Politico reports: The Panama Papers sent ripples across the globe Monday after revealing that 140 politicians from more than 50 countries, including Russian President Vladimir Putin and Iceland President Sigmundur David Gunnlaugsson, were linked to offshore accounts set up by the Panamanian law firm Mossack Fonseca.
Despite its breadth, the scandal so far has barely touched American individuals and companies. There were no mass protests, as occurred in Iceland where protesters demanded the resignation of Gunnlaugsson; no U.S. leaders were forced to deny accusations of tax evasion as Putin did.
How have Americans so far escaped the biggest leak of financial data of all time? It’s not because wealthy Americans don’t use offshore bank accounts to avoid U.S. taxes: they do — to the tune of $1.2 trillion in 2014, according to one estimate. Some professors have suggested that Americans may have disguised their accounts at Mossack Fonseca behind another party. But there’s also a more structural answer, tax experts say — one that has to do with shifts in global financial policy — and, to an extent, taste.
Tax evasion overall is a far larger problem in developing countries, where norms around paying taxes are weak and rules designed to stop such evasion are ineffective. And when wealthy Americans do want to evade taxes, they turn to Bermuda, or the Cayman Islands, or Singapore. They don’t park their money in Panama. [Continue reading…]