From Panama to Paradise!

Another year almost gone, another tax leak exposed  named the “Paradise Papers”. They named it the Paradise papers due the fact that all the places involved are so- called tax havens or “tax paradises”.

The leak was sprung by Germany’s largest periodical, Süddeutsche Zeitung and the data consists of 13.4 million documents (1.4 Terrabytes) from 2 two offshore services providers: Appleby and Asiaciti Trust as well as company register of 19 tax havens.  Although the German newspaper published the information, they were unable to say who provided the data to the papers as they need to protect their sources.

One of the firms- Appleby, said they were hacked but Süddeutsche Zeitung said they cannot verify this claim and are adamant that they received the information through legal channels. The Süddeutsche Zeitung shared data with the international Consortium of Investigative Journalists in Washington so that other outlets could also partake in the reporting.


What is the difference between these and the Panama Papers?

The Paradise papers contain details of Multinational corporations using the offshore system such as Nike, Facebook, Walmart, Allianz, Siemens, McDonalds and Yahoo as well as individuals.  Not all the people and companies are engaged in illegal activities. For example, multinational companies use subsidiaries in tax havens to reduce the amount of profit they report and individuals with offshore companies report to and pay tax  on their profits to the authorities without issues.

Shell companies are generally legal but it does not necessarily mean its activities are legitimate or moral. Take into consideration that many countries lose out on billions each year through legal tax avoidance and is therefore a public interest issue.

Previous revelations such as LuxLeaks, Swiss Leaks and the Panama papers, set off discussions about the dangers associated with tax havens. The Panama Papers changed a lot: Two prime ministers were made to resign (Iceland and Pakistan), an EU Investigative committee was set up and the tightening of laws implemented in several countries.

I assume that more stringent laws will be put into place after the latest leaks. The German Newspaper said they will not be publishing all of the names as there are several companies and private individuals that appear to hold no obvious public interest.

Some of the persons and companies to be revealed so far are:

US Commerce Secretary – Wilbur Ross. He has business connections with Russian entities linked to Vladimir Putin.

Her Royal Highness- Queen Elizabeth II. Has 10 million pounds placed in the Cayman islands and Bermuda.

Lewis Hamilton– Obtained a 3.7 Million pound tax rebate on his private jet by importing it into low tax Isle of Man.

U2 frontman, Bono– Owns a stake in a Maltese firm that bought a Lithuanian shopping mall via a holding company.

Apple– moved 10’s of billions of dollars from low tax Ireland to the Channel Isles which is mostly exempt from EU Tax Rules.

Nike- Used a Dutch loophole to cut its tax rate to just 2% via an offshore subsidiary.

VTB, Russian bank- Funded an investment in twitter while under US Sanctions.

While all of the information is still being sifted through by the relevant authorities, the full repercussions remain to be seen.