President Obama on Tuesday made the case for tax reform by citing the Panama Papers.
Obama mentioned the massive leak of documents detailing the offshoring of assets by wealthy and powerful people from around the world, when touting a new Treasury Department enforcement policy.
The initiative is aimed at preventing future corporate inversions–moves by US-based multinationals to shift operations on paper overseas specifically to reduce tax burdens.
“In the news over the last couple of days, we’ve had another reminder, in this data dump coming out of Panama, that tax avoidance is a big global problem,” the President said.
On Sunday, the first of the Panama Papers stories were published around the world. The articles were based on a 2.6-terabyte leak to a German newspaper called Süddeutsche Zeitung. The disclosure came from the records of a Panamanian law firm named Mossack Fonseca. Süddeutsche Zeitung shared the treasure trove with hundreds of partners around the world, through the International Consortium of Investigative Journalists (ICIJ) and the Organized Crime and Corruption Reporting Project (OCCRP).
The first of the stories exposed the obscuring of wealth by world leaders and some of their closest associates. Named directly thus far in the cache have been Ukrainian President Petro Poroshenko and now-former Icelandic Prime Minister Sigmundur David Gunnlaugsson. On Tuesday afternoon, Gunnlaugsson became the first casualty of the dump, after being forced to resign by a massive demonstration and a party revolt.
“It’s not unique to other countries because there are folks here in America taking advantage of the same stuff,” Obama noted during his press conference.
Shortly after, the first story in the series implicating an American institution was published by the OCCRP. Contained in the papers, it said, were names of “characters who used offshore companies during or after their work as spy chiefs, secret agents or operatives for the CIA and other intelligence services.”
“The documents also pull back the curtain on hundreds of details about how former CIA gun-runners and contractors use offshore companies for personal and private gain,” OCCRP noted.
One of three CIA-linked individuals listed was Farhad Azimi, an Iranian-born American alleged to have played a role in the Iran-Contra scandal. In 1999, notably, Azimi also did fundraising for Hillary Clinton’s Senate campaign, hosting “her and 40 guests for a private dinner that raised $2,500 a head.”
On Monday, Treasury Secretary Jack Lew announced a new enforcement policy aimed at stopping tax inversions. The new initiative could call into question the viability of a $150 billion takeover of Allergan, an Irish drug company, by Pfizer. The New York Times’ Dealbook noted that “[s]hares in Allergan tumbled 21 percent in after-hours trading following the Treasury announcement.”
Because the initiative got little play in the mainstream media, President Obama decided to show up to Tuesday’s press briefing to tout it.
“This got some attention in the business press yesterday,” he said, “but I wanted to make sure we highlighted the importance of Treasury’s action and why it did what it did.”
Obama also noted that “only Congress” can end inversions on a permanent basis.
“I hope this topic ends up being introduced into the broader political debate that we’re going to be having into election season,” he mentioned.
