Even though the “Panama Papers” revealed how Colombia’s elite systematically hid money from tax authorities in offshore tax havens, the same elite’s influence in media has prevented public outcry, according to the former tax chief.
According to Juan Ricardo Ortega, the former director of Colombia’s tax agency DIAN, the elite’s control over mass media and government institutions has encouraged them to hide their wealth abroad, assuming they would never face consequences for it.
Panama Papers reveal 1,245 Colombians have accounts in tax havens
In an interview with newspaper Semana, Ortega blamed the relative media silence on the fact that “there are many very influential people with access to media power” in the Panama Papers.
This widespread control and influence over the media can no longer conceal the dollar signs of hidden money which are racking up after the release of 11 million documents from Panamanian law company Mossack Fonseca.
Additionally, Ortega said that so many of the country’s elite hide their funds to avoid taxation because there are simply no social sanctions or penalties for doing so.
In Colombia, it is legal to have businesses and accounts offshore if they have been declared in full transparency to the DIAN so that they continue being taxed.
However, “all those who are in the Panama Papers are telling half-truths” about their wealth, Ortega said, adding that “very few would pass a judicial revision of their tax statement.”
The former tax chief has been one of the few to speak out about ongoing tax evasion in Colombia that, according to him, has allowed the elite to hide as much as more than a quarter of the country’s GDP in tax havens.
Colombia’s elite hiding more than a quarter of country’s GDP in tax havens
Colombia’s government is now struggling to discern whether the money stashed in these tax havens is legal or not, and must discover who the true owners and beneficiaries are.
Ortega said there are few occasions in which a Colombian is justified in having a business or account abroad in a tax haven. He gives the example of Avianca as a legitimate case, an airline company which operates internationally and has offices in many different countries.
Avianca’s account, however, is registered under its actual name and lists a real address, unlike the many forged foundations and false names slapped on accounts through Mossack Fonesca to conceal the wealth and the owner.
Though some named by the Panama Papers claim they never used those accounts or that they are inactive, Ortega points out that those accounts are still active and that the individuals are paying at least $350 a year in taxes on them in Panama. For those who are using false names, they are paying fees that can rise to $5,000 a year.
This hidden wealth is costing Colombia’s government several billion a year in desperately needed tax revenue.
“To end the lack of opportunities, better education, health, or the conditions of life for million of Colombians, you need money, and that only comes from taxes”
Colombia’s former tax chief, Juan Ricardo Ortega
The former director believes the country can raise the funds to address core development issues, but only if it submits itself to international monitoring and reforms its tax system, which he described as the “great cancer.”
Ortega also told Semana that in general, Colombia needs increased tax revenue. Currently, the government only raises 15.5% of the country’s GDP from taxes, a scanty amount in comparison to their neighbor Ecuador which raises 25% from taxes, Bolivia which raises 30%, and Argentina which raises 36%.
The lost tax revenue has become particularly imminent in Colombia as of late due to the economic slowdown. As a consequence of the slowing economy and its broken tax system, the government has been unable to close its 2016 budget.