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| Photograph by Rodrigo Arangua / AFP / GETTY. Taken from The New Yorker. |
What the he** are the Panama Papers?
The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca.
Read more from the source: The Guardian
What is this Mossack Fonseca law firm?
It is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee. Other services include wealth management.
Read more from the source: The Guardian
Where is Mossack Fonseca based?
The firm is Panamanian but runs a worldwide operation. Its website boasts of a global network with 600 people working in 42 countries. It has franchises around the world, where separately owned affiliates sign up new customers and have exclusive rights to use its brand. Mossack Fonseca operates in tax havens including Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies Guernsey, Jersey and the Isle of Man.
Read more from the source: The Guardian
What does 'offshore' mean?
According to Investopedia, 'offshore' means something located or based outside of one's national boundaries. The term offshore is used to describe foreign banks, corporations, investments and deposits. A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed regulations. Offshore financial institutions can also be used for illicit purposes such as money laundering and tax evasion.
What are tax havens?
According to Shaxson (2015), havens are places where you can put your wealth in order to escape the rules at home. Those rules might be around tax, or criminal laws, or rules about transparency and disclosure, or financial regulations (It’s not always about the tax).
Read more from the source: The Guardian
What has been reveal in the Panama Papers?
The documents show the multitude ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.
Read more from the source: The Guardian
Who are involved?
Iceland's PM (who has resigned), Argentina's President, Ukraine's President, former Ukraine prime minister, former prime minister of Georgia, ex-prime minister of Iraq, former prime minister of Jordan, former prime minister of Qatar, former Emir of Qatar, King of Saudi Arabia, former president of Sudan and the UAE president are the twelve national leaders involved. Others include, the late father of UK's PM, brother-in-law of China's President, Uruguayan lawyer of Fifa's ethics committee and his firm, close associates of Russia's President, three children of Pakistan's PM and many others. According to BBC, it has also been revealed that more than 500 banks, including their subsidiaries and branches, registered nearly 15,600 shell companies with Mossack Fonseca.
Know more about the people involved: ICIJ
How were the documents leaked?
According to Garside, Watt and Pegg (2016), the records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Guardian and the BBC.
Read more from the source: The Guardian
Is it illegal to use offshore structures?
No. Using offshore structures is entirely legal. There are many legitimate reasons for doing so. Business people in countries such as Russia and Ukraine typically put their assets offshore to defend them from “raids” by criminals, and to get around hard currency restrictions. Others use offshore for reasons of inheritance and estate planning.
Read more from the source: The Guardian
So WHAT IS THE PROBLEM HERE?
Although there are legitimate ways of using tax havens, most of what has been going on is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money (Bloom, 2016). According to Bloom, some of the main allegations center on the creation of shell companies, that have the outward appearance of being legitimate businesses, but are just empty shells. They do nothing but manage money, while hiding who owns it.
Read more from the source: BBC
You can get the full coverage, analysis and revelations here: BBC
Note: Most of the information found in this post was taken directly or wholly from the respective sources. I do not claim to own or have written most of anything original here.
References
BBC News. Panama Papers Q&A: What is the scandal about? Retrieved from http://www.bbc.com/news/world-35954224
Bloom, J. (2016). BBC News. Panama papers: how assets are hidden and taxes dodged. Retrieved from http://www.bbc.com/news/business-35943740
Harding, L. (2016). The Guardian. What are the Panama Papers? A guide to history's biggest data leak. Retrieved from http://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers
International Consortium of Investigative Journalists (ICIJ). The Panama Papers: the power players. Retrieved from https://panamapapers.icij.org/the_power_players/
Shaxson, N. (2015). The Guardian. Follow the money: inside the world's tax havens. Retrieved from http://www.theguardian.com/business/2015/jun/19/tax-havens-money-cayman-islands-jersey-offshore-accounts
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