Recent news are mostly filled with various critical messages regarding the most recent scandal and the biggest leak in history. Scrolling down through your online platform, or flipping through newspapers and magazines, the whole world is shaken by The Panama Papers.I have to admit that the first time this scandal was released, it was an astounding report that catches public attention. Yet, we are too focused on the hype of this scandal instead of how it might affect future prospects of our country. So, what now?
Briefly, The Panama Papersscandal is a journalistic leak of 11.5 million documents from a Panamian law firm named Mossack Fonseca, and obtained by German Newspaper called Sueddeutsche Zeitung.After it was obtained, then the documents were shared with an organization called International Consortium of Investigative Journalists (ICIJ) for further investigations. ICIJ decided to work with various journalists all over the world in aim to make this case known worldwide.
Mossack Fonsecathemselves is the world’s fourth biggest offshore law firm, which provide services for their professional clients such as; commercial law, trust services, investor advisory, international business structures, intellectual property protection, and maritime law services. The “services” they provided are actually the world’s main concern as Mossack Fonseca’s clients are powerful people including heads of state and politicians all over the world. Usually, these clients translocate their assets to Panama in avoiding taxes (Tax Evasion), by the fact that Panama is a Tax Havencountry. Although, it does not mean that those clients who translocate their assets to Panama are doing illegal financial activities, yet it is still possible that they may get involved other forms of illegal activities. Therefore, to respond this issue, there are several points that the authorities should be more focused on.
First, government agencies should concern about where the assets came from and what it is used for. Since the reason behind offshoring assets are not mainly because of tax evasion only, people involved in an illegal activity, lets say; corruption, usually move their assets to a tax haven country with the purpose of money laundering by the name of shell companies. To avoid obvious transactions, corruptor can use the benefit of buying bearer shares and bonds, as ownership of such securities is transferable. There are several potential financial illegal activities, such as; money laundering, bearer shares and bonds, and creating shell companies. With all of these “opportunities” there are various manipulative actions that these clients could do.
Second, looking through the point of view of an observer, this scandal has the power to influence public perspective. Government should maintain public’s trust by being stronger than the powerful names on the list. Without realizing, observing how politicians and powerful people involved in this scandal makes us think negatively towards them. Especially, in matter of Tax Evasion, we might think that it is not fair for those who own millions of assets but not paying taxes in contributing their part for the welfare of society. While instead, citizens who own standard amount of savings are paying taxes regularly. At this point, it is important for government in considering penalty or “payback” that fulfill public’s expectations and most importantly, support the welfare society.
In case of Indonesia, there are several names of Indonesia’s politicians and powerful people mentioned, in which on the 8th April 2016, President Jokowi ordered Indonesia's Finance Minister Bambang Brodjonegoro to conduct further investigations on the financial activities of these names. President Jokowi recently also proposed Tax AmnestyBill as a soon-to-be implemented solution for Tax Evasionmatter in Indonesia. Tax Amnesty is the opportunity for tax evaders to come clean and repatriate their undeclared assets by paying a defined amount of tax rate.
Third, government should be aware of the destruction of public moral hazard. At this point, we might think that Tax Amnestyseems to be a fair solution, yet the effectiveness of this solution is still ambiguous and questionable. On a side, it is a fair solution as the tax evaders are paying back what they have been running from, however come to think of it, this proposed solution may only resolve in short-term period. Tax Amnesty as a proposed solution is categorized as way too simple, easy, and compromised, which does not perform as a penalty that may successfully encourage tax evaders to stop avoiding taxes. It is possible that the tax evaders are thinking oppositely instead, as if it is fine for them to pay taxes of their assets later and this is what I meant as a destruction of public moral hazard.
Fourth, government agencies should consider several alternative solutions. Looking through regulations imposed by other countries such as America and India, they are implementing different regulations compared to Indonesia in avoiding tax evasion. In America, citizens are not required to pay taxes of their assets yet they only supposed to pay income taxes. With this regulation imposed, American citizens feel that their country is already a Tax Haven for themselves. This is why there are only few American names appeared in the Panama Papers compared with the amount of names from other countries. Meanwhile, India allowed individuals to do financial outflow for any purposes (such as: shares, property, donations, etc.) only up to a certain limit, which is $250,000 per year. They also implemented restrictive regulations for Indian residents in setting up companies abroad, especially in tax haven countries. These regulations are imposed with the expectation of maintaining “balance” amount of inflow and outflow of India’s financial system.
Other than that, on the 20th April 2016, Indonesia has just recently come up with a proposed solution in addition to Tax Amnesty.In considering the effectiveness and fairness of a solution, Indonesia came up with a plan of asking tax evaders to bring back their assets and the authorities will charge apart of its asset (with a defined and compromised amount) to fund economic development needs such as; infrastructure, education, etc. Yet, tax evaders are not required to pay Tax Amnestybill, as their “payback” is charged within their contribution to the development.
In conclusion, we can see that the presence of The Panama Paperspotentially influenced a significant impact towards the future prospect of global economy. Yet most importantly, we as Indonesian and thoughtful readers has to view this issue through a more responsive side. Through all the points I have explained above, we and especially the authorities of Indonesian government should focused on what Indonesia should do now to respond The Panama Papersscandal.
