Since the Panama Papers exposed the controversial financial dealings of the world’s most powerful politicians, people across the globe have heightened their suspicions and distrust of their leaders and other formerly respected public figures. Though it trended on Facebook for two weeks, the issue may be a bit intimidating to investigate and fully understand, but fear not — I have the answer to all the questions you were too embarrassed to ask. Here’s a breakdown of the Panama Papers.
What was revealed?
The massive leak of documents showed the numerous ways the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, including former world leaders, their families and close associates from across the globe known to have been using these offshore tax havens. (The Guardian)
According to the International Consortium of Investigative Journalists (ICIJ), the collection of roughly 11.5 million records from Mossack Fonseca (the fourth largest offshore tax haven in the world) exposes how an amalgamation of international law firms and big banks sell financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.
What is a “tax haven”?
A tax haven is a place that offers an “escape” from tax with either very low or zero taxes, legally or illegally. Moreover, a major component of these places is that they offer secrecy in various ways, combined with varying degrees of noncompliance with other jurisdictions when exchanging information.
“Offshore is fundamentally about being an elsewhere zone of escape – and offshore services are provided for non-residents.” (The Guardian)
Politicians under fire, with some help explaining from Vox
A $2 billion trail leads directly to Russian President Vladimir Putin through his associates. The papers reveal that they used banks and shadow companies to secretly shuffle the money. National leaders also include Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.
UK Prime Minister David Cameron’s father owned an offshore holdings company in Panama where the prime minister also once had shares and sold before his term as prime minister in 2010. Iceland’s prime minister was forced to resign after the documents revealed he was personally connected to an offshore company, Wintris, registered in the British Virgin Islands. Brazil’s current corruption scandal got even more complicated as the deep ties revealed in the documents also involve President Dilma Rousseff’s impeachment trial. The offshore law firm helped 57 people linked to the Petrobras scandal, a $5.3 billion bribery scheme incriminating Brazil’s most elite politicians and executives, and set up 107 offshore companies.
The aftermath
Immediate reactions:
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Iceland’s prime minister was shamed into resigning.
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British Prime Minister David Cameron released his personal financial assets in an attempt at transparency and will also host an anti-corruption summit next month.
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The European Union’s Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, has threatened to sanction Panama and other tax havens if they don’t shut down their tax loopholes, according to the Associated Press.
Investigations:
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Panama has had a history of refusing to cooperate with international tax issues, but has responded to the strong international outrage by forming an international committee of experts to recommend best transparency practices for Panama’s offshore financial industry. (Vox)
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A New York federal prosecutor has also opened a criminal investigation involving the documents.
Stay tuned for further updates, and keep your eyes peeled, millennials.
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