The Panama Papers tax revelations are more an indictment of government fiscal mismanagement than has been publicly acknowledged.
Who, until recently, could name any Panamanian law firm?
Mossack Fonseca would certainly not have been pleased to have its name on the front page of daily newspapers around the world, but from a position of relative obscurity it has managed to achieve this feat.
Confidential financial records and identity documents, kept in‑house at Mossack Fonseca, were leaked to the major German newspaper Suddeutsche Zeitung in early 2015, and after a sifting process by the self‑styled International Consortium of Investigative Journalists a first batch of documents have only now been distributed to major press houses.
As even the most casual follower of the daily news would be aware the release of the first set of "Panama Papers" has led to explosive allegations that shell companies in tax‑haven jurisdictions have been established to conceal tax avoidance, tax evasion, drug trafficking, and even terrorism financing.
Caught up in the dragnet of disclosures by international media thus far have been heads of state and their relatives, in both developed and developing countries, and bureaucrats, business figures and even, to some embarrassment, the now former head of NGO Transparency International's Chilean branch.
Before responding to the predictable tax haven‑bashing by certain commentators, politicians, and sections of the general public, it is important to consider the privacy implications of this development.
In the modern world of instant communications through computers and smartphones, and with the use of online banking and social media at an all‑time high, protecting one's personal and financial privacy from the vicissitudes of oftentimes reckless, and almost always damaging, public disclosure has become reinforced as a fundamental liberty issue of our time.
But does our enthusiasm for knowing every snippet of detail from the leaked (originally stolen information) Panama Papers suggest that, for uncomfortably too many of us, our robust defence of privacy is contingent upon whose privacy is being threatened?
As Kadhim Shubber noted recently in The Financial Times, plenty of cheers went around when WhatsApp announced it will not encrypt personal messages sent via its app, yet the same cheers are being heard when the financial privacy of some wealthy people had been violated by the Panama Papers disclosure.
The suggestion has been freely made by many commentators that any activity that involves direct corporate or financial activity in, or indirect involvement with, low‑taxing jurisdictions should immediately arouse suspicion, at most even guilt, within the arena of public opinion.
But it is important to note that just because somebody opened a bank account or created a company in Panama, or some other, increasingly rare location that takes financial privacy or low, competitive taxation regimes seriously, it does not necessarily mean that wrongdoing has occurred.
And poor old Mossack Fonseca came out in its own defence by indicating it obeys regulatory obligations to "know the client", a modern euphemism for the notion that legal, financial and professional service providers have to monitor their own customers lest they themselves get into hot water with governments possessing an insatiable appetite for both data and tax.
But in a post‑global financial crisis environment, typified by a growth‑depressing combination of government‑induced financial repression and deep social envy of wealth holdings of almost any kind, even bland statements that tax avoidance isn't illegal arouses a certain degree of hatred and suspicion.
Now, it is entirely legitimate for governments to hunt down crooks, and tracing their company‑making and money trails is a part of good investigative work.
By the same token the slow recategorisation of all international capital movements and tax competition into the realm of criminality, or at least of economic or social harm, is an ill‑informed strategy replete with economic risk, and even personal danger for some.
There is a saying among some Swiss bankers that "there are no tax havens without tax hells", but many detractors of tax haven locations, such as Panama, British Virgin Islands, Ireland, Switzerland, and the United States, forget just how hellish the global tax regime was virtually everywhere during the 1970s and early 1980s.
In Australia the top personal income tax rate was a whopping 61.5 per cent in 1979 (prior to the Medicare Levy and other stealth tax top‑ups imposed today), whereas in the United States and United Kingdom it was an eye‑watering 70 per cent and 83 per cent respectively.
As for the tax rate on corporate income they were 46 per cent, 52 per cent and 46 per cent in Australia, the United Kingdom and United States, respectively.
Financial repression is often married to burdensome taxation regimes, and the degree of restrictiveness in which governments controlled financial flows across borders was once typified by the fact that many Westerners wishing to invest overseas needed written permission from the government before being able to do so.
And the idea that a tourist could take their own spending money with them on overseas trips, of whichever amount they elected to choose, was pure fantasy for many during the period of pre‑1980s capital controls.
The worst of these restrictions were sensibly removed thanks to microeconomic reforms during the 1980s and 1990s, in which liberalisation catalysed capital mobility and significant tax reductions allowed businesses and individuals to keep more of their own money.
Globalisation of capital and finance, and vigorous tax competition between countries pushing down tax rates, helped create the "Great Moderation" of healthy economic conditions up until the GFC, but governments refused to extend the full logic of reform to their social services and welfare systems.
The refusal to reform the costly welfare state has come back to bite Western governments these last few years, especially when it comes to the European reform laggards which elected to keep higher taxes and bigger public spending profiles, to their long-term economic detriment.
Instead of wanting to keep capital flowing freely and maintaining low taxes, oversized Western governments now disingenuously blame tax havens for their financial problems.
They are being assisted in this effort by the OECD, an international bureaucracy now opposed to tax competition but whose staff receive tax‑free salaries, as well as tax‑exempt advocacy NGOs.
Rather than blaming tax havens and driving financial freedom and tax competition out of existence, perhaps it would be better for the West to hold its nerve on globalisation and transition their own economies into tax havens.
Mikayla Novak is a senior researcher with the Institute of Public Affairs (www.ipa.org.au). Twitter: @NovakMikayla