By Sophie Taylor and Joseph Kraus, ONE Policy Officers — Transparency and Accountability
Unless you’ve been living in a yurt on a remote beach in the Cook Islands (one of the world’s most tax haven-y of tax havens), you’ve likely heard about the “Panama Papers” (*if not, scroll to the bottom for a quick recap).
The Panama Papers exposed just how widespread corruption is. It’s not limited to a handful of corrupt African or Latin American dictators, a la Hollywood’s depictions in Blood Diamond or The Last King of Scotland. Sure, there certainly are kleptocrats in the world, but they don’t dance alone – it takes two to tango.
Some of the money siphoned out of developing countries each year—more than $1 trillion according to ONE’s estimates—ends up in banks, real estate, sports cars, and artwork in the Global North. It doesn’t get there via teleportation. It relies on bankers, lawyers, accountants and other facilitators who unknowingly, or otherwise, help the corrupt launder their money to finance lives of luxury.
What can be done to address this problem? Here are five relatively simple changes that your government can make to make the world a less corrupt place:
- Shine a light on anonymous shell companies: As noted above, the Panama Papers have revealed just how easy it is to set up a secret shell company to carry out questionable activities. By taking the simple step of exposing and ending anonymous shell companies and trusts, by publishing, online to everyone, the names of the people who own them, governments will increase their revenues, which could make a sizable contribution to the effort to end extreme poverty in Africa and beyond.
- Make it harder for corrupt officials to live lives of luxury: Let’s face it, people steal money because they want to live a life of luxury. Governments should make corruption less comfortable – and thus less appealing – by making it harder for the corrupt to spend their ill-gotten gains on luxury goods. They could, for instance, ban visa requests from corrupt officials or prevent them from flying first class, or ensure that real estate and art transactions are fully transparent.
- Hold the enablers of corruption accountable: Without help from bankers, lawyers, and accountants, corrupt officials and tax evaders would have a harder time spending their ill-gotten gains. At least $1 trillion gets siphoned out of developing countries each year due to shady or illegal activity. Doing business with corrupt officials should be considered a violation of anti-corruption laws, and those facilitators should be held individually accountable.
- Make companies publish their tax information: Rich countries raised 34.1% of their GDP in taxes in 2011, while low-income countries raised only 13%, on average. This was not, primarily, because their tax rates are lower, but because so many individuals and firms living and doing business in developing countries avoid taxes, either illegally or through sophisticated accounting trickery that shift profits to tax havens. Requiring companies to publicly disclose key financial information in each country in which they operate would help crack down on this abuse. It’s a no-brainer that’s long overdue.
- Publish government contracts: Globally, governments spend an estimated $9.5 trillion each year on goods and services. When governments keep contracts secret, as much as 25% of the money is lost to corruption.
* The Panama Papers is a global investigation into the vast, secretive offshore world that enables people to hide their assets and, in some instances, their illegal activity using shell companies and intricate accounting tricks. Based on more than 11 million leaked files – the largest data leak of its kind in the history of … ever, the investigation exposes how offshore companies can be used to facilitate bribery, arms deals, tax evasion, financial fraud and drug trafficking.