The biggest ever leak of offshore financial data

The Pandora Papers include over 11 million files exposing offshore financial structures and tax havens in Panama, Dubai, Monaco, Switzerland, and the Cayman Islands. Money management firms created these structures to hide the wealth and assets of some of the world's most powerful people, including 100 billionaires, 30 world leaders, 300 public officials, and a large number of celebrities. The papers reveal shell companies holding luxury assets such as property and yachts, as well as missing Cambodian antiques and artwork by Picasso and Banksy. Investigators also tied incognito bank accounts to certain political figures. These accounts contained billions of dollars on which the account holders had paid little (or even zero) tax.

What is a tax haven?

Tax havens, also known as offshore financial centers, are countries with low or no corporate taxes that allow non-residents to set up businesses there easily. They can even exist within a country. Delaware in the USA and the Isle of Man near the UK are two examples. Tax havens typically limit public disclosure about companies and their owners. As the information can be hard to extract, tax havens are also called secrecy jurisdictions. Tax havens earn vast amounts of money by charging fees for their services. They also create work for lawyers, accountants, and secretaries. Mauritius, a well-known tax haven, has said 5,000 people would lose jobs if the country stopped offering offshore banking services.

Who was in the spotlight?

King Abdullah II of Jordan was one of the main figures named in the papers. Documents exposed the king's $100 million property empire, which includes luxury homes in the USA and the UK. Former British Prime Minister Tony Blair was also named. His signature appeared on several documents relating to a UK company controlled by his wife, Cherie Blair. The couple used the company to purchase an $8 million London property without paying the $500,000 tax duty stamp. Several major Conservative party donors also appeared in the papers, creating another corruption scandal for UK Prime Minister Boris Johnson. Celebrities caught hiding money in tax havens include Shakira, Claudia Schiffer, Julio Inglesias, and Pep Guardiola.

Not illegal, but immoral

Many of the tax structures exposed in the Pandora papers are perfectly legal. However, there's a big difference between something being illegal and unethical. The Pandora papers revealed the inner workings of a shadow financial world exploited to hide the wealth (and the hypocrisy) of democratically elected leaders. The incident involving Czech Prime Minister Andrej Babis is a prime example. Babis campaigned for office by promising to curtail corruption and crackdown on tax evasion. Yet the papers revealed how Babis had failed to declare the use of an offshore investment company in purchasing eight properties, including two French villas for a combined value of $15 million.

Even some spiritual leaders were caught up in the scandal. The Legion of Christ, a Roman Catholic religious order with strong ties to the Vatican, stashed $300 million in offshore tax-havens. Some of the money was invested in a corporate property company that evicted struggling US tenants during the pandemic.

Money laundering and organized crime

Although many of these financial structures are not against the law, they are, in some cases, clearly being used to facilitate criminal activity. The leaked list included the names of major players in transnational criminal organizations. Raffaele Amato, boss of the Amato-Pagano clan, a clan within the Camorra mafia, used a shell company in the UK to buy land and real estate in Spain. Security and intelligence services are also worried that offshore financial services are used as a vehicle for financing acts of terror. Commentators are now calling for stricter regulations and anti-money laundering laws, as well as measures to make financial service companies and banks more accountable for enabling (knowingly or not) organized crime or terror networks.

Why are people so angry?

Many people expressed anger when hearing about the leaks, and it's easy to see why. Tax revenues help keep countries afloat and support vital services in society, such as education and health, especially during large-scale economic downturns like those that have resulted from the pandemic. The Pandora Papers revealed not everyone is paying their fair share, suggesting the less affluent are being forced to cover the difference. The revelations are particularly galling for people in nations where taxes are being raised to pay for essential services and due to the economic fallout of COVID-19 lockdowns.

Some have argued that tax evasion exacerbates two of today's most pressing issues, climate change and rising inequality. Sven Giegold, a Green party lawmaker in the European Parliament, says, "Global tax evasion fuels global inequality. It prevents states from providing the services and infrastructure that would allow every person a similar opportunity to succeed."

Discovering the magic money tree

In 2017, the then UK Prime Minister Theresa May came under fire for telling nurses that there was no "magic money tree" to increase their pay to match rising living costs. However, according to the charity Oxfam International, we may have discovered that mythical magic money tree -- or at least something that looks a lot like it! In a statement addressing the Pandora Papers, Oxfam wrote, "This is where our missing hospitals are. This is where the pay-packets sit of all the extra teachers and firefighters and public servants we need. Whenever a politician or business leader claims there is 'no money’ to pay for climate damage and innovation, for more and better jobs, for a fair post-COVID recovery, for more overseas aid, they know where to look."

So what happens next?

Many words have been written about the people and nations involved in this global tax avoidance scheme. The important question is, what happens next? After all, this isn't the first major tax avoidance scandal -- five years ago, for example, the Panama Papers scandal made similar revelations. So far, lawmakers in the US have introduced legislation that requires trust companies, lawyers, art dealers, and others to investigate foreign clients seeking to move money and assets. The proposed law, known as the Enablers Act, represents the most significant reform of anti-money laundering rules since 9/11. Politicians in Chile went even further, They voted to impeach President Sebastian Pinera, setting up a trial in the nation’s senate over allegations he favored the sale of a family property while in office.

More work is needed

Unfortunately, there has been little regular mainstream media coverage on the companies, banks, or financial institutes that provide the kind of services mentioned in the Pandora Papers. In fact, even with the Pandora Papers coverage, many long-form, pandora-related articles published by respected publications such as The Guardian and Washington Post failed to name one actual company or financial institute involved in the scandal.

The power of investigative journalism

The leaked documents revealed the corruption and injustices hiding inside our global financial system. But they also demonstrated the power and value of investigative journalism.

The International Consortium of Investigative Journalists (ICIJ) worked with journalists from 91 media outlets in 117 countries, including renowned (and often competing) news organizations such as The Guardian, the BBC, the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline, and the Australian Broadcasting Corporation. The achievement of the Pandora papers project is a testament to the hope and optimism that a better and fairer world is possible, so long as brave people are willing to hold the rich and powerful accountable for their actions.

This was also demonstrated by this year's Nobel Peace Prize being awarded to two journalists for their tireless efforts to hold the powerful to account. Maria Ressa of the Philippines and Dmitri A. Muratov of Russia, were recognized for "their courageous fight for freedom of expression, which is a precondition for democracy and lasting peace." The prize committee said the represent "all journalists who stand up for this ideal in a world in which democracy and freedom of the press face increasingly adverse conditions."

There is around $11.3 trillion in wealth stored offshore, according to a 2020 study by the Paris-based Organisation for Economic Co-operation and Development (OECD). Will the Pandora papers be the catalyst to kick start real reform and help nations recoup vast sums of unpaid tax revenues? We'll have to wait and see...