In one of the biggest leaks in history, records of assembly line producer of offshore companies Mossack Fonseca has created flutters globally. Its like people who have extra-marital relationship being caught. Its good till it does not come out in the open, when it does, it can be really embarrassing. However, world will not come to an end, if people find out!
While Nepali press has devoted lots of column centimeters on this issue. Media that has just been used to cover elections is finding hard time to go through the rigor of analysis. Its like people who understand basic rules of football trying to report on a game of golf. So we are reading absurd stuff on the leaks. There is difference in ‘breaking news’ and ‘baking news’
For Nepal, off shore banking has been done primarily for three reasons. First, to get around the draconian law of not allowing Nepalis to invest abroad legally. Second, to save taxes on transactions especially relating to land and shares in Nepal. Third, to launder money earned through bribe and corruption that has been on the rise in the past decade. So when the data emerges, it will be good to see what is the share of each segment.
Offshore is prima-facie not illegal, but it can be if it will violate anti money laundering laws and tax laws. Generally, money related to politicians come under this category.
For Nepal, the sophistication of doing business is limited as offshore operations require retaining global law firms and advisory firms, which is not generally palatable for Nepalis. Therefore, many Nepalis chose to send money to individuals who act as conduit. Therefore, direct implications of Nepalis will be limited.
However, with this leak, it is time to look at Nepal’s archaic laws on restrictions on investments outside Nepal. Further, the Central Bank also needs to see what they are doing to push Nepalis to resort to offshore banking. When Nepalis earn foreign exchange abroad legally and then Central Bank decides how that money is spent, people due to frustrations are going to find alternative routes.
Every crisis provides an opportunity to think of re-calibration. Other countries will surely do. Hope Nepal will also learn to keep up with times.