked data has started to be a significant driver in how countries conduct cross-border tax enforcement and make international tax law and policy. But using leaks to direct and formulate tax policy responses comes with some potentially serious pitfalls.

In a new paper—coming soon to an SSRN near you[fn.1]Diane Ring and I explore the social welfare effects of leak-driven lawmaking. Our argument, very generally, is that while data leaks can be socially beneficial by virtue of the behavioral responses they trigger and the enforcement-related laws and policies generated in their wake, there are under-appreciated downside hazards and costs to relying on leaked data in deterring tax evasion and making tax policy.

Continue reading “Leak-Driven Lawmaking”

Emmet Till and The Panama Papers

Photo AP.

By David J. Herzig

Yesterday (July 25) would have been Emmet Till’s 75th birthday.  Since high school I have been fascinated by his story and the impact he had on the Civil Rights movement. For those who don’t know, Mr. Till was born and lived in Chicago.  While visiting his relatives in Mississippi in 1955, at the age of 14, he was killed for allegedly flirting with a white women.  His killers (although an all white jury acquitted both men they both admitted to the killings in this Look Magazine article) were the husband of the woman, Roy Bryant and his half-brother J. W. Milam.

The death of Mr. Till is often credited with a mobilizing factor in the Civil Rights Movement.  For those interested, here is an excellent PBS documentary on the topic.

Thankfully, it did not take long to justify a post on a tax blog about a Civil Rights hero.  The son of one of Mr. Till’s killers name seems to show up in the Panama Papers.  According to the Clarion Ledger, “Harvey T. Milam of Ocean Springs, whose father, J.W., shot Till in 1955, appears in” the Panama Papers.  Apparently, Harvey had quite a scheme involving using off-shore insurance companies.  I may actually have to do some digging around to find out more about the alleged scheme.

The #PanamaPapers Come to the U.S.!

Today’s New York Times has a story about U.S. citizens and residents who have shown up in the Panama Papers. The ICIJ has shared its documents with the Times, which has found at least 2,400 U.S.-based clients over the last decade.[fn1]

The story (which you need to read) details some of the services Mossack Fonesca provided for four wealthy U.S. clients: entrepreneur William R. Ponsoldt, former CEO and chair of Citigroup Sanford I. Weill, Boston Capital Partners managing parter Harald Joachim von der Goltz, and financial author and life coach Marianna Olszewski.

Clearly, at least some of the services Mossack Fonesca provided were legal; some, however, were remarkably shady (for example, it looks like some clients used the offshore structuring to evade gift taxes, and some clients explicitly wanted to set up offshore structures to hide money from potential judgment creditors). Continue reading “The #PanamaPapers Come to the U.S.!”

Lionel Messi, Tax Fraud and the Panama Papers

I have been fascinated by the accusations of tax fraud levied against soccer superstar Lionel Messi and his father by the Spanish tax authorities.  Right when I thought the story could not get more interesting of course Messi is tied to the Panama Papers.  As much as I like Hermione (h/t Shu-Yi), I love Messi!

As a quick background for non-sports and football (I mean soccer) fans, Messi is the greatest soccer player in the world and maybe the greatest soccer player of all time.  As a point of reference, he would be the equivalent of Michael Jordan, Joe Montana, Babe Ruth rolled into one player.  Imagine what would happen if LeBron James were accused right now of tax fraud by the IRS?  This would dominate ESPN and probably network television.  Well, this is what is happening in the rest of the world with Messi.

Last year, a bombshell was dropped when the Spanish taxing authorities accused Messi of defrauding Spain of more than $5 million. Continue reading “Lionel Messi, Tax Fraud and the Panama Papers”

It’s Here! The #PanamaPapers Database

On April 3, 2016, the International Consortium of Investigative Journalists, in partnership with a number of news organizations, announced that it had received a leaked trove of 11.5 million documents from the Panamanian law firm Mossack Fonesca. Dubbed the “Panama Papers,” leak, the ICIJ documented how the wealthy and the powerful used Mossack Fonesca to move money around the world of tax havens and, at least sometimes, to hide it from their countries’ revenue agencies.

Originally, the ICIJ declined to make its data available, even to governments.[fn1] It explained that it is: Continue reading “It’s Here! The #PanamaPapers Database”