Panama Papers observations

Buttonwood presents a trilemma:

The issue may be another example of that common political problem; the trilemma, under which three options are available, but only two at most can be selected. In this case, it is a simple tax system; independent national tax policies; and the existence of multinational companies and investors.

Here is Megan McArdle:

What we’ve seen from the papers so far is not so much an indictment of global capitalism as an indictment of countries that have weak institutions and a lot of corruption. And for all the outrage in the United States, so far the message for us is pretty reassuring: We aren’t one of those countries.

Consider the big names that have shown up so far on the list. With the notable exception of Iceland, these are not countries I would describe as “capitalist”: Russia, Pakistan, Iraq, Ukraine, Egypt.  They’re countries where kleptocratic government officials amass money not through commerce, but through quasi-legal extortion, or siphoning off the till. This is an activity that has gone on long before capitalism, and probably before there was money.

From a Ray Lopez email:

5.  Panama Papers fallout will be: (1) a drive to reduce large denomination bills, (2) a drive to make a ‘paperless’ payment system, (3) a drive to eliminate tax loopholes, (4) a drive towards negative interest rates once paper is abolished

6.  Xi of China is the biggest loser.  He ran on an ‘anti-corruption’ ticket and his Politburo members will be pissed if they see he is corrupt, unless he winks and tells them they are immune from his anti-corruption offensive.  In which case, to pay them off, Xi, needs to appropriate the assets of his enemies to give to his friends.  So possibly it’s a “double down bet” for Xi:  he either folds or has to double down, redoubling his anti-corruption campaign, so he can seize assets to pay off his cronies keeping him in power.  We live in interesting times.

7. The net effect of Panama Papers, along with the FATCA issues above, is that criminals no longer will use law firms, and decent people hiding money as well, which means these services will be offered by more informal channels like from a single proprietor “fixer”.  “Nick the Greek money launderer” will profit, big law firm will suffer.

Here is China in the Panama Papers.


Great points Ray! Surprised you didn't include your Filipino girlfriend somewhere in your email. I hope everything is okay!

So Ray Lopez is actually "Nick the Greek" money launderer?

Lopez BTW is an ancient Greek family name from the island of Chios.

He is fond of chess and Ruy Lopez is an opening in chess, so I think that is what his handle comes from.

I was always under the impression he was this guy:

He didn't cover where to vacation if you're under 40 with kids.

No such thing in Greece

There are other four items, I guess.

Thanks all. I am cited along with such luminaries as Megan McArdle and The Economist. I wonder if I have to tone down by trolling now that I'm mainstream.

Going to Greece for a short trip soon to recover up to 3M euro my going senile wacky uncle misplaced. @AIG- he tried to launder money, so I'm hoping he was successful. I once heard him talking to somebody about Switzerland during the Euro crisis (ironically, he lost everything despite the Greek banks not formally failing). Otherwise, if he buried the money as some speculate, and forgot where it is, I need a 'paper detector', lol. Easy come, easy go. I thought I was going to inherit this amount...I was his closest nephew and he is feuding with my mom so I would have been the logical next of kin...if he leaves a will.

There's a bunch of Greeks all over the world, mostly in Australia, USA, Germany, but there's some on the west coast of Mexico that emigrated there en masse, and a few here in the Philippines (see for PH public figures and another is Steve Psinakis who was the husband of one of the Lopez clans, see,_Sr. (no relation to me) and wrote a book about opposing Marcos)

There's even a mixed Greek in the obscure little town I'm in now (I moved from Manila).

I think objectively the Germans travel and mingle more than the Greeks, but since Greece is such a small country it seems more exceptional.

@AIG - thanks, Mr. Panos is named Pappas, a common name, a pro comedian from Brooklyn, he's gay apparently, and pretty funny. But frankly I've seen his act in real life so often that it doesn't strike me as funny so much as accurate, lol. English is a problem for most Greeks and that's where the comedy comes in. The French colonized the Greek islands and so did the Arabs, Turks and maybe Spanish (Spanish Jews went to Salonika, some from my mother's side from there); on my dad's side we're actually from France from an immigration over 200 years ago. In real life I'm actually famous in Greece. You wanna see my castle? That's what I tell the girls...and it's true. ;-)

@Ray_Lopez, If you could choose, who would you like to direct your biopic? I am thinking Coen Brothers. Although we may need to leave some of the sex tourism stories (earlier this week) out to be more, well, mainstream.

@Iondenio - I don't know much about movies, as I don't watch that many; Coen Bros did No Country for Old Men, and I've visited Piedras Negras (during the height of the Zetas drug war!) where this movie was filmed, so that sounds good. I've also written a movie script about a fictional story (based loosely on real life events) where some German tourists are looking to find buried Nazi gold (and are outsmarted by Greeks). I did like my ending: the villains of the film were the German tourists, and a corrupt Greek official, while the good guys were trying to stop the Germans from taking the gold out of the country. In the end the 'good guys' won, the gold was used to pay off the Greek external debt (this script was written in 2008 so I was ahead of my time), but the twist was the 'good guys' kept a good portion of the gold and in the last scene are laughing their azz off, surrounded by beautiful models on a yacht. So there were no heroes after all. I thought that was clever but I could not sell the script to my Hollywood connections. About the same time Spike Lee's WWII historical fiction film Miracle at St. Anna came out and did poorly ($45M budget, $9 box office, ouch!), so that's maybe why. Fashion is fashion in Hollywood, where else?

Can we see the rest of this email, it seems rather interesting.

You can be fairly sure that Tyler's discretion was to our collective benefit in this instance.

Who needs Panama, when you've got Puerto Rico, Ireland, and Singapore?

"If Apple didn’t hold $181B overseas, it would owe $59B in US taxes"

I suppose Steve Sailer does not use an accountant to minimize his tax bill every year. Nope.

I have a much cheaper way to minimize my tax bill: I just minimize my income.

That is indeed easier Steve. Did you know you could bring your income down to zero, with absolutely no effort? Bonus points: you then get paid by the IRS!

So if poor greek guy doesnt pay taxes is bad, but if Big Apple avoids taxes is good? Sounds logical.

Show some respect. Apple employs lots of... Chinese workers. Well, Foxconn does, anyway.

"So if poor greek guy doesnt pay taxes is bad"

No, if a poor greek guy doesn't pay taxes, but wants lots of benefits either way...its bad.

See what I did there?

I just glanced at that article, but it seems that they are assuming that Apple, Google et al would take no steps to reduce their tax burden here in the US. Its not like there is any great shortage of tax loopholes here in the US that they could take advantage of.

Per McMegan, the Panama Papers have revealed how corrupt government officials and their cronies hide their ill-gotten gains in offshore vehicles. Some people will somehow manage to interpret these revelations as a case for giving government officials even more powers than they already have.

Uhm, hello! Bernie Sanders is way ahead of you.

No, it shows that government officials can't even get corruption right; I mean Panama?! Really?

Also, Ray's #7 is ludicrous. No big law firm sent their clients there, not even the medium size ones; it was the mom n pops that screwed up.

I'd think the "big law firm" applies to the law firm exposed in Panama, not the clients.

"for all the outrage in the United States, so far the message for us is pretty reassuring: We aren’t one of those countries. " Or it shows that the US is sufficiently corrupt or complacent that many of its wealthy have no need of offshore tax shelters.

Here you just hide the money in plain sight and call it a charitable foundation.

the fact we aren't talking about how the clinton's became worth $100+m in this election cycle is depressing.

it's a shame sanders has a "don't go negative policy." it's almost as if he just wanted to push clinton leftward rather than win.

If we aren't, how did so many Democrats get so wealthy? Chicago, Albany, Boston, Fords in Memphis, Clintons, Reid in Nevada....

Yep. Americans have Delaware etc. Don't need Panama. This point has been made by others.

The corruption of politicians in third world banana republics is why we must crush the KKKapitalist system and install our own third world banana republic system of government in AmeriKKKa!

~ Bernie Sanders supporter (please visit my gofundme page. I need $200,000 to complete my degree in anthropology)

Yep, because because Western Europe is a Banan Republic. Go back to Podunk, boy.

True. They can't grow bananas in Iceland. Very insightful insight.

When I was in Iceland long ago, I went to a place where there were big greenhouses heated by geothermal steam. Right in the entrance area was a banana tree.

So if only in 1979, they did grow bananas in Iceland.

Wake me up when Western Europe breaks up all their big banks

Bernie = KKK.

Jan = can't read

On Buttonwood's point, could we keep all three of the trilemma by taxing all monies entering the country at different rates? I would think you could tax the hell out the countries that have nefarious tax havens until you broke them to be more transparent or move into even riskier endeavors. This is against a lot of the free-traders that taught me. But I could possibly see this working if we could get complete transparency in international money transfers Would love to know your thoughts.

Apply the highest marginal tax rate to any flows leaving the country which couldn't prove their legitimate origins?

The analogues to civil asset forfeiture would seem troubling, but a) it's an awful lot less arbitrary than civil forfeiture under the cops, and b) where there are actually lots of legitimate reasons to be carrying cash, there are basically no legitimate reasons to be exporting financial resources that you cannot prove the legitimacy of.

I mean, isn't that basically one of Trump's ideas on how to make Mexico pay for the wall? I don't really like the idea for a variety of reasons, but it would work. Perhaps the IRS would do well to automatically flag anyone for audits if they are found to oppose the measure?

Sounds like you are advocating a system that doesnt have one the the trilema's legs: independent national tax policies.

"What we’ve seen from the papers so far is not so much an indictment of global capitalism as an indictment of countries that have weak institutions and a lot of corruption. And for all the outrage in the United States, so far the message for us is pretty reassuring: We aren’t one of those countries"

Omit the last sentence, & I think for the first time I agree with this tendentious, superficial woman.

Btw, when are identities of the 488 Yanks going to be revealed?

Both sentences are very very wrong.

How so?

1) As with Wikileaks, the revelations are very convenient and a bit obvious (Dictator X is stealing money from country Y)...Which makes it look like propaganda operation.

2) Iceland does not have weak instituitions. Its mostly, the corporations / 1% that are not paying their due taxes (even in countries with strong instituitions). Obviously most of them (especially American ones) wont put it in Panama for historical reasons. (who knows when the next invasion will happen lool ).

3) Why would you put your money in Panama, when you have: Delaware, Virgin Islands , Netherlands, The City, etc etc So this is clearly not representative picture of who, anno 2016, is avoiding is obviously not only Putin's best friend....

4) US and the EU have been saying "rich must pay their taxes" while at the same time not doing anything about the numerous tax havens around the world. A prime is example is the president of the EU comission who used to be president of notoire tax haven Luxembourg. So basically they are endorsing this practice, while at the same time saying "government is spending too much, so increase taxes or cut this or that service".
5) Finally: Tax havens make corruption a whole lot easier, so if you are implicitly endorsing them (EU/US) you are endorsing corruption, and this means you are corrupt. Its simple.

"US ... have been saying 'rich must pay their taxes' while at the same time not doing anything about the numerous tax havens around the world."

What should they do? Invade? See: FATCA and go to the back of the line.

But Panama is one country and this just one law firm.

Perhaps all tax studies in the future should contain an asterisk, which refers to "income as reported."

I practice law in cross-border banking and finance in China. I am puzzled by how non-professionals in this field view offshore jurisdictions as categorically related to criminal activity, embezzlement and corruption, etc.

Almost all cross-border transactions involve offshore jurisdictions at some level. For instance most companies listed on the HK stock exchange are incorporated in the Cayman Islands. Anything to do with Bermuda, Cayman, BVI, etc. in cross border transactions is very, very mundane.

According to the papers, Xi Jinping has relatives who are owners of offshore companies. How is that any sort of evidence of wrongdoing by them (much less of Xi Jinping)? I doubt anyone can provide an intelligent answer.

Intelligent? No. But here's an answer:

@AIG - Pretty good, but it could have been better if Pappas did not make the ludicrous statement (out of character) that Japanese people are Chinese people. No Greek bigot is that dumb, but if they were, they'd not emphasize it, but rather say something like: "all Orientals are the same, Japan, China, whatever". My uncle is like that. Also Pappas was too strident to be a true racist. Most Greek racists don't get worked up about their racism but assume it to be obvious, to be true, no need to defend it. Not unlike our own Steve Sailer. If you're worked up about it, it shows you have doubts.

@Kai - the informed consensus is that Xi is using his relatives to hid his own money. That's common in Asian families, even in the USA. You'll see a deed of trust with all the dozen names of the family members. Or in a bank account.

Further, as a practitioner, no doubt you are aware of 'piercing of the corporate veil' so all those articles on this topic that say "No need to go to Panama or anywhere offshore to hide assets, just incorporate anonymously in Nevada" are completely wrong, see (inter alia):

PS--I'm not a lawyer on the internet but play one...

Where did they get the money from to own those companies? Did they invent something? Build a business from the ground up? Succeed after some brilliant marketing campaign? Devise a new business strategy? A combination of old fashioned business strategies?

Certainly their business success could not be related to milking government access, because stuff like that never happens in China, especially not at the highest levels.

I don't imagine they would have been dumb enough not to give full cover of everything looking legit. Hence the notion of "found not guilty" not being synonymous with "innocent".

It doesn't cost very much money to own an offshore shell company

I mean the origins of the money, not the shell company. Perhaps that wasn't clear .

"For instancemost companies listed on the HK stock exchange are incorporated in the Cayman islands."

This may not be the reason for the HK stock exchange, but a lot of Taiwanese firms invest in China via offshore accounts.


1) Political risk.

2) Taxation: why invest from Taiwan, for example, when Taiwan will then demand a portion of your profits, but Taiwan has nothing to do with your factory in China that exports to America. Thus, use an offshore company to send in your investment.

"For instance most companies listed on the HK stock exchange are incorporated in the Cayman islands."

the trilemma, under which three options are available, but only two at most can be selected. In this case, it is a simple tax system; independent national tax policies; and the existence of multinational companies and investors.

Surely that is a mistake? It is trivial to have a simple tax system, with independent national tax policies and MNCs. Imagine a system with a flat 15% tax. That is it. Simple. National. Independent. With multinationals if they like.

It is impossible to run a corrupt, incompetent tax system that tries to pick winners and losers based on complex electoral calculations without the middle class engaging in massive evasion. That is a different problem.

Simple and with multinationals, but not independent. If independent, another country could tax at 10% and attract the multinationals away. And a third country is denied independence because it can't get away with taxing at 20%.

That is not what independent means. So what if people tax at 20% as well? We all have the right to make our choices and live with the consequences. That is what being independent means.

A country that taxes at 20% is still independent. Just with fewer MNCs.

We did this with the world's ships. When most of the developed world taxed shipping too much, they moved to Panama and Liberia. America is still entirely independent. It can make ship owning as unpleasant and difficult as it likes. It just won't have much of a fleet left.

Yep, Liberia, Lighthouse of Mankind (I guess every fringe ideology has the paradise it deserves, I still remember Brazilian Communists praising Albania's dictator and criticizing the "Soviet revisionists" and American Imperialists).


@Cliff - it's a reference to ships being registered in LIberia for low cost labor (and it used to be Greece).

+Michael Savage is right, you cannot have independent tax policies if countries have different rates, as there is a race to the lowest taxed country.

+Michael Savage is right, you cannot have independent tax policies if countries have different rates, as there is a race to the lowest taxed country."

You can't charge more than your competition, every business knows this. Of course, businesses like to join cartels. This is essentially the same mechanism. Do you support a cartel or a competitive market?

But it surely borrows the term from the 'impossible trinity' trilemma of free capital, stable FX and independent monetary policy. Monetary policy is technically 'independent', but if you want to have stable FX without capital controls then you have to 'choose' to adapt monetary policy to pursue FX objective. Similar here; if you want to keep multinationals, you have to change your tax system to attract them. Doesn't have to be expressed in absolutes. I thought it was a useful way of describing situation.

It fails as a parallel because if you trying to inflate your own currency when you have a fixed peg, you will find the real world will smack you in the face. There is a direct link.

There is none here. If you want to keep multinationals you have to be attractive to multinationals. So what? If you want to tax doctors you have to make it attractive to be a doctor too. There is no direct link here.

It is entirely possible to run a system with all three. It may be that some people will choose to go to law school instead of med school, it may be true that some companies will choose to off shore. It may not.

Tax on consumption. You can't evade that as easily.

Yes a consumption tax would be the sane and logical way to address this. Let people keep money in hidden offshore accounts if they want. If they die before spending any of it, more fool them.

Tax evaders had a good thing going when they could use an offshore bank credit card in the US, for example, but the IRS scrapped that. Its also a paper trail.

Why not? If you require all companies operating in your country to do so via a subsidiary incorporated in your country, and tax that subsidiary, then you should be able to tax all income that is earned by the company *within your country*, surely? The parent company may be incorporated in the Cayman Islands, but that doesn't really matter - if they don't operate in your country, why are you trying to tax them?

I get that there are ways around this, such as having international loans between different subsidiaries of the parent company in order to ensure that the company doesn't actually show a profit... but then you could just tax gross profit instead; it's what happens with personal income tax, no-one gets to claim that they spent all the money on living and so don't owe any tax.

Though I'm not quite sure how such a system would work, or be calculated...

If you're the biggest market in the world, you have a lot of leverage. Especially when the brains of the operation tend to prefer to be located where the other brains (and greater freedoms) are.

Yeah... The middle classes...

The Western middle class is not there yet. Most Western governments are not so corrupt and incompetent that the social compact has broken down. But across the southern Mediterranean it has. Greeks don't pay. I expect that it is partly true among people of southern Mediterranean origin in the US. In much of the Third World no one pays if they can avoid it.

But everyone is getting there. At varying degrees of speed.

However this story is not about tax evasion, it is about kleptocracy.

"However this story is not about tax evasion, it is about kleptocracy."
And has little to do with America or Western middle classes.

I don't agree with McArdle: Panama Papers is a leak from only 1 offshore law firm (Mossack Fonseca), and not even the biggest one. According to the Guardian, M.F. is the 4th biggest in that industry. So, Panama Papers does not reveal all the corruption out there, only some of it. I am from Turkey and there is very strong evidence of Turkish politicians' corruption, but none of their names has appeared in Panama Papers yet. That does not mean they are honest; it means they use a different firm. Likewise, US politicians may be using one of the other bigger offshore law firms.

More likely, they legalize their corruption first and get away scott free.

Romney's retirement accounts.

Sorry, where is the corruption there?

Turkey is indeed highly corrupt, see and but they have excellent airlines. In fact I'm flying next week on Turkish Airways, they have a direct flight Manila to Istanbul and from there a short hop to Athens.

Buttonwood's "trilemma" could be easily resolved at country-level by rule of law. You punish severely enough the institutions which offer plans and means for tax evasion, and they stop offering. I'm not saying this is obviously the right thing to do; I am saying that there is no "trilemma" here, but rather an equilibrium incorporating a general consensus that you don't chase big taxpayers very hard or punish big banks very much.

Does this mean that Ray Lopez made it to the mainstream blogosphere? :P

According to McArdle: "So even as Congress has passed laws like FATCA to force foreign banks to hand over more information about Americans, the U.S.’s own legal system offers them plenty of creative ways to stash their money. For instance, a limited liability company, or LLC, acts as a partnership, so any income is passed through to the partners, avoiding the corporate tax. For foreign-owned LLCs, this structure allows them to avoid U.S. taxes."

So what if an LLC "avoids" corporate taxes by passing income through to shareholders? The shareholders pay tax on the income...even if they did not receive any cash. Is double taxation of the same the corporate and individual levels...supposed to be some kind of entitlement of government?

It wasn't McArdle, it was the Politico link.

The comment isn't even entirely correct. If the partnership is engaged in a U.S. trade or business, then the foreign partner is also engaged in a U.S. trade or business and is taxed on the income like any U.S. (or foreign) person engaged in that trade or business. This why many foreign investors into U.S. partnerships invest through a corporate blocker so that the corporate partner is the one that files a U.S. tax return rather than the foreign investor himself. Even if the partnership is not engaged in a U.S. trade or business but is passively investing, then the partner is taxed (or not taxed) to the same extent as if the partner invested directly in those investments. Congress has made an express policy decision not to tax passive investments by foreigners (other than real estate). Presumably this was to boost the U.S. stock market. While, the LLC avoids corporate level taxation, generally in practice the only people that pay corporate level tax are publicly-traded corporations so it is hard to say that the LLC has some special U.S. tax abuse. The LLC does have a special abuse in avoiding foreign taxes because foreign countries may not view the LLC as transparent, but that's a different matter.

"What we’ve seen from the papers so far is not so much an indictment of global capitalism as an indictment of countries that have weak institutions and a lot of corruption. And for all the outrage in the United States, so far the message for us is pretty reassuring: We aren’t one of those countries."

Really? Why would Hillary hide her money in Panama, when she can do it in Delaware? The main reason why these tax havens exist is to satisfy the tax avoidance practices of multinational corporations and people in the 1%. At the same time tax havens are used by drug dealers, arms dealers, dictators friends to steal money from their countries and used to finance terrorism, but nobody seems interested in ending this practices...

See my link upstream to answer this question. In a nutshell, you invest overseas in Panama to *hide* your money, illegally. You invest in the USA, under a Nevada or Delaware anonymous corporation, to *shield* your money from frivolous lawsuits or nosy journalists, legally. In the US, you're not trying to hide money, but shield it. Example: Riggs National Bank (of Washington DC, yes we had an account there once, as did the CIA and various international terrorists) was known as the 'bank for crooks and criminals' because, back in the days, the proactively helped their US clients hide money (illegally, and they went bust). Hiding vs shielding is a big distinction.

Did it belong to BCCI or smth like that?

Sorry, BCCI apparently did not own Riggs, but they both got busted for money laundering, thanks.

Of course, hiding money in banks in tax havens comes at a price: instability. And shifting production and the income it generates to China and other less developed countries comes at a price: instability. The consequences of the instability are felt by more than those directly involved, but to pretend that the latter (i.e., "globalization") isn't directly linked to the former is to close one's eyes to reality. Here's the analogy: illegal recreational drugs. I tell people who use illegal drugs that they are participating in a criminal enterprise, a criminal enterprise that is both highly profitable and very violent. Companies that shift production to China and other less developed countries can pretend that they are not participating in a criminal enterprise, but any damn fool knows better. And every time you or I buy their products, we too are participating in a criminal enterprise. There are no innocents here, which is why Ms. McArdle et al. can write such nonsense: because it makes the rest of us feel better.

Don't get the similarity between a criminal drug enterprise and off-shoring production to China. Or is it merely a method of argument to declare an analogy and then make an unrelated declarative statement that the reader is supposed to infer is related to the analogy?

Tax avoidance has been an objective since taxes were first imposed, not long after our ancestors descended from the trees. What could be more normal? What's abnormal are nation/states demanding huge percentages of the production of their subjects in order to pay off voters and friends. The problem isn't kleptocratic government figures, it's that there's wealth available for them to steal. If governments were impoverished, as they should be, there wouldn't be anything to steal. By the way, where do Panamanian kleptos hide their money?

Yeah sure, so you will pay for your own roads? ;)

As always, the biggest argument for behemoth government is roads. So imaginative. Ergo, citizens put up with keptocracy in exchange for pavement.

Transportation is about 3% of federal Government spending

"an indictment of countries that have weak institutions and a lot of corruption"

Yet, Iceland is ranked as less corrupt than the U.S. by Transparency International and Gunnlaugsson is stepping down as PM.

One of those ironic sorts of situations where the best and most transparent and accountable places end up with the bad press, because they don't kill people who report on it or remove corrupt people from power ...

Kind of like with politicians admitting to mistakes. If the press were "look at the strength of character of someone who admits to mistakes and learns from them", instead we have "look, he/she admitted to being retarded".

The opportunity to score cheap points is rarely overlooked, and none of us are better off for it.

McMegan: Few Americans using one law firm in one country (whose government happened to be overthrown by America a few years back) =/= American capitalism pure and good.

Yes, therehavebeen a number of articles that Panama is not the preferred location for Americans to off-shore .

thats a pretty lame straw man. I took the point to be that this leak doesnt make the US seem any worse then we already thought.

Yea, the argument is basically saying that the evidence doesn't support the criticisms it's being used to justify, not that the evidence does support a particularly positive view of the U.S.

"A few years back' would be 26 years ago and the government ejected was a crooked military claque which had refused to allow the elected government to take office.

If this isn't an outstanding case for a Georgist land tax, I'm not sure what it would take. Nations should tax the thing that's hard to move rather than things that are easy to move.

Would seem to neatly sidestep the trilemma.

Shh! Let's let the Chinese buy up all of Manhattan and the Saudis buy up all of Beverly Hills before we spring that on them.

The trilemma is pretty binding under current law and philosophy of law. We could try to resolve it, as some say above, by adjusting both philosophy and law. Tax business activity within a polity, and as much as possible tax activity reliant on the polity.

Practice would fall short of theory though. We would probably never recover tax from every ship benefitting from US Navy protection, unless we board them :-)

Isn't this the other side of negative interest rates? The only rationale for buying a bond that costs money to hold is the fear of greater losses. To have your cash in a bank where it can be seized by a government agent is foolish. So you either buy one of their bonds, which they need desperately, or you put your money offshore somewhere.

This is painted as tax avoidance, but the Icelandic guys aren't accused of that. They were simply smart enough to realize that it their pots of money were visible and within reach, the Icelandic government wouldn't have been able to keep their hands off of it.

Does Ray really think other members of the Chinese politburo don't know that Xi is dirty?

Does Ray think that Chinese politburo members themselves are clean?

The real danger is popular anger.

@Harun - maybe the Chinese politburo doesn't know Xi is dirty, since China expert Bill Bishop (yes, chess!) said in TC's China link: " I will wager that Wang Qishan [Politburo anti-corruption chief] and the CCDI are trying to pore over any of the documents they can obtain to add to dossiers on senior officials and their families to find any useful information." After all, like the Russians the Chinese pols are pretty inefficient in that various power centers exist in the Communist Party, it's not "top down" as much as say maybe East Germany was or North Korea is. But, maybe you're right, and that explains why the Chinese government has censored, using the Great Firewall of China, all references to the Panama Papers.

No doubt they will pore over the documents - they are useful as blackmail, insurance policy, and possibly for a power struggle. But they are all dirty to some extent. Even Mr. Red renaissance guy Bo Xi Lai was dirty.

I'm pretty sure (somewhat of a fabrication of my mind, but it seems sensible in a way) that it is common practice to lure people in dirty stuff so that they can be blackmailed later (I assume mostly for political support, or to prevent them from trying to create their own political power centres which are not subservient to existing power holders). So long as everyone is getting fantastically rich in the meantime, there would be little reason to rock the boat ..

Henry Farell has a post @ the monkey cage, detailing how much easier he found it to set up shell companies in Wyoming than in offshore jurisdictions. The fallout is of course shaped by how the media choose to cover the story.

@Vlad - no, see my comment upstream. The issue is hiding (illegal) vs shielding (legal). WY, NV, DL, etc are for shielding not hiding (and not really 'anonymous')

What's wrong with hiding your money? Do you have yours on display somewhere, perhaps framed and hanging on the wall? Or piled up on your nightstand? Why should it be required to store your gelt in some bank if you're confident it will be OK buried in your own back yard?

@chuck martel -no, that's 'shielding' not 'hiding'. Hiding is so you do a Wesley Snipes and not pay taxes you legally should.

The middle class may feign anger at rich people having their money in tax free accounts offshore, but the middle class loves their ROTH IRA, and their 401K, and their SEP, etc. Many of these are not available to the rich - once you get past a certain income, you can't have a roth for example.

so, its not like Joe Six Pack doesn't get tax free accounts either.

....but still pay their taxes, while idiot douchebag "Save the world" Bono, Rolling Stones et al dont. Facebook, Google et al idem.

Rich people have tax free accounts by just investing, and only pay taxes when they sell the investments. Theoretically, it is an infinitely large tax free account, albeit with no liquidity to maintain the tax-free status.

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