Panama Papers: Forgot Already?

- Kritika Kasliwal, Shrenik Chhajed , Journal Club



You might have heard the phrase: ‘You can fool everybody sometimes and fool somebody all the time but you cannot fool everybody all the time.’ Well, in our hypocritical, power-centric world this does not quite hold true. Despite having overwhelming proofs and well documented leaks, absolutely no action has been taken against the various tax evaders who were exposed during the biggest leak of the decade: The Panama Papers.

Almost a year ago, 2.6TB of data was leaked about various dignitaries of the world who, through offshore accounts made billions off their countries’ people by evading tax in the magnitude of billions. The whistleblower- John Doe contacted Bastian Obermayer from German newspaper Süddeutsche Zeitung and asked if Bastian was interested in data .After getting an affirmative , he laid down conditions of no meeting and chatting only over encrypted files. And thus began the saga of the biggest leak in the history.

What were the Panama papers?

There was an exchange of over 4.8 million emails , 3 million database files and 2.1 million pdf files from 40 year history of the Panamanian law firm Mossack Fonseca 214,488 offshore entities. These documents had the names of more than 360,000 people and companies behind secret offshore structures all around the world.These included documents from twelve national leaders among 143 politicians from around the world known to have been using offshore tax havens set up as you could guess- in Panama, a country on the isthmus linking Central and South America. All and all over US$ 2 trillion has passed through the firm's hand and clients included residents of over 100 countries and worked with more than 14,000 banks, law firms, incorporators, and others to set up companies, foundations, and trusts for their clients.

What are offshore accounts?

Offshore bank accounts are set up outside the country of your residence. Colloquially, the term refers to institutions that exist in known tax havens. Individuals and companies use offshore accounts to avoid or evade taxes in their home countries. A tax haven is a nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing.

Is it illegal to have an offshore account?

The truth is that unlike popular belief offshore accounts are not illegal/illegitimate.It’s just that your government would rather have all your wealth onshore where it can see it, tax it and generally benefit from it, and the onshore banking community would like you to retain all funds with them so that they can profit from them.

How does tax evasion through offshore accounts work?

Basically, this is how it goes - you have a lot of money in your bank account and you do not want to keep paying the huge amount of wealth tax every year. You might be a regular person who wants to maybe hide your money from your soon to be-ex spouse or want to keep money at someplace you travel a lot to. So, you just set up an account and put your money there and pay a lesser amount of taxation and benefit to your government. This is all good and well as long as all the documents off these accounts are properly disclosed and you pay the international taxation on your earnings.

When does it become illegal?

So, if anyone holds money, wealth, assets or taxable property offshore without declaring it to the tax authority where they are resident, and/or where they are liable for income, capital gains or even corporate taxation for example, then they could be acting illegally.Money laundering via offshore bank accounts is equally illegal. Money laundering is basically earning through illegal methods and ‘laundering’ that money to seem as if those earnings came from some legal earning. (For example, if you have a meth manufacturing business, you might start a car washing factory to launder your earnings to seem like they all came from the car wash)

Why should we care?

The Panama papers reveals the tax evasion by 214,488 offshore entities which include accounts by our very well respected politicians and celebrities. The Politicians include: Vladmir Putin, David Cameron, Nawaz Sharif and celebrities like our infamous Bachhan family.

What needs to change?

The leak also pointed out the fundamental flaw in the design of laws where the main problem was the fact that most of the schemes were legal and reignited the discussions about need of the public ledgers of about the ultimate ownership of companies.

What action has been taken?

The upheaval caused by the revelation was big enough to cost Icelandic Prime Minister Sigmundur Gunnlaugsson his seat and resignation demands to many political figureheads like Pakistani Prime Minister Nawaz Sharif and British Prime Minister David Cameron. However, even after a year we see that the two latter people sit comfortably at their seats scratch free.

The prosecutor against the firm Mossack Fonseca says that there is not enough evidence against the apparent tax evaders. 2.6 TB of data, 4.8 million emails , 3 million database files and 2.1 million pdf files are apparently ‘not enough evidence’.

As of now, UK made it mandatory to disclose all owner data while British overseas territories have agreed to share data when requested by enforcement agencies . US government made statement regarding legislation to create federal registries regarding actual ownership of any newly created company.

Why should we care?

It is because we don’t care enough that powerful people not only get away with but are rather encouraged to commit felonies of all kinds. After a very short span of uproar, the media conveniently forgot about the massive data leak and so did we.