A look into Offshore Shell Companies and Tax Havens
With many corporations and business executives looking to maximize profits and cut expenses, at times the idea of business ethics comes to question. With the purpose of analyzing and ensuring ethical and moral practises amongst business professionals with the use of laws, guidelines and regulations, business ethics are from time to time disregarded by companies through financial loopholes, which becomes damaging to society.
With the recent conclusion of the Democratic Nominee Race, part of Bernie Sanders’s campaign as a “Democratic Socialist” was his boldness around business ethics. An article published in April 2016, by Vox – Policy and Politics explains one example that Sanders brought up in his presidential campaign on the use of the Cayman Islands and Panama as offshore shell companies and tax havens. Both countries are two that have weak or non-existent regulations for money travelling in and out of the country, and have virtually no income, property or corporate taxes. Due to these regulations, wealthy corporations and politicians have used it to their advantage by moving large sums of money into offshore shell companies in these countries. Companies essentially stash their money in these hidden bank accounts, allowing them to hide assets, cover up scandals, and most importantly, evade taxes.
With the recent leak of the Panama Papers, it has been estimated that $7.6 trillion was stashed away in these offshore shell companies. Not only has the use of these offshore shell companies opened opportunity for business executives and politicians to scandalous activity, but it has allowed many wealthy corporations, including many American, to do as Vox describes, “exploit loopholes to minimize [their] tax bill”.
This certainly is an ethical infringement, as a large portion of America’s tax revenue is being evaded by this financial loophole. This keeps wealthy business executives stay wealthy, while many social programs and services are inadequately funded and unable to help the remaining American population. As Matt Gardner, a Washington tax analyst described, “the heart of our social contract is tax revenues”, emphasizing the negative impact that the manipulation of this loophole has caused on American society.
However, due to the nature of the offshore bank accounts and trade agreements with these countries, it makes it nearly impossible to monitor. Since the government have limited ability to intervene, and as long as American corporations are kept wealthy, there really is no incentive to act ethically at all. Ultimately, the issue for today’s economy and society is the expectation for people to have the integrity to do what’s right for all people, and not just their wealthy associates.
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Works Cited
Business Ethics, Investopedia http://www.investopedia.com/terms/b/business-ethics.asp Accessed Sept 12, 2016
Guy Murfey, The Rise of Bernie Sanders and What it Says About Business Ethics, 8 Feb 2016, Kogan Page, https://www.koganpage.com/article/the-rise-of-bernie-sanders-and-what-it-says-about-business-ethics# Accessed 12 Sep 2016
Matthew Yglesias, Panama Papers: a massive document leak reveals a global web of corruption and tax avoidance, 3 Apr 2016, Vox – Policy and Politics, http://www.vox.com/2016/4/3/11356326/panama-papers Accessed 12 Sep 2016