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News > Ecuador

The Fight Against Corruption Involves Tackling Tax Havens

  • Citizens protest against tax evasion, Brasilia, Brazil, Oct. 13, 2021.

    Citizens protest against tax evasion, Brasilia, Brazil, Oct. 13, 2021. | Photo: Twitter/ @DrAlakbarov

Published 9 December 2021

On the International Day Against Corruption, Latin America recalls recent high-profile cases of tax evasion, a common practice among politicians and businessmen.

The United Nations General Assembly (UNGA) designated December 9 as the International Day Against Corruption to commemorate the convention on this issue that entered into force in 2005. In contemporary societies, however, corruption is a public problem that is not reduced to the delivery of bribes to officials but encompasses multiple forms.


Latin America Must Get Rid Of Colonial Vestiges: Social Leaders

One of the most serious of them is tax evasion, a common practice among Latin American businessmen and politicians. Some recent facts about it are summarized below.

The Panama Papers

In 2016, the International Consortium of Investigative Journalists (ICIJ) revealed confidential documents from the Panamanian law firm Mossack Fonseca. Known as the "Panama Papers," these documents uncovered that former Argentine president Mauricio Macri founded the Fleg Trading LTD offshore company in the Bahamas.

"When Macri declared his revenue to swear-in as president in 2015, he did not disclose his connection to Fleg Trading, whose profits he progressively saved in a bank account of the U.S. Merrill Lynch company," journalists condemned.

The leak also revealed that former banker Guillermo Lasso established at least 11 offshore companies in Panama. Before starting his presidential campaign in 2017, he moved his assets from this Central American country to South Dakota. Regarding this U.S. territory, which has become a tax haven for the world's super rich, Forbes recalled that over US$367 billion are managed in South Dakota through at least 62 trusts.

"The trust owners hide their assets and avoid billions of dollars in taxes... None of the trust owners — whether they are corrupt foreign leaders or U.S. billionaires — likely will ever set foot there. There is no residency requirement to create a trust in South Dakota. And there are few tax benefits for the state and little evidence that the trusts create jobs," it added.

The Pandora Papers

In October, the ICIJ investigation known as “The Pandora Papers” uncovered the secret financial movements of presidents Sebastian Piñera (Chile), Luis Abinader (Dominican Republic), and Guillermo Lasso (Ecuador), all of whom hid their assets in tax havens.

Before becoming Chilean President, Piñera was already one of the wealthiest people in his country. Much of his fortune was made in the 1980s when he created a credit card company and invested in the LAN airline, the football team Colo-Colo, and a television channel.

When he started his political campaign in 2010, he transferred his businesses to his four children to avoid possible interest conflicts. In year, his sons sold the mining company Dominga to Carlos Delano through a US$14-million agreement signed in Chile and a US$138-million agreement signed in the British Virgin Islands, which is a tax haven.

Delano paid the amount in three installments, the last of which was conditional upon the absence of environmental protection in the Coquimbo region. Since Piñera was already serving as President, he facilitated the operation of the mining company by leaving it outside the environmental protection zones.

Due to this revelation, the Chilean Lower House decided to open a political trial against Piñera. The initiative, however, was not approved by the Senate since most of its members belong to pro-government parties.

The Pandora Papers also revealed that Dominican President Abinader owns two offshore companies, Littlecot and Padreso, which he founded with a brother and a sister in Panama in 2011 and 2014, respectively. Abidaner alleged that he has such companies because the Dominican Republic did not have enough corporate laws for local companies to do business abroad until recently.

In 2021, the ICIJ investigation also expanded the information available on Lasso’s international operations since it revealed that he currently controls 14 offshore companies in which their relatives appeared as owners or main shareholders.

The Ecuadorian Congress convened Lasso to a plenary session to explain his current connection to such companies. This rightist politician, however, said that he will not attend the hearing because the Comptroller General already filed an investigation against him for this revelation.

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