300 Economists Sign Open Letter Against Offshore Tax Havens After 'Panama Papers'

Responding to "Panama Papers" economists say tax havens increase inequality

— -- More than 300 economists from 30 countries have written an open letter criticizing the continuing existence of tax havens, one month after the so-called "Panama Papers" exposed more than 200,000 suspicious offshore entities.

Countries with much lower tax rates for businesses or individuals, also known as tax havens, "serve no useful economic purpose,” the letter states, adding that “whilst these jurisdictions undoubtedly benefit some," they operate at "the expense of others, and they therefore serve to increase inequality.”

“Poor countries are proportionately the biggest losers,” the economists who signed the letter believe -- missing out on at least $170 Billion of taxes annually.

The issue of inequality was also raised by the anonymous source behind the Panama Papers. In a blog post on the Panama Papers website, he wrote:

Income inequality is one of the defining issues of our time. It affects all of us, the world over. The debate over its sudden acceleration has raged for years, with politicians, academics and activists alike helpless to stop its steady growth despite countless speeches, statistical analyses, a few [meager] protests, and the occasional documentary. Still, questions remain: why? And why now? The Panama Papers provide a compelling answer to these questions: massive, pervasive corruption.”

The Panama Papers contain some 11.5 million leaked files, which expose the dealings of a law firm in Panama called Mossack Fonseca that deals with the incorporation of offshore entities, according to the International Consortium of Investigative Journalists (ICIJ), the group behind the report. The files reportedly show that Mossack Fonseca worked with more than 14,000 banks, law firms and companies from 1977 through 2015 to create tax havens for the rich and powerful.

The most popular tax havens that appear in Mossack Fonseca’s files, according to the report, are the British Virgin Islands, the ICIJ states, while the second favorite jurisdiction was Panama.

While recommendations are not developed at length in the letter, it may put pressure on leaders ahead of The Anti-Corruption Summit in London on Thursday where Secretary John Kerry and representatives from 40 countries are expected to attend.

"Tax havens do not just happen," Jeffrey Sachs, director of the Earth Institute at Columbia University, said in a statement. "These havens are the deliberate choice of major governments, especially the United Kingdom and the United States, in partnership with major financial, accounting, and legal institutions that move the money."

"If the UK and US and the European Union as a whole decided on Thursday at the UK conference that enough is enough," Sachs told BBC radio 4 on Monday. "There could be a phenomenal change in a very short period of time."

Other signatories include the economist and best-selling author Thomas Piketty and 2015 Nobel Prize economics winner Angus Deaton.