Tax havens and accountability

Many Asia Pacific countries including Sri Lanka have been included in a report comprehensively detailing the inner workings of offshore tax havens from the International Consortium of Investigative Journalists (ICIJ), which could spark an unprecedented increase in financial accountability.

The investigation will release the secrets of more than 120,000 offshore companies and trusts exposing the dealings of politicians, con artists and the mega-rich of more than 120 countries. Even though specific cases are trickling out slowly, it has massive implications for a range of countries in the region.

Former Pakistani Deputy Prime Minister’s son and politician Moonis Elahi has been revealed as a shareholder of a British Virgin Islands firm set up with the help of Swiss bank UBS. This is the latest report from the ICIJ probe that has added to the corruption scandals plaguing Pakistan’s Government. Successive attempts to initiate credible investigations into these oversights eventually led to Chief Justice Iftikhar Chaudhry ordering the arrest of both President Asif Ali Zardari and Prime Minister Pervez Ashraf in January.

ICIJ has also named key members of the Malaysian Government, their families, and well-heeled associates as among those owning secretive offshore companies in Singapore and the British Virgin Islands. French banks, helicopter deals in the Congo and even Bridget Bardot’s husband millionaire Gunter Sachs have been reported by ICIJ as having used offshore accounting to avoid paying taxes and being otherwise financially accountable.  Reportedly included in the investigation are previously undisclosed details about secret bank accounts of Sri Lankan hedge fund manager and former billionaire Raj Rajaratnam, who was found guilty of insider trading by the US and handed an 11-year prison sentence.

Government officials and their families and associates in Myanmar, Indonesia, Azerbaijan, Russia, Canada, Pakistan, The Philippines, Thailand, Mongolia and other countries have embraced the use of covert companies and bank accounts, the ICIJ insists.  ICIJ has delved meticulously into the gathering of documents, which represents the largest inventory of inside information about the offshore system ever obtained by a media organisation. The full size of the files, measured in gigabytes, is more than 160 times larger than the leak of US State Department documents by WikiLeaks in 2010. A list of the personalities they have investigated so far is on their website, with additions being made periodically.

What such reports and investigations underline is the need for countries, developed and developing alike, to foster frameworks of accountability that put a peg on greed. As populations increase and resources become even more finite, the need for equitable development becomes ever more important. This means that tax collection and investment in public services such as education, healthcare and housing become ever more important.

In such a scenario, governments have a responsibility as never before to be accountable to the people and put their interests first, which means that corruption has to be bottlenecked. This, as the report proves, is a significant challenge and in fact a universal one.  The consciousness for financial accountability is undoubtedly growing in the Asia Pacific region and this is a positive development as it would give as much as one fifth of the global population and chance at a better life. What better reason is there to be honest?