Earlier this week the publication of stories, implicating
several world leaders – past and present, in secreting millions of dollars
abroad, brought into the full public glare the issue of off shore tax havens and
how the rich and powerful are playing by different rules than the rest of us.
The “Panama Papers” a treasure trove of documents, 11.5
million pages deep, that were leaked from a Panamanian law firm, Mossack
Fonseca, which evidently has distinguished itself in secreting money away from
the prying eyes of the public or the invasive fingers of governments.
Imagine you are a big fish who has “eaten” a big frog or
multinational company that just thinks they should not pay all the tax due to
them or an independent consultant, not only making tonnes of cash on the side
but who is keen not to make the sources of those incomes known. You get in
touch with a lawyer – in this case Mossack Fonseca and they create a shell
company domiciled in any number of tax havens around the world through which
you can receive payment or pay out of. In this way you can become an employee
of your shell company and receive payments in amounts that will not raise
eyebrows or buy assets as a foreign company.
So for instance I got paid $100,000 (I wish) for consultancy
work I did in Switzerland, I would ask my employers to pay into my offshore
account in the Bahamas, which account belongs to my company SmartBush Inc,
which every so often may send me a check or gives me free use of its credit
card or may buy property in Uganda or come in as an investor to buy privatised
companies for a song.
URA will not be the wiser as to my new income and I can
enrich myself to no end, tax free.
On the other hand if my employers had sent it straight to my
account here URA may claim as much 40 percent of my sh350m pay check or
sh140m!!!
Often times these shell companies are just a post office box
on a sunny island in the Caribbean, administered by a law firm which makes sure
it meets all statutory requirements in those jurisdictions.
The Tax havens have gained notoriety in recent years as
revelations of how much money they are turning over as a proportion of their
general economies are revealed.
Uganda only came up in the case of Heritage Oil & Gas, which tried to dodge a capital gains tax on the sale of its rights to
concessions in western Uganda. Domiciled in the Bermuda they tried to shift to
Mauritius – another tax haven, which has a double taxation treaty with Uganda.
A double taxation treaty shelters companies from suffering a
double taxation on their earnings in two different countries.
"It’s not to say that our big fish are squeaky clean, it’s just that the leak has been in only one firm. There are hundreds maybe even thousands of firms around the world offering these services...
The supporters of the tax havens argue that they have
legitimate uses in the protecting companies from bad regimes or as above
prevent businesses from being taxed twice or several other arguments, which
while they have a sound legal basis, they cannot stand up to higher moral or
ethical scrutiny.
Recent campaigns have fingered these tax havens as one of
the major reasons why wealth inequality is rising across the world. While us
mere mortals pay taxes on our incomes the very rich pay much less in tax as a
proportion of their income to the authorities, with the surplus used to enrich
themselves further.
There is very little people can do about it as it seems
everybody, who is anybody, is in on the action.
However, western governments are beginning to take the
scourge seriously as they realise how much in revenue they lose annually to
these tax blackholes, affecting their ability to provide services for their
people.
And finally about the Panama Papers how come the prominent
stories released are about Russian president Vladmir Putin and African despots?
