Behind Panama Papers lies big, dirty, dead money

No Indian film buff needs to be given the first part of this joke, currently in circulation, whose punchline is the sentence: "Mere paas PanaMA hai!"

What is now known as the "Panama Leakage" is a cache of 11.5 million records that expose a global industry of law firms and big banks selling financial secrecy to politicians and criminals as well as billionaires, celebrities and film stars. These include about 130 major politicians, and the leakage has claimed its first political victim with the resignation of the prime minister of Iceland.

Also read - Panama Papers: Will Modi punish defaulters in world's biggest tax scandal?

The leaked records come from a powerful law firm based in Panama, Mossack Fonseca, which has branches in more than 35 places around the globe. It is one of the world's top creators of "shell companies," corporate structures used to hide ownership of wealth. Shell companies mostly do not employ people or produce anything; they are created merely to hide the assets of the very rich. One of the reasons why this happens legally is the fact that there is no global register of corporations and the real owner of a company is not required by law to disclose his or her identity.

The US President Barack Obama, rightly noted that this is not technically illegal, but he also suggested that it is worse: because it shows that lawmakers and politicians have knowingly allowed the very rich to get away with hiding their wealth and evading taxes.

This is also a system that allows hidden money - required, for instance, in drugs and arms trafficking, without which things like "Islamist terror" would be seriously crippled - to operate outside public scrutiny.

And if you think all this is just a "socialist" reaction to extreme wealth, bear in mind that it is problematic even in capitalist terms. Because the money that is hidden away - estimated at US$25 trillion- falls out of the working global economy.

Also read - #PanamaPapers reveal how off-shore tax havens finance war crimes

Apart from the taxes avoided, this means that a large chunk of global "capital" is dead. Shell companies are not just fake companies: they are empty companies, and hence a dead weight from both socialist and capitalist perspectives.

If we just had a global register of corporations and required company owners to disclose their identities, much of the problem would be solved! The reason it has not been solved proves the complicity of many politicians with big, dirty, dead money.

(Courtesy of Mail Today.)