What is the issue?
While the sensational Paradise Paper leaks occupied considerable media space, the larger impacts of such episodes remain largely under-researched.
What are Paradise Papers?
- International Consortium of Investigative Journalists (ICIJ) had recently published the paradise paper leaks.
- This put around 13.4 million documents from the offshore law firm Appleby and propelled many nations to start investigations.
- The information included investments and funding structures of 120,000 businesses and many influential individuals.
What are the benefits of leaks?
- They provide tax administrations with a free audit of taxpayers reflecting new information and a clearer picture of cross-border activities.
- It also sets specific targets, which thereby increases the probability of detecting other evaders.
- It could also dissuade potential evaders as it highlights the risks and the consequent costs of evasion.
- As a rational response, governments might use leaked data to change tax laws to curb evasions.
How legitimate are leaks?
- Imperfections - Leakers are often anonymous and the hackers who bring them out are a heterogeneous assortment of sources.
- Among other imperfections, the leaks are usually incomplete, non-specific, and have within it - false positives and risks.
- There are also palpable apprehensions that organisations like ICIJ releases only selective data sets that are in its processions.
- Risks - Leaks might be agenda driven, which precise thought given to aspects like the timing of the leak, what and how much to leak.
- High-profile leaks might also carry with them immediate political impacts and on a lesser note, serve as good fodder for trigger-happy media.
- Such episodes could also lead to ill-advised knee jerk reactions that could hamper economic freedom and businesses in countries.
How does the future look?
- Globally, growing concentration of wealth and the inability of tax administrations to track money trails across borders has been a major issue.
- Hence, reliance on systematically collected data to eradicate tax evasion is proving ineffective and sensational leaks are likely to remain popular.
- But it remains uncertain if tax administrations, particularly in emerging economies, would actually follow the process to its conclusive end.
- This is because tax authorities are usually not fully independent and may themselves suffer from pockets of corruption and political arm twisting.
- Steady economic growth and consequent maturity in civic affairs, processes and practices are the only hope for a sustained victory against tax evasion.
Source: Business Standard
