Just recently released Pandora Papers have revealed secret offshore dealings of the world’s richest and most powerful people including politicians, leaders, and billionaires. According to reports, about 35 current and former world leaders along with 330+ public officials from more than 90 countries allegedly used secret offshore companies to hide their actual wealth. However, the papers still do not explicitly confirm whether the activities of officials were illegal.
Legally, anyone can set up a shell company in a jurisdiction where tax amount is low, often known as tax havens. Businesses and individuals can create another offshore company to pool profits while avoiding paying tax twice for international dealings. This process can easily become illegal if total profit is not declared in the home country. Professional firms are paid to set up these offshore companies on the behalf of clients. Then these firms can represent paid directors and hide the identity of the actual body behind the establishment. Due to such loopholes in the legal and financial systems, these tax havens are also being used to conduct illegitimate activities like money laundering, tax evasion, and organized crime. Accountants who are experts in exploiting financial gaps assist their wealthy clients who desire to minimize their taxes and hide wealth from law enforcement agencies.
The leaked report included 11.9 million files from the companies hired by rich clients to establish different offshore structures and trusts in tax havens like Dubai, Switzerland, Panama, Monaco, and the Cayman Islands.
Pandora Papers is the biggest leak in the History of Offshore Data
Breaking down these files, there are 6.4 million documents, almost 3 million images, more than 1.2 million emails, 460,000+ spreadsheets, and more than 886,000 in miscellaneous format. Reportedly, these are the biggest offshore leaks as compared to the previous revelations of similar nature. They identify 29,000 offshore accounts involved in facilitating the rich to avoid taxes and making property purchases.
In 2013 Offshore Leaks, there were 260 GB data of alleged illegal finances, Panama Papers 2016 had 2.6 TB, next year in 2017, Paradise Papers revealed 1.4 TB, while this year’s Pandora papers contained 2.94 TB of data.
The names of the 130 wealthiest and most powerful people across the developing world have been the highlight of these recent leaks. The debate started when most of the American elites like Jeff Bezos, Elon Musk, and Bill Gates were not listed in the leaked papers. Critics argued that these rich Americans already pay so little tax that they don’t need havens at all.
Secret Financial Activities of the World’s Most Powerful People
Some names in the list proved to be shocking for the public while others were not much of a surprise. One was King of Jordan, Abdullah II bin Al-Hussein, who allegedly purchased 15 properties worth 95 million USD in the US and UK. The locations of most properties were reported as Malibu, California (US), and London and Ascot (UK). Another name was Andrej Babis, the Prime Minister of the Czech Republic. He was supposed to face an election on October 8 but now according to papers, he had failed to declare an offshore investment company, which was used to purchase two exquisite villas for 16.2 million USD in France.
Kenyan President Uhuru Kenyatta and the names of his six family members have also appeared in the Pandora papers. They allegedly own 13 offshore companies worth 30 million USD in Panama and London. Kenyatta led a strong stance against corruption and even said that government officials’ assets must be declared publicly so the commoners can know the difference between legal and illegal. However, he did not respond to the media inquiries about whether his family’s wealth was declared in Kenya or not.
Azerbaijan President Ilham Aliyev along with his family and close associates allegedly amassed 500 million USD worth of property in the UK. Reportedly, they own 17 properties including an office building in London worth 44.6 million USD. This building was purchased in the name of the president’s son, who was only 11 years old at that time. They were also able to sell one controversial property to the Queen’s Crown Estate, managed by the UK Treasury.
Other names include the alleged love interest of Vladimir Putin, Svetlana Krivonogikh, a former cleaner with a portfolio of wealth totaling 100 million USD. There was also former British Prime Minister Tony Blair and his wife Cherie mentioned in the list. They allegedly avoided around 434,000 USD in stamp duty for an office in London after purchasing the offshore company that owned that building. Pakistan’s Prime Minister Imran Khan’s cabinet members and their families also appeared to have several offshore companies worth millions of dollars.
Who Obtained the Data and How?
The Pandora Papers included records for only 14 financial services firms that were operating in Switzerland, Cyprus, Singapore, the British Virgin Islands, and Belize. The extensive offshore network is revealed by the International Consortium of Investigative Journalists (ICIJ) and reviewed by 150 news organizations around the world, including DW, Washington Post, the Guardian, and BBC.
More than 600 journalists reportedly spent 2 years examining confidential files, tracking down sources, inspecting court files, and checking public records from several countries. The exact amount of money hidden in the offshore accounts was not clear but ICIJ’s estimates have ranged from 5.6 trillion USD to 32 trillion USD. International Monetary Fund (IMF) reported that governments worldwide lose up to 600 billion USD worth of taxes with the use of tax havens.
Individuals who use these offshore companies claim that they need them for their businesses. Critics, on the other hand, recommend that there is a greater need for monitoring tax havens and offshore operations in order to fight corruption, money laundering, and inequality. The papers have drawn focus towards the shady offshore firms that facilitate tax avoidance and undeclared property purchases. Moreover, the data of their clients is not even secured as it can come to the surface anytime as seen from the previous leaks.
Similar findings and concerns were seen during Panama and Paradise leaks as well but the offshore activity kept on flourishing. This is why the need for greater oversight on this industry was recommended because these “helpful” firms were typically the first ones to give a criminal access to an entirely new parallel universe of finance. If they want, they can expose dodgy people in the beginning rather than granting them access to a tax haven and then waiting for the public leakage. CIA whistleblower, Edward Snowden also mocked the strategy of these firms.