In terms of size, the Panama Papers is likely the biggest leak of inside information in history — more than 11.5 million documents — and it is equally likely to be one of the most explosive in the nature of its revelations. The leak exposes the offshore holdings of 12 current and former world leaders
A new investigation published on April 3, 2016 by the International Consortium of Investigative Journalists (ICIJ), and more than 100 news organisations around the globe — The Panama Papers: how the world’s rich and famous hide their money offshore, reveals the offshore links of some of the most prominent people in politics and business. The leak exposes offshore holdings of 12 current and former world leaders. The Pakistanis who are part of this undesirable club have been unveiled by journalist Umar Cheema in Pak politicians, businessmen own companies abroad [The News, April 4, 2016].
The Panama Papers contain new details about Putin and associates, major scandals ranging from England’s most infamous gold heist, an unfolding of political money laundering affair in Brazil and bribery allegations convulsing FIFA, the body that rules international soccer.
Shockingly, the voluminous papers unveil hidden financial dealings of 128 politicians and public officials around the world. They show how a global industry of law firms and big banks are engaged in selling “financial secrecy to fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.”
The Panama Papers, according to ICIJ, “expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan.” They also include the names of at least 33 people and companies blacklisted by the US government because of evidence that “they’ve done business with Mexican drug lords, terrorist organisations like Hezbollah or rogue nations, including North Korea and Iran.” Iceland prime minister has resigned in the wake of these reports and the Pakistani premier has ordered judicial inquiry.
The leaked records, reviewed by a team of more than 370 journalists from nearly 80 countries, emanate from a little-known but powerful law firm based in Panama, Mossack Fonseca. It has branches in London, Beijing, Miami, Zurich and more than 35 other places around the globe. The firm is one of the top “creators of shell companies” in the world. Shell companies are “corporate structures that can be used to hide ownership of assets.” The leaked internal files of Mossack Fonseca contain information on 214,000 offshore companies connected to people in 200 countries and territories.
The leaked data include emails, financial spreadsheets, passports and corporate records revealing the secret owners of bank accounts and companies in 21 offshore jurisdictions, from Nevada to Hong Kong to the British Virgin Islands. The Panama Papers make it clear that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens. The disclosures from Mossack Fonseca have dramatically expanded on previous leaks of offshore records that ICIJ and its reporting partners have revealed in the past four years. In this regard, see two articles written by us — Hunt for black money [The News, March 29, 2015] and The power of dirty money [The News, March 1, 2015].
Tackling the dual menaces of unlawful outflows, money laundering and tax evasion is not our peculiar problem. Many governments of the world are facing challenges of checking flight of untaxed money. Wealth management specialists estimate that the world’s wealthy park around $36 trillion in tax havens — share of Pakistanis is around US$100 billion. According to the World Bank’s Stolen Asset Recovery initiative estimates, the cross-border flow of proceeds from criminal activities, corruption and tax evasion is between $1 trillion and $1.6 trillion per year, about half of which comes from the developing and transitional economies.
Economists, tax and financial professionals, accountants, lawyers, academics and writers of the world have a consensus that tax is the foundation of good government and key to the wealth or poverty of nations. But this foundation is under threat by tax havens as proved by The Panama Papers. About our Premier and family the following startling revelation has surfaced:
“Nescol Limited and Nielson Holdings Limited were incorporated in BVI in 1993 and 1994, respectively, and were held by one bearer share each. In February 2006, Mariam Safdar signed a resolution of Nescol Limited as the “sole (bearer) shareholder.” Mossack Fonseca (MF) was appointed as the registered agent through Minerva Trust which described Mariam Safdar as the beneficial owner of both companies.
Following queries from the Financial Investigation Agency in 2012, MF invoked the Anti-Money Laundering and Terrorist Financing Code of Practice (2008) to grill Minerva for information about Nescol and Nielson. In June 2012, Minerva Trust & Corporate Services Ltd revealed that both companies “owned a UK property each” — 16 and 17 Avenfield House — and were “owned by the same beneficial owner Mariam Safdar.”
The important question is why these properties did not find any mention in declarations of Mariam Nawaz’s husband in tax returns and declarations before Election Commission as required under the law. Why the family opted to use tax havens to buy properties. The answer lies in understanding what tax havens offer. Tax havens offer not only low or zero taxes, but also provide facilities for people or entities to get around the rules, laws and regulations of other jurisdictions, using secrecy as their prime tool. Therefore, Tax Justice Network (TJN) prefers the term “secrecy jurisdiction” instead of the more popular “tax haven” and highlights following serious problems:
Tax havens help rich people hide money that should be spent on schools, hospitals, roads and other public services.
Tax havens force poor people to pay taxes due from the rich.
Tax havens help criminals hide their loot.
Tax havens help dictators and their cronies plunder resources of developing countries.
Tax havens allow banks to dodge financial rules and regulations.
Tax havens corrupt markets, concealing insider dealing and supporting aggressive tax dodging by multinational companies.
Tax havens create a private world of secrecy, impunity and power for rich elite.
Tax havens widen the gap between the rich and the poor people.
Tax havens make laws in secret which affect us all.
Tax havens shake our faith in democracy.
The Panama Papers have proved beyond doubt that the corrupted international infrastructure allowing élites to escape tax and regulations is also widely used by criminals and terrorists. As a result, tax havens are heightening inequality and poverty, corroding democracy, distorting markets, undermining financial and other regulation and curbing economic growth, accelerating capital flight from poor countries, and promoting corruption and crime around the world.
Undoubtedly, the fight against tax havens is one of the greater challenges of present day world. It challenges basic tenets of traditional economic theory and opens new fields of analysis on a diverse array of important issues such as foreign aid, capital flight, corruption, climate change, corporate responsibility, political governance, hedging funds, inequality, morality — and much more. Assets held offshore, beyond the reach of effective taxation, are equal to about a third of total global assets.
Offshore finance is not only based in islands and small states, it has become an insidious growth within the entire global system of finance. The largest financial centres such as London and New York, and countries like Switzerland and Singapore, offer secrecy and other special advantages to attract foreign capital flows. As corrupt leaders and other élites strip their countries’ financial assets and relocate them to these financial centres, developing countries’ economies are deprived of local investment capital and their governments are denied desperately needed tax revenues. This helps capital flow not from capital-rich countries to poor ones, as traditional economic theories might predict, but in the opposite direction. It is time that international community addresses seriously what may be the biggest risk of all: tax abuse, and tax havens and everything they stand for.