Pieth and Stiglitz warn of offshore tax haven dangers

The office of Panamanian law firm Mossack Fonseca, which has been at the centre of the Panama Papers scandal Keystone

Tax havens must be treated as “carriers of a dangerous disease” to be quarantined and cut off from the global financial and economic system, warns a report by Swiss anti-corruption expert Mark Pieth and the Nobel prize-winning economist Joseph Stiglitz.

“Secrecy havens should be treated like the carriers of a dangerous disease. If left unchecked, it can spread like a virulent virus. We know what to do with dangerous contagious diseases: quarantine,” the co-authors declared.

The findings of their newly published reportExternal link, “Overcoming the Shadow Economy”, are to be discussed at the European Parliament’s Panama Papers inquiryExternal link on Wednesday.

The report states that tax havens pose a global problem. To help close loopholes, it recommends the creation of publicly searchable registries of the beneficial owners of each corporation, trust, foundation or other entity in every country.

The authors say all tax haven companies must be compelled to file an annual report, setting out the names of their owners, the jurisdictions in which they have operate and a full set of tax returns.

Controls must also be tightened on lawyers and agents, who play a “pivotal role in the creation of the web of corporations”. They also call for tighter controls to combat widespread money laundering through property.

According to Pieth and Stiglitz, “as economic leaders, the United States and Europe have an obligation to force financial centres to comply with global transparency standards”.

“There is a widely shared perspective that these havens only exist because the United States and Europe have looked the other way,” they said.

Treasure trove

The International Consortium of Investigative Journalists (ICIJ) first published the so-called Panama Papers on April 3. They are a 2.6 terabyte trove of leaked data from the Panamanian law firm Mossack Fonseca.

They list the activities of global banks and financial intermediaries on behalf of wealthy clients. The records date back 40 years, containing information on more than 210,000 companies set up in 21 tax haven jurisdictions.

The papers had previously revealed that 1,339 Swiss lawyers, financial advisors and other middlemen had set up more than 38,000 offshore entities over the past 40 years. These entities listed 4,595 officers – or administrators – who are also connected to Switzerland. Swiss banks cited have denied any financial impropriety.

Following the Panama Papers scandal, Stiglitz and Pieth were appointed to a committee by Panama’s president to suggest ways to be more transparent.

However, they both quit, saying the expert panel itself lacked transparency and the government refused to promise to make their recommendations public.