An academic who has already criticized how vast data hauls from offshore financial centers have been used to assault financial privacy takes aim at the "Paradise Papers" case.

Recently, the mass leak of private account data from the offshore law firm Appleby, a haul known collectively as the “Paradise Papers”, sparked fresh controversy about the proper boundaries between legitimate financial privacy and illegitimate secrecy. The “leak” of such data follows last year’s “Panama Papers” episode. As in that case, an academic who has eschewed the standard clichés about the issue is Philippe Braillard, emeritus professor, University of Geneva. Prof. Braillard is a strong defender of financial privacy, and argues that the way the data has been obtained is illegitimate. He also claims that certain organizations are hypocritical in their condemnation of so-called offshore centers. The erosion of privacy in financial matters was also the recent focus for a Breakfast Briefing as hosted by WealthBriefing, sister news service to this one, and is undoubtedly a topic of continued interest.

The editors of this news service are pleased to share these views with readers; they don’t necessarily share all views of guest contributors and invite readers to respond. This article first appeared in Le Temps, a Swiss publication. 

After the publication of the Panama Papers in spring 2016, the International Consortium of Investigative Journalists (ICIJ) has again put itself in the spotlight of the world’s media with the Paradise Papers. The consortium, which has more than 200 journalists in around 70 countries, is publishing information about shell companies and transactions it claims show aggressive tax avoidance or tax fraud, through more than 13 million confidential documents stolen from the prestigious law firm Appleby.

The use of shell companies for unlawful or criminal purposes – such as tax fraud, corruption, money laundering, organized crime and terrorist financing - is rightly condemned. However, we should also recognize that this vast media operation raises a number of questions and calls for several remarks. Most of the comments made at the time of the Panama Papers publication must be reiterated today.

Firstly, is it acceptable to expose indiscriminately all companies or individuals that have created or used a shell company? Although shell companies are sometimes used for unlawful and indeed criminal purposes that is by no means always the case. They are also used for perfectly lawful ends, particularly to meet the entirely legitimate need for confidentiality. In other words, although it is reasonable to criticize unlawful activities, this should not be used as an excuse to violate the privacy of all those using this kind of legal vehicle, branding them as criminals and trying them in the court of public opinion. It is likely that, as with the Panama Papers, the vast majority of cases currently being exposed by the ICIJ will prove to be entirely lawful.

Secondly, the work done by investigative journalists often shows a high level of confusion in terms of the concepts used and accusations made. There is a tendency to confuse tax optimization – often automatically described as “aggressive” – with tax fraud. The journalists also struggle to distinguish between law and morality. It may be shocking that, in a globalized world, very wealthy individuals or powerful multinational companies can use subtleties and loopholes in legal systems to avoid tax, while other citizens or companies are unable to do so. The situation raises the principle of “no taxation without consent”, which goes to the heart of democratic values. Although we can accept that not everything that is legal is necessarily moral, this should not cause all behavior that goes against our moral values to be deemed criminal. It is true that the legal system is supposed to reflect the values of society, although it does so imperfectly and often with a time lag. However, those values are no substitute for laws.

Thirdly, the ICIJ’s analysis of governmental responsibility in the cases it is uncovering is superficial and unconvincing. It highlights around twenty tax havens, exotic or otherwise, including Bermuda, the British Virgin Islands, Jersey, the Isle of Man, Mauritius and the Seychelles. While doing so, however, it overlooks the behavior of countries like the US which, while being a forceful critic of tax evasion, refuses to apply the global standard on the automatic exchange of information and hosts hundreds of thousands of shell companies, and so is one of the world’s biggest centers for tax evasion. The ICIJ also ignores the hypocrisy of the EU, which has announced plans to publish a tax haven “blacklist”. This list will in principle exclude all European countries, even though certain EU member-states promote tax optimization and indeed tax evasion through their legislation and behavior. 

Fourthly, the muddled and indiscriminate accusations levelled by the ICIJ – censuring the Queen of England, Bernard Arnault, Lewis Hamilton, Vladimir Putin, Justin Trudeau, Glencore, Apple, Nike, etc. – cast doubt on whether the organization really merits the epithet “investigative”. Does its approach not consist mainly of compiling stolen data, rather than any real journalistic investigation? By doing so, is the consortium not pandering to commercial pressure, yielding to the temptation to sensationalize?

Fifthly, the consortium’s members ignore fundamental tenets of the rule of law, such as the presumption of innocence and the right to be heard. They are presenting only the prosecution case, depriving the accused of the protections that should be available to any citizen.