Mossack Fonseca clients and their associates caught up in the “Panama Papers” leak face prosecution in the court of public opinion. Many most likely feel public backlash against them is both undue and unjust. After all, the money they were hiding under layers of shell corporations is theirs. From their perspective, it is no one’s business what they do with their money. For those who actually paid their taxes, they probably have the right to feel slighted by the criticism and the violation of their privacy. Public outrage over the hypocrisy and special treatment of the affluent is, however, also justifiable. In fact, it is the product of broader issues faced by rich and poor illiberal economies alike.
The “illiberal” concept, which was popularized by Fareed Zakaria, describes nations that embrace superficial democracy, yet lack true democratic institutions and a legal system that protects the civil liberties of individuals. This writer has argued “ill-democratic” better describes situations where authoritarian-minded leaders hijack democratic institutions to legitimize, solidify, and consolidate every form of power in their countries. The “illiberal” term should be reserved for situations where the unimpeded freedoms of the affluent allow them to suppress the interests of others, which is exemplified by pre-Civil Rights Movement America.
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Pfizer-Allergan Inversion Failure and Corporate Tax Reform: Time for a Territorial Tax Code?4/7/2016 The US Treasury announced two rules on April 4th 2016 in an effort to stem business practices, such as so-called “corporate inversions,” rooted in perverse incentives of harmful economic policies to the delight of many and the chagrin of others. Designed to eliminate the tax benefits corporations can derive from renouncing their US citizenship and relocating their headquarters to a foreign land where taxes are lower, these rules almost immediately resulted in the cancellation of a $152 billion merger between Pfizer and Allergan. The apparent targeting of Pfizer over a legal business deal can seem unjust, but this kind of damaging correction is what happens when unhealthy regulations are embraced.
Tax loopholes, which reward corporations for leaving the US, exemplify public policies that favor special interests over US interests and must inevitably be changed. No longer can US subsidiaries of inverted companies take a loan from their foreign parent and use interest payments as tax deductions to reduce their US tax liability. US companies must also own less than 60% of the combined company’s stock, excluding any acquisitions of US companies within three years, to derive any tax benefits. Frankly, these changes should have been made years ago. Consequently, the Pfizer-Allergan deal, which just happened to be affected by these changes, is just one among many high-profile inversions that forced necessary changes. The “Panama Papers,” also known as the “Mossack Fonseca Revelations,” offer the global economy much needed transparency into one of the world’s 80 plus tax havens. Hiding between 20 and 30 trillion dollars, tax havens like Panama hide sums worth up to nearly half of the annual Gross Global Production. Although those named in the 11.5 million document leak are not necessarily guilty of criminal behavior, their wealth adds to a significant amount of “black money,” which assuredly helps distort the capitalist mechanisms and functionality of the world’s economies. Just as important, such secretive practices reinforce a sense of economic injustice and lack of confidence in the economy.
Initial reactions to the Panama Papers have less to do with criminal wrongdoing and more to do with ethical wrongdoing. Coupled with persistent economic inequality, a lack of honesty when it comes to the practices of the wealthy fosters suspicions that economic policies are engineered to favor the already wealthy. California’s 15 dollars an hour minimum wage, for example, represents frustrations with the failure of capitalism to provide for the needs of poorer Americans, yet perverse disincentives of higher wages, which could result in higher federal taxes for minimum wage earners and fewer hours, highlight the futile struggle of average workers in a world where the rich keep getting richer. The First Amendment of the US Constitution clearly identifies the freedom of the Press. The Founding Fathers included this provision to ensure government would be scrutinized and the People had a means to accurately monitor their leaders. In the modern age, mass media from newspapers to the worldwide web provide a constant stream of information about political leader. While this transparency can improve government by helping to root out the bad behaviors of politicians, scandals over ill-spoken thoughts and trivial matters undermine the legitimacy of the political system and can destroy the careers of otherwise good leaders.
This is certainly no truer than when it comes to Presidential candidate Donald Trump and his collisions with so-called professional journalists. Since the Huffington Post decided to cover Trump’s campaign as entertainment, instead of politics, and the start of his feud with Fox Host Megyn Kelly, the media has clearly covered Trump’s campaign in a very antagonist fashion. In politics, people often take statements out of context and interpret them in the worst possible way in order to frame candidates in the worst possible light. With the introduction of Trump’s “American First” platform the potentially unethical coverage of Trump’s campaign now threatens US foreign policy. |
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