April 5, 2016
What is the connection between the terrorist attacks in Paris and Brussels and the huge size of the tax-avoidance industry, as illustrated by the recent publication of the “Panama Papers” ?
On a superficial level, none. In actual fact, the exponential proliferation of illegal activities – the drug and arms trade, the rapid multiplication of criminal networks, the smuggling of refugees and, ultimately, terrorism in the Western world – has everything to do with the financial and logistical incapacity of states to collect revenues in order to police their neighbourhoods or their internal and external borders.
For almost two decades now, conservatives have imposed on most Western economies a “small government” agenda followed by drastic budget cuts. This has had the effect of rendering formerly powerful Western states defenceless against all sorts of illegal trafficking, criminal networks and now against terrorists. Meanwhile, in order to get elected and stay in power, a good many centre-left parties have pushed a similar if not identical agenda. The consequences of such destructive policies are now clear for all to see.
The world-wide dissemination of the “Panama Papers” serves as comprehensive proof that the global business elites, political elites and nowadays even small-time investors have indulged in massive tax avoidance schemes that bleed their respective national treasuries dry. Governments in need have been forced to resort to borrowing and to reducing essential services – such as healthcare, education, police and even the military – in order to make up for the budget shortfall.
The extreme weakening of most Western states is ultimately responsible for fuelling the exponential growth of criminal and terrorist networks on a global scale. To give but a few examples, the German police is unable to defend its own population because its numbers have been reduced to a bare minimum in the past ten years; the Belgian secret services lack the manpower to keep tabs on jihadis in the country; the French legal system lacks sufficient personnel and in some cases courts have to do without photocopying paper; EU agencies such as Frontex have less than half the manpower needed to stem the flow of illegal refugees; and everywhere in Europe the number of competent tax collectors and auditors is far below the minimum required to verify compliance with existing taxation rules for corporations and individuals alike.
Little wonder, therefore, that major corporations – but also politicians, smaller firms and individuals with money – have used to their advantage the dire predicament in which Western states currently find themselves.
Not to be outdone, criminal and terrorist networks have flourished to levels unforeseen and are putting public authorities on the defensive. A global war against them, however, would be fought in vain unless the community of states takes resolute action against tax evasion and fiscal havens.
But as matters now stand, Western states are not financially able to employ the number of people needed to detect, prosecute and punish tax fraudsters. Consequently, they are not in a position to give their bureaucrats the means to hire and train more police, judges and secret service agents, or to proceed to a wholesale dismantling of existing criminal cartels and terrorist networks.
