In 2016, Colombia faced its first global tax haven scandal with the publication of the Panama Papers. Revelations about the firm Mossack Fonseca led to the exposure of 1,191 Colombian individuals, businesses, and associations with direct ties to corporations situated in tax havens. Of those identified, only 433 normalized their tax status with the National Directorate of Taxes and Customs (DIAN) in 2018. As a result, $772 billion pesos were omitted or reported as liabilities to attain lower taxes – a loss of $85 billion in revenue for the Colombian government.
This discovery was not made by DIAN, but the result of an investigation carried out by journalists and thousands of global collaborators, which calls into question the work of the tax agency and the efficiency of its work.
One of the primary problems with tax evasion is that it rarely results in sanctions or criminal consequences for the person who commits it. The DIAN is unable to collect all of the information needed and, as a result, their fight against tax evasion – proposed in Colombia every year or two via tax reforms – is an empty one. Furthermore, tax standardization, an incentive for raising revenue, has ended up rewarding those who do not declare their assets on time.
While housing money in tax havens is not necessarily illegal, these activities are far from transparent and ethically questionable.
In the Pandora Papers, a pattern exposed in the Panama Papers is repeated: those involved in this scheme are not just millionaires, but people very close to political power who have the ability to influence monetary and fiscal policy in their respective countries.
This has dire consequences in Colombia, a country with extreme concentrations of wealth at the top. When those in charge evade their taxes, it is difficult to believe that governments will implement policy changes needed to discourage tax avoidance.
For example, Alberto Carrasquilla — a former Minister of Finance under the Álvaro Uribe and Iván Duque administrations — proposed tax reforms that triggered one of the most extensive national strikes in recent history and resulted in dozens of dead or missing protesters. Despite his political position, Carrasquilla was named in the Panama Papers as a shareholder in a Panamanian company called Navemby Investments Group in 2011. Navemby Investments was a majority partner in a consulting firm, Konfigura Capital, that included Carrasquilla. The firm was later revealed to be involved in the Water Bonds scandal, a financial scheme that left poor municipalities in Colombia highly indebted and with unfinished aqueduct and sewage projects. How can one trust a finance minister, whose job is to manage and enforce tax policy, while he himself is part of an offshore scheme?
Among the most notable names are: former presidents César Gaviria and Andrés Pastrana; current vice president and foreign minister, Marta Lucía Ramírez, together with her husband, Álvaro Rincón, and her daughter, María Alejandra Rincón; the Minister of Transportation, Ángela María Orozco; former ministers Guillermo Botero, Gina Parody and Fernando Araújo Perdomo, among others.
Most troubling is that the current director of the DIAN, Lisandro Junco Riveira, was listed in the Pandora Papers as a beneficiary of the Cyber Security System Company, an incorporated business in Delaware. According to El Espectador, he also has an account in Cyprus and a virtual office in London managed by a Dubai-based provider. Although Junco has stated that this was all declared and reported to the appropriate agencies, journalist Paola Herrera found more inconsistencies that confirms what was published in the Pandora Papers.
To date, consequences for the hundreds of individuals highlighted in these journalistic investigations have been nonexistent. Those with power are all horses on the same carousel: the attorney general is a friend of the president; the legal counsel is a friend of the president; the comptroller general is a friend of the president; they are all in charge of monitoring the DIAN director, who was appointed, of course, by President Iván Duque. The only ones without powerful friends are ordinary Colombians who bear the brunt of tax evasion with higher taxes.
Action must be taken to ensure that they, the evaders, cannot continue to rob millions of Colombians, and contribute to inequality, poverty, and illegality.