The "Panama Papers", a treasure trove of terabytes of leaked tax law documents from Panamanian law firm Mossack Fonseca, shows just how corrupt over the years the world's elite have been when it comes to hiding what could be trillions from the tax man. Several current and former world leaders, high-profile criminals, and even wealthy celebrities all use shell corporations set up by the law firm as tax havens,
and now the information is there for the world to see.
Mossack Fonseca is not a household name, but the Panamanian law firm has long been well known to the global financial and political elite, and thanks to a massive 2.6 terabyte leak of its confidential papers to the International Consortium of Investigative Journalists it's about to become much better known. A huge team ofhundreds of journalists is pouring over the documents they are calling the Panama Papers.
The firm's operations are diverse and international in scope, but they originate in a single specialty — helping foreigners set up Panamanian shell companies to hold financial assets while obscuring the identities of their real owners. Since its founding in 1977, it's expanded its interests outside of Panama to include over 40 offices worldwide, helping a global client base to work with shell companies not just in Panama but also the Bahamas, the British Virgin Islands, and other notorious tax havens around the world.
The documents provide details on some shocking acts of corruption in Russia, hint at scandalous goings-on in a range of developing nations, and may prompt a political crisis in Iceland.
But they also offer the most granular look ever at a banal reality that's long been hiding in plain sight. Even as the world's wealthiest and most powerful nations have engaged in increasingly complex and intensive efforts at international cooperation to smooth the wheels of global commerce, they have willfully chosen to allow the wealthiest members of Western society to shield their financial assets from taxation (and in many cases divorce or bankruptcy settlement) by taking advantage of shell companies and tax havens.
If Panama or the Cayman Islands were acting to undermine the integrity of the global pharmaceutical patent system, the United States would stop them. But political elite of powerful western nations has not acted to stop relatively puny Caribbean nations from undermining the integrity of the global tax system — largely because western economic elites don't want them to.
And that's the rub: these are the kind of people who have plenty of money to give to politicians to get them to look the other way on things like setting up shell corporations in Panama. But with it all now out in the open, nearly 40 years of record dating back to 1977, the elephant in the room can no longer be ignored.
As you would imagine, there is quite a lot in the 2.6 terabytes. Here are a few of the highlights that the team found, with links to the full stories where you can read the details:
The International Consortium of Investigative Journalists has a full profile of political figures and their relatives named in the Panama Papers for your reading pleasure.
But though political corruption is fun and newsy, the document dump also features a leaked memorandum from a Mossack Fonseca partner revealing the more boring truth that "Ninety-five per cent of our work coincidentally consists in selling vehicles to avoid taxes."
The Panama Papers show everyday tax avoidance by the rich stretching over decades, and for the most part it's perfectly legal. That's how the game is played, all we know now is how big that game is. The global elite have been cheating the world's government for decades because that's what they have the money to do.
Spoilers: taking Panama out of the offshore tax haven game makes it easier on the competition.
You know, America.
After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.
“How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at Anaford AG, a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.”
Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.
US states serving as tax havens is nothing new, both Dakotas, Delaware, Rhode Island and Florida have been playing that game nearly as long as Panama has. Apparently the world likes a quality tax haven however. Why dick around with a banana republic when US states with 50 different sets of business and corporate tax laws can provide all you need?
Trump's wrong. America really is the best in the world at some things in 2016.