With all the anti-one-percenter rhetoric and tax-evading-evil-doer narratives spewing forth from the mainstream media mouthpieces of the establishment since The Panama Papers were exposed for all to see, it may come as a surprise to some to find out which cohort of the elites are the most populous among the tax-haven-creating documents...

The Politicians!

Source: WikiData

Which makes us wonder if this leak was indeed a plot to blackmail/expose the West's ruling class?

Nevertheless, one thing is very clear, as Luis Guillermo Valez explains via PanamPost, officials are hypocritically denouncing the strategies they practice themselves...

Why can’t tax evasion be a legitimate form of self defense? In some countries and circumstances, it is.

Despite what politicians want us to believe, tax havens exist because some countries have been turned into tax hellholes by officials bent on “social justice” and “income redistribution.” Sometimes, those same politicians top the list of “offshore” account holders trying to evade taxes.

“The Wealth of Nations” by Adam Smith had something to say about this kind of government revenue, namely that taxes are a lesser evil overall than other forms of paying for public services.

But to prevent taxes from harmful excess, Smith left to posterity the four principles of good taxation, which have been almost completely forgotten by politicians concerned with legislating taxation. Here is Smith’s wise warning:

Excessive taxation is a powerful stimulus to evasion, so penalties to offenders grow proportionally to the temptation that causes it. Contrary to the principles of justice, the law first raises the temptation to infringe it and then punishes the violators.

And if corruption and overspending is added to excessive taxation, the motives for tax evasion are complete. Once again Smith:

In all countries where there is a corrupt government, and where there is suspicion that it incurs in great expense and government revenue is improperly used, very often these laws that protect contributions are little respected

In the 1970s, I met a Canadian man called Bryan O’Connor. He used to deliver pizzas in Toronto and always carried a little notebook in which he religiously wrote down all the tips he received in his work, preventing the risk of missing a penny in his tax return.

I’ve never met anyone else like Bryan. I think he and Immanuel Kant are probably the only people in human history who voluntarily paid all their taxes. I’m sure Bryan has.

Nor do I believe that Jesus Christ was completely honest when answering the Pharisees about paying taxes. He said “give back to Caesar what is Caesar’s.” After all, the man had left behind the honorable carpentry work and did not seem to generate any taxable income. That’s probably why he was defeated in the famous vote competing with Barabbas, who– weapons in hand – had rebelled against the ominous tribute of Imperial Rome.

Since ancient times people have rebelled against taxes. The Roman provinces were often faced uprisings against fiscal depredations and their leaders’ abuses. The peasant wars in Germany, of which Frederick Engels, Marx’s buddy, has left a vivid account were tax rebellions.

The French Revolution began as the uprising of the Estates General against taxes, demanding a cheap government. Interestingly, the twentieth century, which saw a rapid growth in the size of governments and taxes, was free of riots and tax rebellions. And not because all taxpayers behaved like Bryan O’Connor.

Panama Papers: What about Modern Governments?

Though no less rapacious than prior ones, modern governments are more tempered and have given up on the most ominous tax collection practices: murder and torture.

However, it is not shocking to the majority’s opinion that there are a few who punish tax evasion with imprisonment. This is the case of Mexico, Chile, and Peru, Colombia’s partners in the Pacific Alliance, and whose shameful example the Colombian government proposed to imitate in the last tax reform.

Everyone, from the Leviathan-worshipping economists, politicians, and political scientists who serve them, to journalists, tax attorneys, and the public opinion sees the evader as a criminal and the government that punishes him as the defender of society, no matter how corrupt and abusive it may be.

In illo tempore, the evader was seen as a hero who faced a thief state. The inverted values of current times have a background of hypocrisy that nobody can deny.

In almost all countries, legislatures who enact taxes are composed mostly of professional politicians who, by granting special benefits, want to keep lobbyists and wealthy campaign donors happy.

Interest groups and political operators are willing to grant each other benefits with the hope that the general coffers will bear the costs.

Everything is a bargaining of crossed interests leading to casuistical and tangled tax regimes, completely away from the predicaments of solidarity, equity, and efficiency which ultimately are no more than a cover more for private interests.

The economists, lawyers, tax experts, and other technicians who advise governments in the design of structural tax reforms – which are periodically announced but never arrive – are generally also company advisers and wealthy individuals looking to reduce their effective taxation rate.

The middle class defends itself by under-invoicing or non-billing and making up liabilities and expenses on their tax returns. The poorest, who usually only are reached by indirect taxation, join the noisy protests of civil servants who live from taxes and always receive the support of politicians competing for their votes.

That is the common background of what is called the state, from which everyone wants to get a lot and contribute little. But yes, everyone denounces tax evasion.

Governments around the world – in their relentless fight against the tax evasion problem created by themselves with their fiscal voracity and performance – have unseemly decided to form an international coalition against so-called tax havens, while those same officials seek shelter for their good or ill-gotten fortune.

This new and sinister Statist International will be a major threat to capital mobility and individual freedom. However, because supposedly the offshore world only affects the rich, everyone applauds in a universal expression of envy and hypocrisy.

The problem of national and international evasion is not resolved with the creation of a universal tax police. Small, moderate, simple, and austere governments and fiscal systems adjusted to the four rules of Smith are the best antidote against tax evasion.

But in the current state of public opinion where people accept and demand – as Walter Lippmann would say– a large government that administers their affairs for them instead of a government that administers justice among men who conduct their own affairs, it is at best an anachronism to invoke the wise old Smith.