At a meeting on Brexit and the law last week in Dublin, former attorney general Paul Gallagher SC emphasised the potential for instability in the UK's referendum on leaving the European Union.
What if one of the largest economies in Europe was to pull out of such a project as the EU? Would others follow suit, or threaten to do so unless they received whatever was on their national demand wish list? How would this affect an already very fragile world order? Are we back in the 1930s, Gallagher asked, sleepwalking towards disaster?
Up until the financial crisis erupted in 2008, the US Federal Reserve believed the global financial system could cope with whatever difficulties the system threw up. Europe dealt with the crisis while maintaining social cohesion, he said, but the "outcome was not inevitable". Gallagher's comments are interesting not least because he was attorney general in the government in which his friend, the late Brian Lenihan, served as minister for finance, and which was at the coalface when the European crisis was at its most intense. But public finances being used to bail out the banking system has left a bad taste. Mixed with other factors, such as stagnant wages for lower-paid people in much of the West, demographic developments in much of continental Europe that are creating massive pressures for national exchequers, and a host of other pressure-creating factors, there is a strange mood abroad. People feel the system is not delivering for them, and that the level of unfairness is unacceptable.
The lengthy statement issued on Friday by the anonymous source behind the massive Panama Papers leak, fits snugly into this narrative of a system that is not working and is showing signs of instability.
“Income inequality is one of the defining issues of our time,” he, or she, said. Despite all the debate and analysis, the system appears helpless to stop its steady growth. The leak suggests an answer to why this is so, the source said: “Massive, pervasive corruption.”
It's a leak that exceeds in size that of Wikileaks, Luxleaks, and Swissleaks combined. It contains four decades of the files of the Panama-based Mossack Fonseca law firm, one of the world's largest suppliers of offshore services. The data was leaked to Suddeutsche Zeitung, which in turn shared it with the International Consortium of Investigative Journalists (ICIJ), in Washington DC, which in turn organised the Panama Papers project involving media groups around the globe, including The Irish Times. Since the publication of the Panama Papers stories in early April, according to the source, the prevailing media narrative has focused on the scandal of what is legal and allowed. What is allowed, the source said, is indeed scandalous and must be changed.
One of the key aspects of this legal activity is the use of companies in offshore jurisdictions so that the beneficial ownership of assets is not publicly available information. Even with access to the Mossack files, it is often not possible to discover who owns the companies that the correspondence in the files is discussing. There is now an international clamour to end the process whereby ownership can be hidden in such ways. The offshore entities involved are frequently in British Overseas Territories such as the British Virgin Islands or the Bahamas, but they can also be in places such as Nevada or the Cook Islands. The “overseas” business is a growing one.
Later today the ICIJ, and its media partners including The Irish Times, will publish the company names contained in the Panama Papers, along with shareholders and beneficiaries. The documents contained in the leaked files will not be published. What is being published is the type of information that would normally be disclosed in "onshore" public registries. Inclusion in the lists does not imply any illegality and is not intended to. But it is a fact that the people who make use of legal, if secretive, offshore services are doing so alongside not just multinationals such as Google, Facebook and Microsoft, who use tax havens for their tax planning structures, but also kleptocrats, sanction busters and associates of the rulers of some of the most corrupt regimes, as well as more common-or-garden tax dodgers.
Tax authorities around the globe are anxious to get their hands on the data. An unusual meeting of tax authorities took place in Paris in the wake of the disclosures, and an OECD-organised Panama Papers Network of tax administrations has been established. The Revenue Commissioners is part of the group.
Threats The Irish Times has told the Revenue it will not be acceding to its request to hand over the files. Similar requests have been made around the globe to the various media groups involved in the project, with threats of legal action being used in some cases. All have to date refused.
In Canada the tax authorities have gone to court and secured an agreement from the Royal Bank of Canada that it will hand over 40 years of files relating to offshore companies. Some of this information may in time be shared with other tax authorities.
The Revenue Commissioners, in a statement to The Irish Times, said it was participating in the OECD-organised Panama Papers Network of tax administration. "We have sought access to the papers concerned directly and through the network. We understand information will be published by the ICIJ and we will continue to systematically address information regarding Irish connections to the firm [Mossack] as it is disclosed, using our investigative powers as necessary."
One of the main points made by the anonymous source behind the leak is that, in his or her view, the democratic world, its legislatures, tax authorities, media groups, and legal systems, are failing in the battle against growing inequality.
Inequality is reaching levels of “economic slavery”, with secrecy being used to keep “the slaves” unaware of both their status and their masters “who exist in a world apart”.