The most uplifting thing about the Panama Papers leak this week has been the media strategy taken up by Ramon Fonseca, one of the founding partners of the Panamanian law firm Mossack Fonseca, which is now at the centre of what is being hailed as the biggest financial leak in the history of journalism.
In an interview with the Financial Times, Fonseca dismissed the story as a "witch hunt," and gave his personal guarantee that "there is more dirty money in New York and London and Miami than in Panama." And then he said to Bloomberg News, "The cat's out of the bag, so now we have to deal with the aftermath." An aftermath that he doesn't believe will lead to "one single legal case," despite the leak implicating several world leaders (including the Prime Minister of Iceland, who has since stepped aside, at least temporarily), political despots, royalty, captains of industry, celebrities and professional athletes. As Fonseca outlined in his detailed explanation of how international tax law works, "It's like if you buy a car and sell it to a dealership and it sells it to a woman who kills someone – the factory isn't responsible."
He is right about one thing, of course, and that's the prevalence of so-called "dirty money" (also known as untaxed cash) in cities such as London, New York and Vancouver – or any of the metropolises where the world's small-but-powerful flock of global superrich have chosen to alight with all their trappings.
It's well known that wealth stratification is more extreme than ever before. A recent report issued by the charity Oxfam shows that half of the world's wealthiest 62 people own as much wealth as the poorer half of the world population.
In China, the biggest economy in the world, a third of the money belongs to just 1 per cent of the population. This group of financial stakeholders is, unsurprisingly, extremely canny when it comes to finding ways to protect and shore up its assets. A small city of people works in London's financial-services industry, many of them helping to do just that.
We've all read the articles and watched the salacious reality shows about how this other 0.0001 per cent actually lives. In Vancouver you've got the fuerdai, the second-generation offspring of ultrarich Chinese, recently chronicled in the New Yorker.
Here in London, there are the rich Saudis, Qataris, Russians and the newly minted African and Indian billionaires. There are neighbourhoods full of "iceberg houses" – enormous city mansions whose owners have opted to dig down and out, often several storeys down, in order to house their swimming pools, movie theatres, fur-coat storage units and luxury cars.
Most of the owners of these monoliths are people known as non-domiciled residents, or simply "non-doms" in London parlance. What this means is that they don't actually live here and are thus not required to pay tax on their worldwide income. In this way, cities such as London and Vancouver have become land banks, places where the global superrich choose to park their money, and sometimes their kids, by way of real-estate investments.
This is hardly surprising for anyone acquainted with the effect of high-end foreign investment in modern urban real-estate markets. This rise, combined with stagnant wages, has been squeezing out Vancouver's middle class for years. In London, I have seen many educated professional friends with good jobs (lawyers, journalists, architects and teachers) priced out of the outer boroughs. I have a friend who moved his family to Spain and commutes each week via easyJet to his architecture practice in London because that way his kids can have their own bedrooms.
When the superrich pounce on a particular city – even a specific neighbourhood – the effect can be felt for many miles around. The rapidly rising tide of real-estate values means that many people I know in London can boast that their homes "earned" more than they themselves did in the last year. It sounds funny but it means that previously affordable neighbourhoods can become out of reach to regular working people almost overnight.
Among the dwindling number of middle-class people who do manage to dig in their claws and stay in cities such as London and Vancouver, resentment of the tiny, but influential, billionaire club is becoming increasingly palpable.
For years we have been told by our politicians and business leaders that we desperately need the money of foreign investors to keep the wheels of industry churning. But in the historically seedy yet quickly gentrifying neighbourhood where I reside in North West London, businesses on the main street are struggling. Independent cafés, bakeries, clothing shops and hardware stores have all closed down in recent months, and what has opened in their place? Almost without exception: new real estate agencies and boutique interior-design firms. When your neighbourhood becomes so "desirable" that the only thing you can buy there is a $3-million house, you know that something's well and truly broken.
Given this state of affairs, I think the very least the superrich could do is pay their fair share of taxes. And by "fair" I don't mean "virtually nothing thanks to an offshore legal loophole." By fair, I mean at least the same percentage that everyone else pays. Given that Canada's highest federal tax bracket tops out at 33 per cent for earnings over $200,000, that doesn't seem too much to ask – especially if your take-home package was in the tens or hundreds of millions.
In short, I think Ramon Fonseca is wrong. If the woman driving the car ends up killing someone because there was a fault in the system to begin with, then the factory is most certainly to blame. Sue the manufacturer, I say. Or just take the factory apart and build a new one that actually works.
Editor's Note: The original newspaper version and an earlier digital version of this story incorrectly said a recent report by the charity Oxfam shows that half of the world's wealth is controlled by just 62 billionaires. In fact, the report shows the wealthiest 62 people own as much wealth as the poorer half of the world population. This digital version has been corrected.