Sorry, David Cameron–”private” offshore holdings are indeed a matter of public interest

Privacy isn’t going to cut it this time.
Privacy isn’t going to cut it this time.
Image: AP Photo/Geert Vanden Wijngaert
We may earn a commission from links on this page.

Political casualties are mounting fast in the wake of the Panama Papers—a historic leak of confidential documents from a Panama-based law firm that revealed connections between a number of world leaders and nearly 215,000 offshore shell companies.

The prime minister of Iceland has said that he plans to step aside “for an undetermined amount of time” after the Panama Papers revealed that his family owns previously-undisclosed offshore investments. The leak also implicated high-ranking current or former elected officials in countries including Russia, Argentina, Ukraine, Libya and Syria. Even David Cameron, the United Kingdom prime minister who has strongly condemned tax evasion, is facing scrutiny over a shell corporation set up by his late father.

Cameron’s spokeswoman responded to the controversy by arguing that Cameron’s family investments are a “private matter”—a characterization that has been greeted with derision by everyone from Edward Snowden to The Guardian. After all, the world’s democracies are only as good as the public’s faith in their political and economic establishments. The opacity of Cameron’s finances now calls that public faith into question.

There are clear, practical reasons to worry when elected officials have offshore accounts. For one thing, their political decisions may be influenced by financial interests that are hidden from the public eye. Critics argue that the shell company owned by Icelandic prime minister Sigmundur David Gunnlaugsson, for example, disguised a conflict of interest related to the country’s failed banks.

Moreover, financial secrecy is a breeding ground for all manner of illegal enterprises, from political bribes to tax evasions to money-laundering by terrorist organizations and drug lords. In the US, shell corporations have also been used to circumvent campaign finance laws by routing political contributions through untraceable sources.

It’s likely that the offshore income of the Cameron family has nothing to do with any of these unsavory activities. But the salient point is that we have no way of knowing. The veil of secrecy over shell corporations makes it impossible for British citizens to know whether Cameron is telling the truth, and therein lies the rub.

There is a simple solution to this problem: Sunlight. Right now, lax disclosure laws in many countries make it easier to set up an anonymous shell corporation than it is to take out a library card. This must stop. At a bare minimum, tax administrators and law enforcement officials should have easy access to information on the ownership of all companies incorporated in their jurisdiction. Better yet would be to make this information known to the general public around the world.

This change would also help to restore general public trust in elected officials. The Panama leaks confirm what many ordinary citizens around the world fear: their government’s institutions have been hijacked for the personal benefit of a few well-heeled individuals, and the giant corporations that can afford to buy access to special favors. The hidden accounts of Cameron and other politicians are a potent symbol of their elite privilege.

An Oxfam report (pdf) released earlier this year highlighted the growing income divide between the global elite and the rest of the world. The report found that the top 1% of the global population now has more wealth than the rest of the world combined. The report further found that many wealthy people use an elaborate system of tax havens and wealth managers to shield their money from taxation. In total, the study found that the world’s richest individuals are holding $7.6 trillion in offshore accounts.

Citizens of all nations suspect that world leaders are gaming the system. The Panama papers suggest they are right. If our politicians want us to trust them, they’re going to have to earn our trust back first.