If another lawyer lectures us on the difference between legal tax “avoidance” and illegal tax “evasion,” we will scream. If another ally of President Petro Poroshenko talks about all the good taxes paid by the billionaire oligarch’s business empire and how there are countless legitimate and legal reasons to register companies offshore, we will fall ill.
The Panama Papers revelations – and may God bless whoever acquired the documents from Mossack Fonseca, the Panama firm that specializes in registering firms in tax havens – show that the global economy is rigged.
What is the explanation for so many Ukrainian companies to register their businesses offshore? Many cite weaknesses in Ukrainian legislation. So fix them! The explanations hardly disquise the more likely reasons why so many Ukrainian oligarchs and uber-wealthy go offshore: to optimize, avoid, evade or, legally or illegally, otherwise simply not pay the full amount of taxes due to the home nation.
The Kyiv Post could not get an answer from the Roshen Corporation on the company’s effective tax rate, the only meaningful statistic on whether a fair share of taxes is being paid by the president’s company. It’s a private company and the information is private, a company spokeswoman replied in refusing to divulge the information on April 7. That might be acceptable for another company, but not the president’s company, when the public deserves answers about the taxes paid by his business empire. Instead, Roshen decided to selectively tout its tax record.
If everything was on the up and up, as the president claims, then why did it take a massive leak of documents to disclose the set-up? We hope we’re wrong, but our guess is that Prime Asset Partners, Ltd., of the British Virgin Islands, was set up to minimize taxes.
“A lot of this stuff is legal, not illegal,” U.S. President Barack Obama said of offshore tax havens, where an estimated 8 percent of the world’s wealth is parked. “And unless the United States and other countries lead by example in closing some of these loopholes and provisions, then in many cases you can trace what’s taking place but you can’t stop it.”
At the least, Poroshenko is setting a poor example by sneaking around while telling the nation he will combat oligarchs, offshore firms and tax avoidance that costs the nation up to $11.6 billion a year – 10 percent of its national income, 25 percent of its government budget. He promised the nation to sell his empire in 2014, but has concocted one unconvincing excuse after another — now it’s the process of pre-sale restructuring.
The fact that everybody tries to pay as little in taxes as possible does not excuse evasion at the top. The poor shopkeeper who keeps his meager income rather than pays it to an unaccountable and corrupt government is doing so for survival. The oligarch who does it robs the nation.
The nearly 25 years of tax dodging and misspent government budgets show every day in shortened lives, bad education, poor health care, dilapidated buildings, potholed streets and myriad other problems that Ukraine should not tolerate.
