An extensive investigation from a multitude of media organisations and journalists has today been leaked, revealing an unprecedented array of documents showcasing the extent of offshore tax schemes. The leak is the biggest ever, with over 11 million documents and 2 terabytes of information being revealed, even larger than leaks by WikiLeaks in 2010 and by Edward Snowden in 2013. Documents revealed within the leak span nearly forty years, from 1977 to as recent as December 2015. The investigation is known as the Panama Papers, in reference to Panamanian law firm Mossack Fonseca, who facilitated the creation of offshore ‘shell’ companies which are the subject of the leak. The shell companies, which Mossack Fonseca help create, are used as a means of hiding assets and laundering money anonymously by everyone from prominent politicians and celebrities to drug lords, financial scammers and arms traffickers.
Many influential people have been implicated in the leak, including several world leaders. The leaders hail from several countries, including most notably Russian President Vladimir Putin as well as the likes of Ukraine’s Petro Poroshenko, Nawaz Sharif of Pakistan and Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson. Putin in particular is extensively implicated within the Panama Papers. Though he is not directly linked, many of his close associates and partners, particularly his best friend, the cellist Sergei Roldugin, have been directly implicated within the leaks. Roldugin is revealed to be in part ownership of Bank Rossiya, a Russian state-owned bank. Through this bank, money is hidden in offshore bank accounts and shell companies, with the assistance of Mossack Fonseca. The transactions reveal suspicious behaviours, including false share deals, exorbitant charges for consultancy and more. Though Putin and his associates have long been suspected of suspect financial behaviours, the Panama Papers are the most concrete and extensive revelation of these practices by Putin and the Kremlin.
Tax havens and tax avoidance schemes through offshore companies, though legal, are controversial. Many of the documents revealed within the leaks show evidence of illegal and seriously questionable transactions and movements of cash and assets. The scale of the leak is such that world governments will be under additional pressure to clamp down on tax havens and tax avoidance schemes such as the ones revealed by the Panama Papers. World leaders such as the UK’s David Cameron have called for more stringent laws on the practice. A summit of world leaders is expected to meet next month on the issue of tax avoidance. In light of the Panama Papers, the ongoing investigation will undoubtedly be central to these discussions.
For all the talk that will inevitably occur about clamping down on tax avoidance and minimisation schemes, however, it is unlikely that significant change will occur. Due to the global, interconnected nature of the financial system, all governments would have to come to a consensus on a plan of action in terms of tax. Such a level of coordination, even among wealthy first-world nations is unlikely, let alone with other nations throughout the world. Nations such as Panama, the Cayman Islands and the principality of Monaco, as of now, have no compelling reason to make their tax laws less opaque and more transparent.