David Lerner Associates: The Panama Tax Evasion Scandal
Financial news has been abuzz this past week with the revelation of leaked documents, dubbed “The Panama Papers,” detailing a network of banks and law firms that help many of the world's most powerful people — politicians, criminals, athletes, magnates, celebrities — hide money in offshore accounts, according to a coalition of investigative reporters.
This may not be as big a surprise as one might think. Rebecca Wilkins, a senior counsel for the non-partisan group Citizens for Tax Justice, spoke out about this issue, along with Sen. Bernie Sanders in 2011, when a Panama Free Trade agreement was under consideration.
“A tax haven… has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of noncooperation with other countries on exchanging information about tax matters,” she told the Huffington Post in 2011. “Panama has all three of those… They’re probably the worst.”
At the time, there were other warnings that the Panama trade deal would open up the possibility of tax evasion on a massive scale. Many other watchdogs called on Barack Obama and Hillary Clinton, then Secretary of State, not to pass the free trade agreement that had originally been negotiated by the Bush administration, the International Business Times noted.
This could prove to be a problem for Hillary Clinton as the presidential race marches on. She was on record as praising President Obama and the agreement at the time in a statement she released on the Department of State official blog.
That statement reads in part, “This President has gotten trade policy right. These agreements, made better at the President's insistence, will strengthen and expand ties with strategic partners in Asia and Latin America even as they support tens of thousands of jobs here at home.”
While the scandal continues to swirl around international public figures and though it is as yet unclear whether any crimes will be pursued by the appropriate justice systems, the lesson here is clear — there are legal ways to mitigate tax burdens, investments being one of them.
An investment strategy or an estate plan, carefully structured by an experienced professional, can help with reducing the amount owed to the government. And while it’s not the same as avoiding taxes altogether, it is, however, legal. That’s worth keeping in mind.
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