Just to clarify from the beginning: this column doesn’t condone illegal or criminal practices. I also don’t want to decry proper journalistic investigation, but the case of the recently-disclosed cache of Paradise Papers, something doesn’t add up.
When a whopping 13.4 million confidential documents end up in the hands of selected media to meticulously evaluate, one would assume that the world changes (for the better?) somehow – or at least that the leak advances our knowledge of reprehensible schemes of the wealthy and powerful, and prompted a legal investigation.
Not much of that has happened since the trove of documents from Bermuda law firm Appleby was leaked last month. Unsurprisingly, what was billed as a huge expose of dirty dealings in tax havens drew a faint response. The Paradise Papers count as one of this year’s major media flops. Why?
1. Not Truly «Investigative»
The International Consortium of Investigative Journalists, or ICIJ, maintains that it revealed the tax fraud after an extensive investigative effort. In fact, the network received the trove of data – anonymously, but presumably from the U.S. – that had been stolen from a law firm and to a lesser extent from a fiduciary firm. The journalist’s accomplishment was to serve up the data as desired by the source and to instigate a public scandal. The fact that basic principles were ignored didn’t enter the equation (see point 7).
2. Many Inaccuracies
The investigation is burdened with too many inaccuracies and irregularities to call the Paradise Papers a sensational reveal. The fact that tax optimization – which is perfectly legal – and tax fraud – which crosses the line into the criminal – are treated as one and the same belies a lack of understanding of the subject matter, and ultimately a lack of propriety. To be clear, every Swiss citizen who maintains a private pension account is optimizing their taxes, which is a savings method encouraged by the government. Under the ICIJ’s line of argumentation, this would make pension savers effectively criminal.
3. Wrong Approach
The ICIJ seem to have assumed that the credibility of the leak would be underpinned by its sheer volume. The consortium released names of a slew of prominent figures – including George Soros, Madonna, and Lewis Hamilton – who haven’t necessarily done anything wrong. The leak insinuates that to be referenced in the documents is already proof of tax wrong-doing. Statistically, a pile of more than 13 million documents will contain some misdeeds, but to tar everything in the leak with the same brush is reckless.
4. Double Standards
The journalists involved in the leak judged financial activity in tax havens as morally indefensible, and unlawful as a result. This is wrong, as long as the line of argumentation isn’t rooted in a legal basis. Depending on interpretations of right and wrong, what is amoral is not necessarily illegal. Many people believe that prostitution, for example, is wrong; nevertheless, it is legal in many jurisdictions. To equate morality with lawfulness is to apply a vague, do-good view which has no place in a proper inquiry.
5. Unequal Treatment
The quality of the Paradise Papers is cast into question by the major countries which don’t appear in the data leak. The partial view is reminiscent of historical misrepresentation more commonly applied by totalitarian states. Unlike the often legitimate denunciation of many tax havens, the papers are absent of any mention that the U.S. for example is an active participant in international tax fraud.
The American government refuses to participate in the automatic exchange of information and it tolerates mailbox subsidiaries which are frequently used for tax advantage if not evasion. U.S. prosecutors have shown little inclination to crack down on Miami, a tax haven.
The European Union also emerges from the Paradise Papers oddly unscathed, even though the bloc contains several countries which would fall under the ICIJ’s definition of tax optimization of even tax shelters despite data-swap agreements.
6. A Certain Sympathy
The fact that the revelations didn’t reverberate more widely or spark more anger may, paradoxically, also be due to a certain sympathy which many citizens harbor for international tax dodgers. Given the opportunity, rank and file citizens might make use of the same tax optimization methods – legally – as long as they feel they are being squeezed by their treasury at home.
7. Presumed Innocent
Last but not least, the editorial consortium behind the leak neglected an elementary obligation: the presumption of innocence until proven otherwise, and the right to legal representation.
Those mentioned in the papers were often not given the opportunity to respond to the allegations until after the leak was made public. The ICIJ’s heavy-handed methods, which naturally resulted in a more spectacular public splash, is dicey, especially by journalists who presume lawfulness and morality on their side.
Claude Baumann is the Founder and Editor-in-chief of finews.ch and finews.asia, which is based in Singapore. Previously, he wrote for «Weltwoche» and «Finanz und Wirtschaft». He also co-founded the publisher Nagel & Kimche and launched business travel magazine «Arrivals». Baumann is the author of several books on the banking industry.