11.5 million documents describing offshore accounts and shell corporations linked to 140 politicians and world leaders were leaked on April third by the International Consortium of Investigative Journalists (ICIJ). This is the biggest leak of documents in history, beating Wikileaks and NSA leaked documents.
The documents describe offshore accounts where money and possessions can be hidden under a veil of secrecy through shell corporations. People went to a law firm like Mossack Fonseca in Panama, the source of the documents, and the firm put the money in a fake company set up in a tax haven. This system is virtually untraceable and is useful to those whom need a cover on their assets.
In Uganda, an oil company avoided 400 million dollars in taxes for selling an oil field by using Mossack Fonseca to move their company to be based in a tax haven. 400 million dollars is more than the total health budget in Uganda.
The leaks exposed people such as Vladimir Putin, Iceland’s former Prime Minister Sigmundur Gunnlaugsson, the King of Saudi Arabia, the President of Ukraine, Petro Poroshenko, and Ahmad Ali al-Mirghan, the former President of Sudan.
Putin, unlike other leaders named, was traced through childhood friends, Arkady and Boris Rotenberg. The Rotenbergs are affiliated with seven companies located in the British Virgin Islands, a tax haven. These companies are also affiliated with Mossack Fonseca. Vladimir Putin has moved an estimated two billion dollars through offshore accounts.
Slowly, more and more powerful people have responded to their ties to the leak, including British Prime Minister David Cameron, whose father’s offshore corporation brought up questions of his own finances. The company, called Blairmore Holdings Inc. has more than 31 million dollars in assets, and has never been taxed since its beginning in 1982. Cameron defended himself saying that he was paying taxes on the accounts and that he is being slandered by the press.
The rich holding money offshore is widespread. Citizens for Tax Justice estimates that a half trillion dollars’ worth of profits were moved offshore to tax havens by corporations in 2012. It is estimated that 30 of the top 200 richest people have part of their fortune held offshore.
What many find surprising about the documents is that, while some of the accounts have legal conflicts, many have not committed any crimes. Though it might seem otherwise, it is not explicitly illegal to create shell companies.
To investigate how one would set up a shell company, Ken Silverman for Vice News decided to try it himself. Silverman set up a shell corporation named Seabasstian Consulting in the state of Nevada where his name could not be traced back to for less than $1000 dollars and in less than a week.
“With Seabasstian Consulting and MCSE, I was positioned to go into business as a drug trafficker or arms trader or dictator's bagman. But Heather Lowe, head of Global Financial Integrity, told me that I'd probably want to create several more subsidiaries offshore to put a few extra layers between me and my American shell companies. After that, I could open a foreign bank account that would be very hard for the IRS or international law enforcement to trace.” Vice Journalist Ken Silverman wrote.
Though many feel pessimistic about any sort of change that might come out of these documents, there was already a push to crack down on tax havens by President Obama before the leak. In 2009, Obama made a push to congress to end the use of tax havens of the rich. The Panama Papers have the ability to boost the popularity of bills that would end the use of tax havens, but for now, millions are still hidden from the world.
Image Courtesy of cubadebate.cu