Panama Papers no Holy Grail of global corruption

The Panama Papers offer insights into dirty laundering, but the papers in their own rights are no “smoking guns”.

Before concluding that the Panama papers are the Holy Grail of global corruption, certain facts must be viewed in perspective. This is a perspective that the journalists involved in the expose have been careful to articulate but one that their readers may overlook because the big names on offer could seduce them into jumping to conclusions. 

The papers are essentially records maintained by a law firm in a tax haven and show that several individuals used its services to set up entities and investment vehicles. By itself, this may not be a crime in several jurisdictions as the journalists have pointed out. But if properly investigated, they may reveal how some of those named might have used the route to evade rather than avoid taxes. This is the fine distinction that must be made whilst evaluating the leaked information. 

So far as India is concerned, the onus is on tax and enforcement authorities to probe the names and information that have come into the public domain and evaluate these against declarations and filings made by the named individuals before reaching definite conclusions.

This exercise must be concluded with urgent dispatch, as any delay would in the event of a default deprive the exchequer of revenue. Equally, if the transactions are kosher, a delay would prolong an infamy. What we suspect though is that because of the nebulous nature of tax laws and the frequent amendments made by governments, many of the transactions will fall in that large grey space that almost by design exists between the black and white of the legal framework. 

In jurisdictions outside India, especially those where public persons must maintain the highest standards of probity, the revelations are bound to cause upheavals, as indeed they already have in Iceland. 

They are unlikely though to cause more than momentary discomfort to the likes of Russian President Vladimir Putin or Pakistan Prime Minister Nawaz Sharif, individuals who have in the past brushed aside such charges with disdain. Beyond the fact that the records of one law firm are now out in the open, their disclosure a remarkable journalistic feat by any measure, it must be obvious that neither the presence nor the role of overseas tax havens is exactly a secret. They exist, as they have for a long time, and are used as much for avoidance as they are for straightforward evasion. 

While the Indian government has been quick to announce a probe, it must view these disclosures in the backdrop of its avowed and largely unfulfilled objective of rooting out black money, especially money salted away overseas. In this context, the response of India’s  central bank governor has been both measured and pragmatic. Thus, while the Panama papers offer leads to Indian investigators, they are not by themselves the smoking gun. The objective of a tax probe is to unearth revenues, not bandy names.