In 1971, there were the “Pentagon Papers” released by US Government analyst Daniel Ellsberg and published by The NY Times that blew the lid on the Government’s dissembling on the Vietnam War and forced them to end it in 1973. Forty years later, computer intelligence consultant Edward Snowden, an employee of the CIA, made as big a stir when he released highly classified information from the NSA to reveal numerous global surveillance programmes. Since then, it would appear that the whistleblower syndrome infected the “non-governmental” world to reveal their secrets.
In 2016, there were the “Panama Papers”, consisting of 11.5 million files amounting to 2.6 terabytes of information released from a hitherto obscure Panamanian law firm, Mossack Fonseca, to a German paper by hackers. The firm specialised in creating “dummy corporations” or “shell corporations” in countries such as Panama and the US Virgin Islands that facilitate the mechanism allowing citizens to evade taxes on legitimate or illegitimate incomes in their home countries. Panamanian law does not require corporations that are registered there to declare their owners’ names. Enterprising law firms like Mossack Fonseca in these jurisdictions filter money from clients through a string of these corporations all across the world in other tax havens so that even Sherlock Holmes might not be able to untangle the money trail.
The following year there was the “Paradise Papers”, representing 13.4 million files from the Bermuda offshore law firm of Appleby and two offshore service providers — one based in Singapore — were released by the German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ). But unlike the files in Panama Papers, which shocked the world to learn about the technically “legal” tax havens being used for illegal purposes, including fraud, tax evasion, and evading international sanctions, the Paradise Papers — named after their idyllic locales — elicited comparatively little comment.
And this brings us to the “Pandora Papers” that were released last week by the same ICIJ that brought us the “Paradise Papers”. The significance of them choosing “Pandora”, which means “the one who bears all gifts”, might be significant as further details are released. This latest cache dwarfs the Panama Papers and demonstrates that the practice of tax dodging has ballooned. The top ten countries with tax dodgers, in descending order, are Russia, UK, Argentina, China (yes, China!), Brazil, Ukraine, Venezuela, Cyprus, Italy and Guatemala. Some big names netted include some 160 public figures, including Ex-PM Tony Blair of England’s Labour Party fame, the King of Jordan, Czech PM, friends and cronies of Russian President Putin, and the President of Kenya, Uhuru Kenya, and 30 other world leaders. From India, the findings include Anil Ambani, who declared bankruptcy in a UK court but holds unaccounted assets in 18 front companies.
What these papers reveal is that while most attention on incomes have focused on the growing chasm between ordinary workers and the top 1%, most of the latter have achieved that status by using the tax havens across the world to secrete their ill-gotten and legally gotten gains. In addition to the old Swiss Banks that hid fortunes of the old European aristocracy and business magnates from prying eyes, the practice has now spread with tax havens to service anyone with funds to hide. There was even one Guyanese company caught in the trawling of the Panama Papers.
Interestingly most of the companies that create the shell companies for the tax havens are located in London in the UK, and Delaware in the US. And maybe this is why there has not been the same outrage that was generated by money laundering in the regular banking systems of small countries like Guyana by the Financial Action Task Force (FATF) some years ago which almost brought our financial intermediation system down.
As was shown in several jurisdictions in developing countries such as Kenya, the tax havens could be depriving those countries of taxes that could spur their developmental goals.