It has been five years since the Panama Papers blew the lid off the secretive world of offshore finance, revealing its scale to be far bigger than imagined. This week, the release of the Panama Papers by the International Consortium of Investigative Journalists builds on that legacy. It is a triumph of collaborate reporting. But its important revelations risk being lost in the complexity of its background.
The scale of the investigation is immense. 2.94 TB of data have been leaked from fourteen sources, including 12 million files consisting of 6.5 million documents, 3 million images, and 1.2 million spreadsheets, among other pieces of evidence. In terms of information storage, this is the equivalent of nearly a million Bibles. This has been poured over by over 600 journalists in 117 countries, from Mongolia to Mozambique, to Pakistan and Paraguay.
The Pandora Papers are not a single story. It is more manageable to think of them as a collection of stories, which will trickle out to the public over the coming weeks, linked by the shadowy world of offshore finance. This is a world where the super-rich can reduce the amount of tax they pay, or even hide their assets, using tax havens and anonymous shell companies. Among them are 35 current and former world leaders.
Revelations include that the King of Jordan has amassed a global property empire worth $100m, and the extent of the London property empire of President Ilham Aliev of Azerbaijan. The Queen’s crown estate has now launched an investigation into how it paid £67m to President Aliev’s family to acquire one of his properties.
The leaks also raise questions for the Conservative Party. Not because the Prime Minister has been found to be keeping money offshore, as was the case with David Cameron in 2016. But because multiple donors have been found to hide their wealth in offshore companies. One was found to have advised on a telecoms deal which turned out to be a £162m bribe to the daughter of the President of Uzbekistan.
The leaks reveal staggering hypocrisy of some politicians who rode into power with pledges to combat corruption. It turns out that the Ukrainian President Volodymyr Zelensky, who assumed office on an anti-corruption platform in 2019 (four years after playing a history teacher who did the exact same thing in the political satire Servant of the People), transferred a 25% stake in an offshore country to his friend and advisor during the campaign.
The Pandora Papers will pose uncomfortable questions for the Czech Prime Minister, Andrej Babiš, who is fighting an imminent General Election. Babiš, who has a net worth of £2.7bn, used a convoluted network of companies based in the British Virgin Islands, America and Monaco to buy a £13m chateau near Nice. He also campaigned for office on an anti-corruption ticket.
A lot of what has been exposed by the Pandora Papers, and the exposés which came before, isn’t even illegal. Avoiding tax by restructuring one’s assets to minimise the amount of tax paid is legal, and highly profitable for countries which allow themselves to become a centre of it. It is no coincidence that most tax havens are small island nations or microstates. However US states such as Delaware, and European countries like Switzerland and Ireland have also facilitated these activities.
It is easy to think that the financial affairs of the global financial and political elite are their private business, and thus should not concern ordinary citizens like us. But the consequences of this do matter, and have knock-on effects for the taxpayer. When Tony and Cherie Blair saved £300,000 in property taxes by purchasing a £6.5m Mayfair office and mansion via a shell-company in the British Virgin Islands, they kept £300,000 from the exchequer. The estimated amount of tax HM Revenue and Customs lost to tax avoidance and evasion in 2018/19 stood at £1.7 billion and £4.6 billion respectively. While this happens, the Conservative government has increased the tax burden on working people by raising national insurance rates and lowering the threshold for the repayment of student loans.
Globally, tax havens cost governments over $500bn in lost corporate tax revenue a year. Lower-income countries are disproportionately hit relative to their GDP, meaning that the offshore world is a threat to their development.
It is yet more evidence that a two-tier system exists. The ultra-rich have access to a completely different rulebook, leaving ordinary people to foot the bill. Journalist Oliver Bullough likened the shadowy world of offshore finance to its own country with its own set of laws – ‘Moneyland’. Want to set up a shell company far away in a tropical tax haven? You can hire a London-based financial advisor to help. While you’re at it, you could pick up Antiguan citizenship – and thus visa-free access to 130 countries – for a $500,000.
London, with its booming service industry and streets lined by mansions owned by shell companies, could justifiably be considered the capital of Moneyland. The UK is simultaneously on the biggest enablers of Moneyland, and one of the biggest losers in terms of lost tax contributions.
The ICIJ state that not everyone named in the papers is accused of wrong doing, including the Blairs. But the same systems which allow the super-rich to reduce their taxes can be used to launder profits from illegal businesses, and even finance terrorism.
Will the Pandora Papers change anything? We can look to the fallout from the Panama Papers to get a clue. According to an analysis by the Reuters Institute for the Study of Journalism, a fifth of countries implemented some kind of reform to address problems exposed by the papers. How effective those measures have been is a separate question. What does seem possible is that citizenship-by-investment schemes such as those in Malta and Bulgaria will come under greater scrutiny after the Cypriot programme shut down.
The Panama Papers also led to an increasing public awareness about what is going on in the corridors of power, and beyond the bomb-proof doors of central London mansions. You can even go on kleptocracy tours through the city, where journalists and anti-corruption campaigners tell you about the shell companies which own unimaginably expensive properties.
The Pandora Papers, like the Panama and Paradise Papers before, have shown it is unlikely that action will be taken to prevent these activities, since the very people with the power to clamp down on tax havens sometimes benefit from their existence. World leaders pledged to crack down on money laundering at the 2014 G20 Summit. And yet, nothing. After the release of the Panama Papers, the British government announced plans to force the owners of shell companies which own property in the UK – such as the one the Blairs used to buy their mansion – to reveal their names. These promises are yet to bear fruit.
But an absence of a global reckoning does not mean that the Pandora Papers will be inconsequential. The Chilean national prosecutor’s office has announced that it will investigate President Sebastián Piñera over his stake in a mining project in the country, and could potentially lead to charges of bribery. It is likely that more consequences will emerge over the coming weeks, or even years.
It is important to recognise that there is also the potential for a backlash against journalists involved in uncovering uncomfortable truths. A reporter for an outlet which was friendly to the Venezuelan government was fired because of his involvement with the ICIJ, the consortium who analysed and publicised the Panama Papers. Censors in China have reportedly instructed news agencies to remove articles about the Panama Papers. The backlash has also been felt in the European Union, where countries typically score higher on press-freedom indexes: the Finnish tax authorities threatened to raid journalists homes to seize documents. Chillingly, in Slovakia and Malta, journalists have been assassinated in connection with their involvement in the Panama Papers and other investigations into corruption.
Regardless of their consequences, the release of the Pandora Papers should be celebrated as a show of unified force from investigative journalists across the world. As we enter what Reporters Without Borders call a “decisive decade” for journalism, the ICIJ investigation reiterates the value of a free press to told the powerful to account. Moneyland still has many secrets to reveal, some of which will be highly consequential. But as citizens, it is our duty to arm ourselves with an understanding of how this world works so we can ask the right questions of our leaders.
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