Over the course of the past few days we have added new words to the lexicon “Panama Papers” – millions of documents leaked from a Panama law firm.
They suggest that hundreds, possibly thousands, had through intricate networks of business entities, succeeded in concealing the location, origin and ownership of a massive amount of assets – worth billions of dollars – out of the reach of tax administrations worldwide.
The roster of folks involved is interesting because of their collective high profile. The Icelandic prime minister stepped down as angry constituents let him know their feelings about his name being involved.
So what of the collateral consequences the Panama Papers will have on the “ordinary expat” – folks like you and I?
No U.S. expat worth his or her salt ignores U.S. Treasury efforts to identify those who have unfulfilled fiscal obligations. FATCA, initially seen by many as overreach by the U.S. in the fiscal sovereignty of other states, began yielding results: prosecutions of individuals involved in schemes to conceal assets and scores of “voluntary” disclosures.
Little by little, other tax authorities began understanding that the U.S. idea was one they could implement in their own way. The Organization for Economic Cooperation and Development has developed a common reporting standard for financial assets. Cross reporting of assets owned by nationals of member countries will begin, adopting the spirit of FATCA if not its form.
The Panama Papers provide fuel to the fire in the “war” against undeclared income and assets, suggesting there is far more out there to be “had.” The low-hanging fruit will go first. What will happen when all those are taken into account? Of course, hands are going to reach further and further up the tree. Suddenly, the ordinary expat may look like a Mossack Fonseca client.
Aristóteles Nuñez, head of the SAT (the Mexican IRS), stated his agency has begun to look at the named names. He said that offshore ownership of assets is not necessarily illegal, and I concur. But back to the ordinary expat. Could he or she expect a paradigm shift? Possibly.
We don’t know how much or how soon. One thing is for certain: the Panama Papers may alter the prospects of increased fiscal vigilance worldwide, even if we are not prime ministers, rock stars or tycoons.