The Panama Papers have dominated headlines around the world for the past couple of weeks, but am I alone in thinking the whole thing is a storm in a teacup?
I suppose the prime minister of Iceland would disagree. His departure from office is certainly a serious consequence for him and his country, but if the immediate fall-out is limited to a small island in the middle of the Atlantic with a population probably about as big as that of Deira in Dubai, then it is pretty inconsequential in the great scheme of things.
The other potential casualty, the UK prime minister David Cameron, appears to have weathered a storm that was generated by the political opportunism of enemies in politics and media. It turns out he never did anything wrong, apart from being comfortably well off.
Unless there is some really big revelation to come when the full squillion terabytes is made available, I think that will be the end of the political damage. If a politician is corrupt and dictatorial enough to have stolen billions from his people and stashed then in secretive Panamian trusts, he will not be inclined to take any notice of public outrage back home – if his citizens are even allowed to hear of his venality.
But what the affair has done is to focus attention on two issues of central importance to the UAE and the Arabian Gulf region: tax, and the offshore financial system. Policymakers here should welcome the debate prompted by the Panama Papers on these two matters.
I was annoyed to see, once again, the UAE being included in the lists of global “tax havens” trotted out after the Panama data was leaked. To group the Emirates together with the British Virgin Islands, or the Marshall Islands, as a secretive place where wrong-doers can hide their ill-gotten gains is to fundamentally misunderstand the nature of the financial system here.
The UAE is not a “tax haven”. It is a no-tax regime where rulers and policymakers have made the quite legitimate choice to allow citizens and residents to retain all their income.
The trade-off is that government and communal services have to be paid for in other ways, either out of private pockets or a government levy on services. But this is the choice people make when they come to live and work in the country. It’s a perfectly legitimate financial proposition, and far more just than arbitrarily taking money from your pay packet.
The UAE government has made it clear that, while some kind of sales tax is inevitable, it is extremely unlikely to interfere with the basic “social contract” by imposing income tax. Bravo.
The Panama Papers have also highlighted the governance of offshore financial centres, and the UAE has a direct interest in this debate via its investment hubs in the Dubai International Financial Centre and Abu Dhabi Global Market.
But once again, it must be made clear these are not offshore hubs like the ones revealed by the Panama Papers, places for “shady men in sunny places” as they’re often described. Both are governed and regulated to standards as high as any in the world.
Rather than criticise the UAE, those outraged by the Panama revelations could learn a few lessons from the Emirates.
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