Opacity

Part of the world's money does not hide in vaults. It hides in arrangements that are perfectly legal, or almost.

First place: tax havens. Territories offering very low tax, and above all discretion.

Islands, but not only. Some are in the heart of Europe, or in American states.

How much money sits there? Nobody really knows. An economist, Gabriel Zucman, estimated the share at about eight per cent of households' financial wealth.

Second tool: the shell company. A company with no office, no employees, no business. Just an address and an account.

Its point: a name appears on the papers, but it is not the real owner's.

Companies can be stacked: a company owned by another, owned by a foundation, in a third country.

At the end of the chain, one person. But to find them, you must trace each link back, in each country.

April two thousand sixteen. Journalists around the world published the Panama Papers.

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Eleven point five million documents, from a single firm that created shell companies for its clients.

Heads of state, sports stars, fortunes. Within days, Iceland's prime minister resigned.

But most of these arrangements were legal. That is the first twist: opacity is not always a crime.

Third tool, the most massive, reserved for multinationals: transfer pricing.

A multinational sells things to itself, between its subsidiaries. And it sets the price.

For the example: a product sold for one hundred euros, costing sixty to make, in a country where tax is twenty-five per cent.

Forty euros of profit, ten euros of tax. Simple.

Now, the brand belongs to a subsidiary in a country with no tax. It charges thirty euros for its use.

Local profit falls to ten euros, tax to two euros fifty. Seven euros fifty have vanished. The factory has not moved.

Profit is moved, not activity. And it is often legal, as long as the price looks defensible.

States reacted. Since two thousand twenty-four, in Europe, large groups must pay at least fifteen per cent, wherever they declare their profits.

And registers require companies' real owners to be declared. But public access to them was restricted by the European court in two thousand twenty-two.

The final twist: opacity costs those who cannot afford it. Tax unpaid by some is paid by others.

Remember the line: reducing your tax with the tools the law provides is a right. Hiding what you own is not.