Panama Papers

[Martinus]

[mongers]

Van Halen's non-accounting expositions were ahead of their time. 

[Admiral Yi]

Yeah but it is legal. So change the law if you don't like it. Complaining that businesses make use of legally available ways to optimise their operations is idiotic.

The ability to legally hide your money in laundering centers is what makes them laundering centers.

[MadImmortalMan]

If it's legal it's not laundering. 

[Martinus]

Yeah but it is legal. So change the law if you don't like it. Complaining that businesses make use of legally available ways to optimise their operations is idiotic.

The ability to legally hide your money in laundering centers is what makes them laundering centers.

I think you don't understand what the term "laundering" means. Laundering means taking money from illegal sources and using it in legal transactions in order to create presumption of legal origin for it. (So, for example, you have money from selling illegal drugs which you want to launder - so you transfer it to a legitimate business as a payment for a service that was not actually performed. Then you call the business telling them you sent them the money by mistake and they return it to you. Voila, the money has been laundered).

The practice described in the Panama Papers mainly concerns taking money from legal sources (such as income from capital) and then transferring it off shore, either for the purpose of beneficial tax treatment or to conceal them (from the public, the authorities, the relatives etc.). So, for example, you operate a business in Norway with god-knows-how-high taxes where using your own brand is an important compenent. So you set up an IP company in Malta, which does not tax income from use of IP rights, transfer the trademark rights to it and then have it charge royalty to your Norwegian business. This reduces the taxable income in Norway by the amount of the royalty (assuming it is on arms length's terms) and allows you not to pay income tax on the royalty in Malta, leading to tax optimalisation of your business. Such practice is not necessarily illegal and legality depends on jurisdiction and actual purpose of doing this. Money laundering is always illegal.

[Martinus]

Just to be on the same page, I just wanted to make sure that you guys realise that tax avoidance is legal, right? And what differentiates it from tax evasion (which is illegal) can vary wildly from a jurisdiction to a jurisdiction.

[Tamas]

Where I am with Marty is that this kind of stuff is done by everyone everywhere, the only difference is, everyone is doing it on their own scale. That BS business expense excuse you used to pay a few dollars less tax, having your car on your company's name etc.

The only valid reason for the level of outrage shown by the public is for public figures who have money they clearly could not have from legal means. Rest is just increasingly repulsive hypocrisy.

[Martinus]

Not just that but everybody probably makes actual non-BS tax deductions on their tax return, whether it is because of social security they pay or being able to file a joint tax return with their non-working spouse etc. Companies and high value individual do the same, they just can hire (better) tax lawyers and get better returns. So saying something is "legal but dodgy" is extremely hypocritical - it's just a subjective moral judgement from the have-nots on the haves.

To paraphrase Milo, if you want to have access to better tax optimisation arrangements, stop being poor.

[Martinus]

And yeah I agree with Tamas that the actual bad part about the Panama Papers is public figures who got the money from corruption and other illegal sources.

[Jaron]

Not just that but everybody probably makes actual non-BS tax deductions on their tax return, whether it is because of social security they pay or being able to file a joint tax return with their non-working spouse etc. Companies and high value individual do the same, they just can hire (better) tax lawyers and get better returns. So saying something is "legal but dodgy" is extremely hypocritical - it's just a subjective moral judgement from the have-nots on the haves.

To paraphrase Milo, if you want to have access to better tax optimisation arrangements, stop being poor.

Does Milo define your entire spectrum of political views nowadays? I swear everything you believe in seems to be attached to "According to Milo".

[Admiral Yi]

I think you don't understand what the term "laundering" means. Laundering means taking money from illegal sources and using it in legal transactions in order to create presumption of legal origin for it. (So, for example, you have money from selling illegal drugs which you want to launder - so you transfer it to a legitimate business as a payment for a service that was not actually performed. Then you call the business telling them you sent them the money by mistake and they return it to you. Voila, the money has been laundered).

The practice described in the Panama Papers mainly concerns taking money from legal sources (such as income from capital) and then transferring it off shore, either for the purpose of beneficial tax treatment or to conceal them (from the public, the authorities, the relatives etc.). So, for example, you operate a business in Norway with god-knows-how-high taxes where using your own brand is an important compenent. So you set up an IP company in Malta, which does not tax income from use of IP rights, transfer the trademark rights to it and then have it charge royalty to your Norwegian business. This reduces the taxable income in Norway by the amount of the royalty (assuming it is on arms length's terms) and allows you not to pay income tax on the royalty in Malta, leading to tax optimalisation of your business. Such practice is not necessarily illegal and legality depends on jurisdiction and actual purpose of doing this. Money laundering is always illegal.

I understand what laundering is and I understand that's not necessarily what we're talking about (although I strongly suspect laundering is going on as well), I just couldn't come up with a term to describe what Panama is.

You already conceded downstream that there is no guarantee the money parked in these accounts is legitimate income.  The inclusion of Putin on the list of names means at least some of it is not.

But the problem is what you describe as the virtue: other people don't know it exists.  Other parties, be they taxing authorities, divorced spouses, creditors, whatever, who have the legal right to know about and to take those assets can't.

[Martinus]

Whether these other parties have a right to know these assets exist depends entirely on the jurisdiction.

As a moral rather than legal question, I generally believe that people have a right to privacy and it extends to their assets, in the same way people should be able to keep their correspondence private (and it should be legal for them to use encryption and other technical means of ensuring this privacy) - even though in some jurisdictions such techniques are prohibited.

[frunk]

These are corporations not people we are talking about.  I don't think they have any particular right to privacy.

[Martinus]

These are corporations not people we are talking about.  I don't think they have any particular right to privacy.

Uhm, no. The Panama Papers are largely about private individuals and their wholly owned company vehicles, not about corporations.

[DGuller]

Where I am with Marty is that this kind of stuff is done by everyone everywhere, the only difference is, everyone is doing it on their own scale. That BS business expense excuse you used to pay a few dollars less tax, having your car on your company's name etc.

Speak for yourself.  I've never done such a thing.