Pandora Papers: How the fight against tax evasion is going

Q REPORTS – The Pandora Papers are the latest global media investigation into the use of offshore tax havens by world leaders, businessmen and celebrities to hide assets worth hundreds of millions of dollars.

Some 35 current and former world leaders involved in latest tax haven scandal

About 600 journalists scoured 11.9 million leaked documents from 14 financial services companies to uncover a vast mine of data revealing allegations of corruption, money laundering and global tax evasion.

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The revelations are further proof of how dirty money from struggling dictatorships and democracies is pouring into developed economies and tax havens.

Among those implicated: King Abdullah of Jordan, Czech Prime Minister Andrej Babis, a former mistress of Russian President Vladimir Putin, former British Prime Minister Tony Blair and singer Shakira.

Ladder of hidden wealth revealed

The fight against tax evasion has become a political hot potato since the first investigation by the International Consortium of Investigative Journalists (ICIJ) in November 2013 when a “who’s who” was revealed concerning people and entities hiding assets abroad in 122,000 companies managed from Singapore and the British Virgin Islands.

Two months later, the group revealed how the Chinese elite, including several close to President Xi Jinping, had parked money in offshore tax havens. Later in the year, the ICIJ’s so-called LuxLeaks investigation showed that multinational companies such as Amazon, Apple, IKEA, Pepsi, AIG and Verizon had made secret deals with the Luxembourg government to avoid paying taxes. billions of dollars in taxes.

In 2016, the Panama Papers detailed more than 200,000 offshore entities created through the law firm Mossack Fonseca. A year later, the Paradise Papers revealed leaks from Bermuda-based offshore specialist Appleby. In 2020, FinCEN files revealed details of more than 200,000 suspicious financial transactions, valued at over US $ 2,000 billion (€ 1.72 trillion).

How widespread is tax evasion around the world?

Last year, a report by three groups, including the UK-based Tax Justice Network, estimated that governments around the world lose US $ 427 billion each year to tax evasion and fraud businesses and high net worth individuals.

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The report found that multinationals transfer US $ 1.38 trillion in profits to tax havens every year.

In the 2017 book, The Hidden Wealth of Nations: The Scourge of Tax Havens, Gabriel Zucman wrote that tax havens hold nearly $ 8 trillion in global wealth, 75% of which is undeclared.

Last month, the European Union estimated that Europe’s largest banks pay an average of 20 billion euros ($ 23.3 billion) in profits a year to tax havens.

Julia Wallace, associate editor of the Organized Crime and Corruption Reporting Project – a network of investigative journalists involved in the Pandora Papers investigation – told DW that the offshore service industry created “webs and Incredibly complicated networks of property companies stacked up. on companies that are very difficult to disentangle.

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“These providers are lawyers and people who start businesses, and they do such a good job of creating these complex structures that you, me and anyone on the street would never be able to figure it out if it weren’t for it. not that kind of running away. “

How do governments fight tax evasion?

Proposals to stifle corporate tax havens were approved by leaders of major Group of 20 (G20) economies in July, which will set a global minimum corporate tax rate of 15% for large multinationals.

The plan would make it less profitable for companies like Facebook and Google to use low-tax regimes like Ireland and the Cayman Islands, and force companies to pay more tax where they actually operate.

However, the proposals must pass the U.S. Congress – a tricky move given opposition from several Republican lawmakers, who say it will make U.S. businesses less competitive.

Several low-tax countries are also against the plans, which they say could limit foreign investment in their countries.

The proposals will also not cover wealthy people – especially those in authoritarian states who can hide their fortunes abroad with impunity.

Most EU countries have approved a new bloc-wide tax transparency tool that aims to ensure that companies with a total turnover of around 750 million euros – doing business in the ‘EU through subsidiaries – will have to comply with the same rules as EU companies.

The EU also maintains a blacklist of uncooperative tax havens which is updated twice a year. Panama, Seychelles, Fiji and the US Virgin Islands are on the list. EU states have been urged to impose sanctions on the countries on the list. The EU Tax Observatory was launched in June to help tackle “tax abuse”.

However, many commentators have warned that governments are still not doing enough to crack down on tax evasion.

“We live in a time when governments need a lot of money… to fight mainly against this pandemic,” Frederik Obermaier, reporter for the Süddeutsche Zeitung, part of the ICIJ, told DW.

Obermaier added that the shortfall was due to the fact that the richest people “evade or minimize and avoid their taxes and their fair share in our society”.

Has anyone been punished?

More than 150 investigations have been opened in more than 70 countries following the Panama Papers scandal alone. Several prominent personalities and organizers identified by the ICIJ have also taken legal action to try to clear their names.

However, many of the complex and opaque structures put in place in tax havens are not illegal, including shell companies – businesses that only exist on paper and do not conduct day-to-day business operations.

Among the political victims was then Pakistani Prime Minister Nawaz Sharif, who resigned and was banned from running for office after being convicted of corruption over links to the Panama Papers scandal. He was then jailed for 10 years but was allowed to travel to London for medical treatment. Two years later, he still has not returned to Pakistan.

Icelandic Prime Minister Sigmundur David Gunnlaugsson was forced to resign in 2016 following revelations his family had sheltered money abroad.

German prosecutors last year issued international arrest warrants against co-founders of Panamanian law firm Mossack Fonseca, Ramon Fonseca Mora and his German-born partner, Jürgen Mossack.

The couple had been arrested and jailed after the Panama Papers scandal broke, but were later released on bail.

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