The Pandora Papers’ Secret: Everyone Already Knows This Stuff

The media uses these leaks to push for tax hikes, which are bad policy—as is the existing tax code.

By Joseph C. Sternberg of The WSJ. Excerpts:

"The scandal is meant to be that you and I and millions of others pay our fair share every year while the mega-wealthy of the world somehow don’t. It’s an elegant theory with only two flaws. As reporters must grudgingly but prominently admit, precious little of the activity these leaks uncover is illegal. This is a hint that what look like “loopholes” may actually arise from tax provisions lawmakers concluded serve some broader policy purpose. And as the global-taxation-industrial complex never admits, the amounts involved are pathetically small.

Britons, for instance, are supposed to be outraged that former Prime Minister Tony Blair and wife Cherie effected a London property purchase by means of the transfer of an offshore holding company, saving them £312,000 (around $425,000) in land-transaction taxes. Big deal. Britain’s government borrowed £321 billion last fiscal year. If closing this sort of loophole in the tax code is the grand plan to pay the government’s bills, it’s not much of a plan at all.

Especially if doing so might come at considerable cost to the economy. Transaction taxes are economically inefficient. Many corporate transactions that might have some nexus to the property market are exempted from Britain’s land-transfer tax regime to prevent an inefficient tax from gumming up the market for corporate control. Allowing that market to function properly is far more important to Britain’s economy (and government revenue) than small bits of revenue “lost” on the land-transfer stamp duty. A good question for the activist class would be how much investment they are willing to stifle to close loopholes that serve important functions and won’t make a dent in government debt anyway."

"Having witnessed firsthand how much loophole-creating slicing and dicing of a modern tax code is required to permit an economy to function, why have they not long since simplified matters with flat taxes?

The scandal, if there is one, is that the political class is too ideologically or intellectually blinkered to have learned anything from their accountants after all these years."