The Panama Papers show us, once again, that capitalism is a system of absolute greed. It is a system where capitalist governments help their mates to hide their income and wealth while all the time businesses pretend they are paying their “fair share” of taxes.

The 11.5 million leaked documents from Mossack Fonseca contain details of the 14,000 clients of the Panama-headquartered company and the 220,000 shell companies it has set up for them in tax havens around the globe.

Why tax havens? Not only do these countries have no or low tax rates, they also have secrecy provisions which protect the income and assets of wealthy individuals and companies from the prying eyes of state bodies like tax offices and company regulators.

Shell companies mean that the ostensible owners of the companies are often front men and women for the real owners, or are companies whose ultimate owners are untraceable. One senior tax officer many years ago summed up tax havens: they kill the paper trail.

Take Wilson Security here in Australia, for example. It runs the “security” on Australia’s asylum-seeker and refugee gulags, Manus Island and Nauru. It is owned by Wilson Offshore Group Holdings (BVI) Limited, a British Virgin Islands company set up by Mossack Fonseca to protect the true identity of the owners from any governmental scrutiny.

Thomas Kwok, one of those true owners, is in jail for fraud in Hong Kong. The other, his brother Raymond Kwok, was acquitted of similar charges. They had resigned as the directors of Wilson Offshore Group Holdings (BVI) Limited shortly after the charges were laid. Two companies, Winsome Sky and Harmony Core, replaced them as directors. The Panama Papers show the brothers control those two companies.

The reason for these arrangements? Wilson Security would not have won Australian government contracts if it knew that one of the real owners was in jail for fraud. By the way, Wilson Security also supplies the guards for various government bodies, including the Australian Tax Office (ATO).

It is not just Wilson Security. The ATO is investigating 800 Australian entities named in the leaked documents. The Panama Papers refer, for example, to Australian banks and BHP Billiton. Banks are involved because you have to get the money out of your jurisdiction and into the tax havens, often via more reputable tax haven countries that supposedly aren’t, like Singapore, Hong Kong, Switzerland, the Netherlands or Luxembourg.

Ripples

Iceland’s Prime Minister, in the face of big demonstrations, has gone on indefinite leave (resigned) after it was revealed his wife held shares through a shell company in the very banks her husband was negotiating a bailout with. UK Prime Minister David Cameron inherited wealth from his father whose Panama shell companies made tax free money for 30 years.

Australia’s current Prime Minister Malcolm Turnbull, one of Australia’s richest men, has what appear to be high earning investments in or through the Cayman Islands. He used to have an investment in a vulture fund (a hedge fund that buys distressed debt) based in the Cayman Islands. He sold out of that and bought into some hedge funds (unregulated funds that long and short the assets they hold).

The point here is not whether they are legitimate or not or that the investors pay their “correct” amount of tax. It is that they are part of the game the rich and powerful play to increase their individual wealth, and that the game is rigged in their favor by governments too afraid to crack down on “legitimate” investments in tax havens.

So the problem is the tax havens, is it? Before we get too carried away with colonial outrage, remember that many tax havens exist today as outposts or former outposts of empire set up to hide the money of British colonialists and capital. Some of them, like the British Virgin Islands, the Cayman Islands and Bermuda, are British Overseas Territories, still under some form of British control. At the center of these tax havens is the city of London, one of the main financial hubs of British, and indeed, global capitalism.

The U.S. has its own equivalent tax havens, in particular Delaware, where half of all Wall Street companies are incorporated for the low state taxes and slack company regulation.

So the traditional view of tax havens as sunny places for shady people is actually not correct, unless climate change has turned the city of London into a tropical paradise.

Tax Avoidance

These revelations are not new. They are the latest in a range of leaked and other information about the dark underside of capitalism. We have had the Luxembourg leaks, the Tax Justice Network which estimated that between $21 trillion and $32 trillion is held in havens (about twice U.S. GDP and five times the wealth of Australia), the TJN/United Voice report into tax avoidance by Australian companies, and the ATO release recently of tax data of public and private big business companies which shows that well over one-third pay no income tax and the majority pay less than the statutory rate of 30 percent. Apart from a bit of huffing and puffing, nothing has happened to address rampant tax avoidance by big business.

Big business tax avoidance gives the lie to the Turnbull mantra that we have to live within our means. This mantra will be the justification for the ongoing cuts to public health and education, to public transport and to social welfare. There would be no budget crisis if we addressed big business tax avoidance. Our mantra in response to Turnbull should be to tax big business and the rich.

Using tax havens and shell companies is part of a wider capitalist dynamic of hiding assets and arrangements from prying tax and other state eyes. It reflects the business view that any profit is “theirs,” rather than the reality that it arises from the unpaid labor of workers.

As Google Chair Eric Schmidt said about his company’s tax avoidance activities around the globe, activities which have seen it funnel almost $10 billion into Bermuda, saving $2 billion in taxes: “The company isn’t about to turn down big savings in taxes. It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”

The problem of tax avoidance is systemic. It requires a systemic solution, a democratic and socialist revolution to put the vast majority in control of the assets of the world and to organize production to satisfy human need, not to make a profit. In such a world we would not need tax havens and shell companies.

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John Passant is a freelance writer. This article was originally published by Solidarity.