The Panama scandal raises questions about the use of tax powers in Scotland too

Written by Mandy Rhodes on 11 April 2016 in Editor's note

The Panama Papers scandal may feel far removed but it opens up the opportunity for wider philosophical argument about wealth and poverty

The construction of the Panama Canal was one of the 20th century’s greatest engineering achievements, linking more than 160 countries and bridging the geographic gap that had for so long frustrated the smooth exchange of global trade across the two Americas.

But following last week’s leak of millions of documents from one of the world’s most secretive companies, a Panamanian law firm called Mossack Fonseca, we now have proof positive that the engineering Panama achieved wasn’t just reserved to building canals.

Over 40 years’ worth of files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax on an industrial scale. There are so far spidery links to at least a dozen current or former heads of state and government, including dictators accused of plundering their own countries. They reveal a suspected billion dollar money laundering ring involving close associates of Russia’s president, Vladimir Putin.


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The emerging scandal has already cost the scalp of Iceland’s prime minister, Sigmundur Davíð Gunnlaugsson, who stepped down amid absolute public outrage, nearing revolt, after the leaks showed he owned an offshore firm. And while he denies any wrongdoing, the people of Iceland, having endured economic hardship and worldwide humiliation in the wake of the financial crash, are in no mood for excuses.

The financial data further implicates hundreds of relatives and associates of political leaders in tax-dodging deals that include the prime minister of Pakistan, the presidents of Argentina and Ukraine, and our own prime minister, David Cameron, who has found himself at the wrong end of questions about his own late father’s financial arrangements.

Each day brings further shocking revelations with connections to this one company’s dealings, cutting right across celebrity, royals and high-profile business circuits, leaving the questions hanging about how much more is to come and from where.

Resentment over the behaviour of a financial and political elite has been simmering for years. The public outrage over the Westminster expenses scandal was only compounded by the excesses revealed by the financial crash.

And a Tory government’s attempts to plug a public sector funding gap by hitting the most vulnerable, while at the same time reducing the tax burden on the most wealthy has further exposed an anger over the realisation that normal rules of fairness do not always apply where the rich are concerned.

For 17 years the Scottish Parliament has been sheltered from having to make difficult decisions about tax raising. As a result, in straitened times, MSPs have been able to point south for someone to blame. But with new powers, our politicians become directly responsible for the financial decisions they make and the tax they take.

As a result, tax has become pivotal to this so-far uninspiring election campaign. And while most Scots appear to welcome the idea of ‘other people’ – richer people – paying more tax, polls show that they are less inclined to pay it themselves.

Nicola Sturgeon understands that and so far has played safe and to middle Scotland with the not entirely unjustified claim that richer Scots could flee. And the current Panama narrative certainly helps ring that true.

Labour’s Kezia Dugdale, meanwhile, has staked her party’s political fortunes on the principle that if you have the broadest shoulders, you can afford to pay more to help those with less.

She says the Panama leaks speaks to the same public fury as the Westminster expenses scandal. I’m not so sure, though I applaud her for conflating the raw feeling about tax dodgers with her own modest tax plans as well as on an announcement that her party will implement in full all 15 of the recommendations that came from the SNP’s poverty tsar, which, ironically, the party of government that commissioned the report has still to do.

What Dugdale has done is bring into sharp relief what the tax debate is about – the distribution of wealth.

The Panama scandal may feel, literally, far removed from our own shores but the exposure of such unfettered greed opens up the opportunity for that wider philosophical argument.

Poverty is Scotland’s national shame. It robs families of precious years of life, relegates the poor to the educational dustbin, and it pushes the deprived to the brink of destitution, criminality and despair. It wastes our most precious resource – our people.

Sturgeon clearly does care about this. She appointed the poverty tsar, moved to mitigate the bedroom tax, ended right to buy, introduced free school meals, and established, for the first time in the UK, a designated cabinet role in charge of the fair work agenda which, among other things, promotes the living wage, supports people with disabilities and others into work, and works with employers to create a more equitable workplace.

But poverty affects around a fifth of Scots and its effects encroach on every other government portfolio. It holds Scotland back and in any other context would be considered a national crisis provoking a high priority political solution. For some, that was what the referendum was all about.

And with just three weeks to go of this election campaign and the manifestos about to be published, it might be germane for Sturgeon to reacquaint herself with that map that on the eve of the 2011 Scottish election The Sun newspaper carried.

It showed the most deprived areas of Scotland, represented for generations by Labour MPs, coloured in red. That map was enough to make some voters, impatient for change, to switch and it is now yellow. But five years on patience can only be stretched so far.

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