Why are the Panama Papers a big deal?
April 4th, 2016
April 4th, 2016
In what is being referred to as the largest data leak in history, 11.5 million files of confidential information from global law firm Mossack Fonseca were leaked to the International Consortium of Investigative Journalists (ICIJ).
Mossack Fonseca, based in Panama, operates in more than 40 offices worldwide, and is known for their work setting up companies for wealthy individuals and corporations. Though it’s not inherently illegal, the secrecy afforded to these types of shell companies makes them the perfect vehicle for tax abuse, crime and corruption.
The leak included forty years of data, revealing that everyone from world leaders to celebrities had hired Mossack Fonseca. According to The Guardian, 12 national leaders are among the 143 politicians, their families, and close associates from around the world known to have been using offshore tax havens.
The online news outlet Vox created a useful breakdown of some of the highlights found in the leaks:
The name of Ian Cameron, the late father of British Prime Minister David Cameron, also shows up in the Panama Papers, and shockingly so, as David Cameron has been at the forefront of the movement in support of beneficial ownership transparency, which would make it far easier to track the abuse of anonymous shell companies. Mossack Fonseca helped Ian Cameron set up an investment company called Blairmore Holdings (named after his family’s ancestral country estate) in the British Virgin Islands, where, marketing material assured investors, the company “will not be subject to United Kingdom corporation tax or income tax on its profits.”
Explore an interactive created by ICIJ to help visually navigate who did what, and how.
The leaks are incredibly relevant because despite strong words, some of the most outspoken on offshore abuse seem to have now been caught up in it themselves. The entire international community is talking about the Panama Papers, and rightly so. The leaked information is a major breakthrough for tax justice and anti-corruption advocates, and impacts various groups around the world, from the political scene in Iceland, to struggling small-business owners in Nigeria.
Gabriel Zucman, an economics professor at UC Berkeley, estimates that the money in offshore tax havens totals at least $7.6 trillion. That’s upward of 8 percent of all the world’s financial wealth, and it’s growing fast. Zucman estimates that offshore wealth has surged about 25 percent over the past five years.
The Panama Papers should be seen as another marker as to why we need genuine financial transparency. One simple step that some governments are already taking is to create public registries that disclose a company’s beneficial owners—the real person or people actually in control.
With registers of this information, the secrecy that Mossack Fonseca and countless other firms sell would become far less attractive.