The feigned excitement everywhere these days over the ‚revelations‘ about offshore tax evading companies in Panama in the media is easy to explain, but difficult to understand. Most commentators see the ‚scandal‘ as an opportunity to profilate themselves in the inequality debate. They bravely fight for the rights of the voiceless. But to understand the spellbound is something else. The same people who seem so terribly upset today found nothing else to do in the last three decades than to complain about high taxes for the rich and for companies. In a political campaign which had no equal, they succeeded in achieving their lofty goal. Now that the consequences of these policies are crystal clear, they act as if all hell just broke loose. Now they defend the poor from their high moral ground position.
There is not much that they had not hoped to get from these tax cuts. The rich would invest much more, they would create many more jobs and at the end everything would be so much better. Yes, we even engaged in a ‚competition‘ among nations. Who will cut taxes the most? Did not Germany massively cut its corporation tax because Slovakia and Ireland, among others, pampered companies with super-low tax rates?
Today, nothing much else is left than sheer hypocrisy. The soldiers of low tax present themselves in front of the microphones to say that ‚we did not mean it like this:‘ companies should indeed pay almost no tax, but it is unfair that they then go on exploiting the practically zero tax rates in Panama, the Cayman Islands, the Virgin Islands or in Ireland. Why is it unfair? When everybody declares for decades that low taxes for businesses are absolutely justified and necessary because this is only way in which companies can fulfill their social tasks, you cannot blame firms if they try to find the very lowest tax regime on the planet.
Nothing has been said yet about the role of the evil banks. The banks provide the rich and their companies with the services of finding the lowest rates of taxation or/and to channel money all over the world so that, at the end, no one knows anymore if taxes need to be paid or how much. Of course, this is all too true. For many banks and other financial institutions, helping rich people with money that they really do not know what to do with in order to make them even richer became their main and most lucrative business area: there is a myriad of tricks and refinements, a library of loopholes. No one needed a Panama-leak to realise this. Why are they all of the sudden so excited about?
Who told working people that they would have to provide for the future, save as much of their income on different accounts so that their money ‚works for them,‘ so that they will still enjoy an income when they are too old to work? Was it not a Red-Green Federal Government with a Labour minister called Riester who threw billions of tax payers money at a mischief that had been carefully worked out by the insurance industry? Even today there are still naive spirits who favour a ‚Germany Fund‘ because they think that this is the most efficient way to make money of ordinary people work: always looking for the highest return and – of course – the lowest tax rate.
Panama is everywhere because everywhere the same fiction is being chased after, the illusion that any amount of money that is provided to the capital markets will without any major problem yield a good return. This idea has always been wrong, but today even any halfway rational person can easily understand that the world economy does not function like this. The fact that all over the world the interest on safe long-term investments, especially government bonds, is zero or even negative unequivocally proves that the idea that ‘one can make his money work for himself’ is a pipe dream. Experts in banking and hedge funds who devise the most outlandish tricks involving the most outlandish countries are capable of performing the impossible for a while, but their services are not cheap. The fact that they are generally faster and smarter than national tax officials is not particularly surprising.
There are a few simple ways to correct this global madness. First you need to return to the normal taxation of businesses and citizens who earn far more than the average. Why is no one saying that the dramatic tax reductions for businesses and the reduction in the top rate of income tax have nothing, but then absolutely nothing, accomplished for society as a whole? Today, the ratio of investment to GDP is lower than it was in the years of high taxation. Why is it politically taboo to mention this?
Even more importantly: everyone within the federal treasury who is cheering because they fully support Schäuble’s black zero policy is more responsible for the ongoing global insanity of the competition for desposits than any peripheral country that tries to find an unoccupied niche somwhere in the tax cut competition of nations. This year, Germany will be the world’s largest net exporter of capital. The size of the German current account surplus for 2015 has just been officially confirmed. It is €257 billion. This is €257 billion that has been exported as a potential investment seeking capital. This year, it will be even more. This is the work of Wolfgang Schäuble, who has nothing else to do than to stubbornly add his austerity policies to the already pronounced austerity delusions of households and companies in Germany.
The outrage about Panama is cheap. Understanding the underlying relationships is obviously difficult. But those who understand it and still keep quiet are really responsible.
This article was first published in Die Tageszeiting (Taz). The original article can be found here: http://www.taz.de/!5289945/