Panama, Paradise, and Pandora Papers - Why Shell Companies Haven’t Been Cracked

Writing by Daniel Delfs. Photography by Marc Rentschler.


On October 3rd, 2021 the International Consortium of Investigative Journalism (ICIJ) published the largest information leak of all time, the ‘Pandora Papers’. Through the collaborative efforts of more than 600 journalists all over the world, who spent more than a year scouring a combined 2.94 Terabytes of documents, emails, images, and spreadsheets (Source 1), the ICIJ was able to publish the financial exploits and deceit of some of the world’s most affluent and powerful players. Although the Pandora Papers themselves - and the leaks which set its precedent - are monumental works of investigative journalism, the very fact that we have had nearly back-to-back years of leaks and disproportionately little change of the systems which enable tax evasion is disheartening and, unfortunately, unsurprising.


The ICIJ’s documents present convincing evidence against ‘35 current and former world leaders, more than 330 politicians and public officials in 91 countries and territories, and a global lineup of fugitives, con artists and murderers’ (Source 6), who utilize anonymous shell companies in so-called ‘tax havens’ in order to escape taxation. A tax haven is a country or territory in which taxes on corporations are not only low or non-existent, but which often also have lax legislation regarding the establishment of new corporations, allowing for companies to be set up and run by the super wealthy anonymously. Examples of tax havens are countries such as Switzerland, Greenland, and Singapore. However, territories and there are many more territories, such as the British Virgin Islands, the Cayman Islands, or Anguilla. A comprehensive list can be found here. Via these tax havens, faceless corporations can now invest huge sums of money into property, bank accounts, etc. with no questions asked, effectively ferreting away their funds without ever having to face taxation. Although the true sum is unknown, the ICIJ estimates the total amount of money stored in shell companies and offshore accounts worldwide is between 5.6 and 32 trillion dollars, an incomprehensible amount of money, even at the conservative estimate.


The reason organisations such as the ICIJ have a tally on the funds in tax havens is because they are not a recent discovery. The Pandora Papers are no novel concept. Starting in 2013, with a comparatively small amount of data via Wikileaks which only scratched the surface of the global network of shell corporations, the Offshore Leaks were published. In the years following the Offshore Leaks, we have seen increasingly large leaks on offshore accounts, shell corporations, and the people secretly connected to them. April 2016 saw the release of the Panama Papers to much fanfare and uproar, as a whistleblower from the company Mosseck Fonseca, responsible for facilitating the clandestine creation and running of shell companies, leaked 11.5 million documents (Source 4). The media and political scientists at the time speculated as to the impact these leaks would have on the global economy, and the consequences leveled against the companies involved in the leaks. Hilary Tuttle speculates in the journal ‘Risk Management’ in 2016, that ‘investigations are likely to be one of the primary drivers of concrete costs for businesses, as protracted investigations and potentially significant fines may be handed down for those that used the firm to avoid tax responsibilities. Simply being mentioned in the data dump may be enough to prompt this’. However, to what extent was this truly the case?


There were without a doubt efforts towards consequences following the release of the Panama Papers. One example of these consequences in Europe, is that the European Council created a tax haven blacklist in 2017, which was meant to inform EU states which countries, by its criteria, were tax havens, and thus should be economically and otherwise sanctioned for it. Of course these consequences for tax havens were only suggestions, and EU states were free to act on the blacklist as they saw fit. Detracting from this already somewhat lax blacklist, on October 5th, 2021, the European Council took Anguilla and Seychelles off the blacklist, both states which still have a 0% corporate tax (Source 8). A 0% corporate tax means that any money owned or made by companies within these countries goes completely untaxed, and so if billionaires from all around the world stash their money in shell corporations in these countries, their money is untaxed. This move by the European Council came within days of the Pandora Papers’ release, in which both Anguilla and Seychelles featured prominently, and Oxfam’s EU tax specialist Chiara Putaturo claims it ‘renders the EU’s blacklist a joke’, completely letting tax havens off the hook (Source 9). In the US, of the 2.6 trillion USD known to be held in tax havens by American companies, a 2017 repatriation tax charged corporations 8-15% for offshore revenue made since 1987 . While no small charge, the tax ultimately let the companies off the hook for the actual 35% charge for returning funds to the US, and promised them a nearly negligible corporate tax within the US for the future (Source 10). In the UK, whose territories are some of the most notorious tax havens, the government drafted legislation in 2018 that would require that the owners of UK property could not remain anonymous, thus preventing an aspect of tax evasion. The draft has still not been presented to MPs (Source 1). Throughout the institutions of the self-proclaimed free and just Western democracies we see a severe lack of consequences for tax evasion and tax havens that borders on political posturing in its inefficacy.


Tax havens do not only pose an immoral scenario in which billionaires do not need to pay taxes like the rest of us, they actively harm governments all over the world, and more importantly their citizens, due to the funds that are not reinvested into the support and development of the societies they are made off of. The ICIJ tallied the amount of revenue returned via investigations sparked by the Panama Papers in April of 2021 at 1.36 billion dollars (Source 3). Unfortunately, this number pales in comparison to the speculated trillions of dollars in shell corporations (5-32 trillion USD), and is less than one percent of the calculated annual loss in tax money due to tax havens according to the IMF (Source 7). The global annual loss for governments because of tax havens is tallied at 500-600 billion USD. This number can be broken down to around 350-400 billion for developed economies and 150-200 billion not being taxed in less economically developed countries (LEDCs). Keep in mind that in these LEDCs, 150-200 billion goes a much longer way than it does in more economically developed countries, and would actually be at least equal to or greater than the annual 150 billion USD which LEDCs receive in foreign development assistance from the global North (Source 7). So, to cut the numbers, governments worldwide are losing out on a shitload of money every year because of tax havens, and the countries of the global South are the ones being hit the hardest by this loss.


Viewing the issue of tax evasion from the vacuum of ‘rich people not paying their taxes’ alone, presents a clear moral issue and directly contributes to inequalities worldwide: the most affluent of our societies are not contributing to the overall intake of governments worldwide through tax havens, amounting to an estimated $600 Billion/year. This in turn is not invested back into the countries and communities already being exploited for their land and labor by the global North. Additionally, the anonymity of shell corporations, which are not technically illegal, allows for a level of opacity that makes truly criminal activities infinitely easier to accomplish. If we add to this vacuum the fact that many of the perpetrators of tax fraud are important political actors, on both national and multinational levels, as the various leaks have exposed, we arrive at the crux of the issue. Because, if tax evasion was an issue of simply making tax havens, shell corporations, and anonymous fund movements illegal, legislation could be changed and tightened, and perpetrators of tax fraud appropriately punished when leaks such as this one come to light. In ‘Tax Havens: Consequences and remedial’ (2017) Taranjeet Singh highlights the many loopholes in tax legislation that tax havens represent, and the high level of international, multilateral cooperation required for effectively tackling these loopholes (Source 5). However, if the same individuals responsible for penning and voting on laws, and meant to be demanding accountability for tax evasion are the ones benefiting from it, there is no logical way we can expect to see progress or change on the issue from within the system, no matter the dozens of millions of documents leaked proving the duplicities of the wealthy.


Following the Panama Papers, 2017’s Paradise Papers were more or less written off as an offshoot or inevitable sequel and did little to shift the lacklustre responses to tax havens. Four years later, amidst the general economic struggles experienced due to Covid-19, to no one’s surprise, the Pandora Papers exposed current and former world leaders’ connections to tax havens. From Vladimir Putin to Tony Blair, and the presidents of Kenya, Ukraine, and Ecuador, as well as 130 billionaires from around the world, these wealthy individuals continue to hoard their wealth and selfishly expand it, leaving millions floundering in the consequences of a worldwide pandemic (Source 6). Of course the documents in the Pandora Papers, while very convincing evidence, are still only evidence for any allegations against these officials, and many of the accused political actors responded with vehement denial, as well as censorship of news reporting on the leaks (Source 2). Even in Western media, the news of the Pandora Papers’ release came and went with no (explicit) censorship necessary. No major outcries or renewed efforts due to the major tax fraud that has been happening under our noses dominated the headlines, the news cycle has seemingly moved on without a hitch. How can there be outrage or surprise when society knows the super wealthy have been getting away with little to no taxation in most countries, tax haven or not? We are simply used to the rich getting away with practically anything and are desensitized to their deceit. Each successive leak, no matter how monumental, is faced with more social apathy and resignation, while governments and multilateral organizations barely put up a show of standing up to tax evasion any more, political actors crippled by the hypocrisy of misrepresenting their own interests. Tax havens appear to be here to stay, letting billionaires continue to abuse shell corporations, without giving a pence back to the people they exploit.


References/Further Reading

1 On Pandora papers and also comparisons to prior leaks

https://www.bbc.co.uk/news/world-58780561


2 Reactions by state officials in Kenya accused and exposed in leaks, censorship of the accusations

https://www.bbc.co.uk/news/topics/ckml857490zt/pandora-papers


3 ICIJ talking about funds recovered via panama papers investigations

https://www.icij.org/investigations/panama-papers/panama-papers-revenue-recovery-reaches-1-36-billion-as-investigations-continue/


4 Discusses Panama Papers at time of leak, muses about potential consequences

https://www.proquest.com/docview/1813906660?pq-origsite=gscholar&fromopenview=true -


5 Looks into why tax havens are so hard to punish, esp. in LEDCs, and the extent to which it requires international cooperation

http://indusedu.org/pdfs/IJRMEC/IJRMEC_1260_37001.pdf


6 ICIJ talks about its own leak and details what it has exposed

https://www.icij.org/investigations/pandora-papers/global-investigation-tax-havens-offshore/ -


7 IMF saying that tax havens cost 500-600 bn a year, 200bn for LEDCs, and that US only repatriated some of the 2.6 trillion known to be held offshore in 2018

https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-global-tax-havens-shaxon.htm


8 EU blacklist for tax havens, removing some recently, and explaining its intent

https://www.consilium.europa.eu/en/press/press-releases/2021/10/05/taxation-anguilla-dominica-and-seychelles-removed-from-the-eu-list-of-non-cooperative-jurisdictions/?utm_source=dsms-auto&utm_medium=email&utm_campaign=Taxation%3a+Anguilla%2c+Dominica+and+Seychelles+removed+from+the+EU+list+of+non-cooperative+jurisdictions


9 Oxfam on EU blacklist changes https://www.oxfam.org/en/press-releases/eu-blacklist-must-penalise-tax-havens-not-punish-poor-countries


10 On 2018 US repatriation tax

https://money.cnn.com/2018/01/02/investing/us-tax-companies-overseas-cash/index.html





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