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The Panama Papers, Wearing Sha’atnez and Tax Avoidance / By: Rabbi Yosef Fund
Several important documents were leaked in the April 2016 scandal known as the “Panama Papers”. The leaked documents detail the operations of a Panamanian law firm and its clients’ shell companies. Creating an offshore business entity is not illegal in the jurisdiction in which it is registered. However, many shell corporations may have been used for illegal purposes, including fraud, drug trafficking and tax evasion.
The Panama Papers exposed how some wealthy individuals and public officials hid their assets from public scrutiny. Many high ranking political figures have been negatively impacted by the report and were accused of fraud and money laundering, using offshore accounts to hide illegally diverted funds.
What are the halachic ramifications for those who try to bend the law for their personal gain? What guidelines does the Torah provide for those who wish to avoid paying their dues?
Wearing Sha’atnez to Avoid Dues
In discussing the prohibition of wearing Sha’atnez – wool and linen mixtures – there are two Pesukim in the Torah. The Pasuk in VaYikra[1] states: “and a garment of Kil’ayim, Sha’atnez, thou shall not raise upon you”. In Devarim[2] the Torah writes: “You shall not wear Sha’atnez, wool and linen together”.
The Mishna[3] states that one may not “wear Kil’ayim even on top of ten other garments, even for the purpose of avoiding duties”. Rabbenu Hannan’el[4] understands that the Mishna is referring to one who wants to avoid paying customs by wearing several layers of clothing he intends for sale and disguising them as personal items. Rabbenu Shimshon[5] also understands that this is referring to a tax which exempts clothing that are worn.
An Unjust Toll
The implication seems to be that layering clothes to avoid paying duties would be permitted, if not for the issue of Sha’atnez. The Gemara[6] questions why this should be so if – as Shemuel said – Dina D’Malchuta Dina: “the law of the land is law”. Rav Hanina bar Kahana, in the name of Shemuel, resolves this difficulty by distinguishing between a duty-collector who collects as much as he wills, and one who collects a set toll, whereas Deve Yanai maintain that the Mishna is only discussing a non-authorized duty collector. A modern example of this would be in areas of the world where governmental rule is weak, and militias establish unauthorized road-blocks for the sake of extracting tolls.
We must, however, ponder the following question: if in the Mishna’s scenario clothing that are worn are indeed exempt from duties, why then are we discussing the limits of Dina D’Malchuta – doesn’t the law of the land itself exempt clothing that are worn? If so, then even if the toll is exacted fairly and legally, one should be allowed to wear clothing to exempt them as long as he complies with the law’s specifications.
Rav Yaakov Yeshaya Blau[7] זצ”ל suggests that in the Mishna’s scenario, only normally worn clothing were exempt from duties, but extra layers were not. That is why wearing extra layers where Sha’atnez is not an issue, is only allowed when the collecting of duties is not done justly. But if the duties are collected in a just manner, it would not be permitted to wear extra layers to hide them from collectors.
The Sha’atnez Model
We further find in the Mishna[8]: “Clothing salesmen may sell [model clothes made of Sha’atnez] in their customary fashion as long as they have no intention under the sun [of protecting themselves], from the sun or in the rain [to protect themselves] from the rain. The scrupulous, model on a stick (rather than wearing the Sha’atnez, despite the fact that it is permissible)”. The commentaries[9] question why modeling clothing should be permitted while wearing multiple layers to avoid duties is forbidden.
Rabbenu Shimshon[10] takes the position that these two Mishnayot are, if fact, in dispute. The Rema[11] cites this position as allowing the wearing of Sha’atnez to avoid duties. However, Maran in the Shulhan Aruch[12], following the Rambam, quotes both these Mishnayot as authoritative Halacha, obviously taking the positions that these two Mishnayot are not contradictory.
The commentators offer various explanations as to what principle would allow modeling Sha’atnez clothing while not allowing wearing Sha’atnez to avoid duties. The Ritva[13] writes that the salesman would place the clothing on their shoulders and not fully wear them, whereas the one seeking to avoid the toll would wear the clothing in the normal fashion. The Shach[14] understands that since only clothing that was worn was exempted from duties, therefore the intention was to wear it, as opposed to the salesman who does not intend to wear but to display. The Pithe Teshuva[15] points out that according the Shach it would follow that in a situation where clothing that are worn are also taxed, there would not be a violation of the laws of Sha’atnez to wear clothing under other clothing to hide it. In this case there is no intention to wear the bottom garment, since this is pointless, but rather to hide it. Again, this is in a case where the duties are not collected justly.
The Hattam Sofer[16] writes that a salesman may only model clothing if the wearing is in a manner that is different from one who wears clothing for benefit. The Havot Ya’ir[17] writes that in the case of the tax-avoider we are concerned as to Mar’it Ha’Ayin.
It is worth noting that Hochmat Adam[18] rules that although modeling Sha’atnez clothing is permitted, it is prohibited for a potential customer to try it on. A discussion of this ruling is beyond the scope of this article. Rav Ovadia MiBartenura quotes a commentator[19] who explained the Mishna as referring to a situation where non-Jews were exempt from a duty imposed only on Jews; the subject of the Mishna wishes to wear Sha’atnez to appear as a non-Jew. This would be subject to a discussion in the Poskim whether a discriminatory law is valid under the principle of Dina D’Malchuta.[20]
[1] יט, יט
[2] כב, יא
[3] כלאים פ”ט מ”ב
[4] ב”ק קי”ג ע”א, הובא בחי’ הראב”ן שם (מהד’ דבליצקי ח”ג עמ’ פא)
[5] כלאים שם, וע”ע בפי’ ריבמ”צ שם.
[6] ב”ק שם
[7] מלבושי ישע פ”ד הערה כב
[8] שם מ”ה
[9] ע”ע ב”ק שם
[10] בפירושו למשנה ב’
[11] יו”ד סי’ שא ס”ו
[12] שם סעיפים ד-ה
[13] שבת כ”ט ע”ב
[14] יו”ד שם ס”ח
[15] שם ס”ד
[16] נדרים ט”ו ע”ב
[17] סי’ קפח, הובא בפת”ש יו”ד סי’ ש”א ס”ק ה’. וע”ע בערוה”ש שם סקי”ח.
[18] קו, כ
[19] כן נראה דעת הראב”ן הנ”ל (מהד’ דבליצקי ח”ג עמ’ פא) בפי’ הראשון שהביא.
[20] פתחי חושן, הל’ גניבה פ”א הערה ד’