Crack down on offshore tax scams

Partner of the Panama-based law firm Mossack Fonseca, Ramon Fonseca speaks during an interview at his office in Panama City, Thursday, April 7, 2016. Fonseca, a co-founder of Mossack Fonseca, one of the world's largest creators of shell companies, said that documents investigated by the ICIJ were authentic and had been obtained illegally by hackers. (AP Photo/Arnulfo Franco)

In the novel and film “The Girl with the Dragon Tattoo,” a young woman hacker uses the Internet to help solve a murder — and raid a Caribbean bank account.

As life imitated art, anonymous hackers have created a big story of their own. In 2014, they spirited documents from the enormous files of a Panamanian law firm that served a large and diverse clientele via offshore banking centers in the Caribbean.

Those self-described hackers provided their findings to an international consortium of journalists from many publications, and the preliminary results were made public this week.

The exposure, albeit through dubious means, has generated broad outrage. It offers evidence of how wealthy individuals in numerous countries seek to avoid taxes, increasing the tax burden on others. The controversy should lead to an international effort to end offshore banking haven secrecy, deter tax evasion and bring violators to account.

It should be also recognized that offshore banking can serve legitimate purposes. And the exposure has evoked outraged protests by the Panamanian law firm whose records were hacked. The firm, Mossack Fonseca, insists that its activities were legal.

Meanwhile, there have been denunciations of the leaks by the Russian and Chinese press as the work of enemies, and embarrassment for those whose offshore banking activities have been brought into question.

There are reportedly 11.5 million documents covering transactions involving 214,000 different entities over 40 years. That is 10 times larger than any previous major leak.

Public release of selected information from the files has led to one immediate political consequence, the resignation of Iceland’s prime minister.

Bombshell news reports on the so-called “Panama Papers” cited offshore banking activities connected to 11 other current or former heads of government and approximately 60 relatives of high ranking politicians, including the president of China.

It was reported that the business of creating offshore accounts for Chinese clients was so lucrative that the Mossack Fonseca firm reportedly did much of its business through a Hong Kong office.

The BBC, one of the media organizations given time to review the data before release, reports that the files also give details of a suspected money laundering scheme involving close associates of Russia President Vladimir Putin amounting to more than $1 billion.

Iceland Prime Minister Sigmundur Gunnlaugsson resigned following the disclosure that he had an undeclared interest in an offshore account belonging to his wife, though he insisted that he had broken no laws.

British Prime Minister David Cameron has been embarrassed by disclosure that his late father used an offshore account, though there has been no allegation of tax evasion or other illegal purpose.

With the potential to expose corruption and give rise to many lawsuits, the stolen files will require time for full — and fair — evaluation.

Meanwhile, it’s worth noting that Mossack Fonseca is reportedly only the fourth largest Panama law firm engaged in setting up offshore accounts.

In 2012, it was estimated that money deposited in all offshore bank accounts — sometimes held by companies that exist in name only to hide true ownership — was as much as an astonishing $31 trillion worldwide. That’s twice the size of the U.S. 2015 national income as computed by the Commerce Department.

Authorities in the U.S. and beyond should look closely into the detailed reports about the “Panama Papers,” and the questions they raise about offshore tax havens in general. An international crackdown could be in order.

Judging from the initial reaction out of China and Russia, however, cooperation from those quarters may be too much to expect.