What are the Paradise Papers?
Definition: Paradise Papers refers to a massive leak of financial documents that showed the great lengths, politicians, world leaders, and celebrities are willing to go, to hide wealth in offshore accounts and avoid paying taxes.
A German newspaper, Süddeutsche Zeitung, is the perpetrator behind the leak that contained 13.4 million files made up of 1.4 terabytes worth of data.
What Do The Files Show?
The paradise papers leak underscored how the offshore ecosystem is bigger and complicated than initially thought. First, it showed the myriads of ways firms and individuals are using to avoid paying due taxes on income using artificial structures. While most of the schemes used were legal, some were not.
The leaked files highlighted tax engineering schemes that the wealthy have used to hide wealth in offshore accounts for more than 65 years. Half of the leaked data showed loan agreements, financial statements as well as trust deeds, emails, among other paperwork tied law firm, Appleby, with operations in Bermuda.
Part of the Paradise Papers leak also contained half a million documents tied to Singapore firm Asiaciti as well as 6 million documents made up of company registries in 19 jurisdictions. The German Newspaper went on to share the leaked files with 96 media partners for analysis, pooling together 381 journalists in 67 countries.
The paradise paper showed how some of the wealthiest people in the world, as well as celebrities, had schemed to evade paying taxes in their homelands. Similarly, the leak features some of the largest multinational companies in the world made up of the likes of Apple, Nike, and Facebook.
Paradise Papers Key Revelations
The world’s largest commodity trader Glencore found itself entangled in the scandal after it emerged it had diverted millions of dollars into tax havens as part of a plot to avoid paying due taxes. The leak also showed that the company had conducted $25 billion worth of currency swaps, having also made a loan of $5 billion to Israeli billionaire Dan Gertler.
The Paradise Papers leaks also showed how the Russian Government had invested huge chunks of money in some of the biggest tech companies in the world. Investments in Facebook and Twitter appear to be some of the biggest stocks closely followed by the Russian government. The two social networking giants had allegedly received multi-million dollar investments from Russian state financial institutions.
Similarly, the paradise papers showed extensive dealings involving Donald Trump cabinet members. For instance, U.S commerce secretary, Wilbur Ross had invested in a shipping firm with close ties to Russian President Vladimir Putin.
Entangled in the massive leak was Queen Elizabeth II, as well, who apparently had close to $13 million in private investment funds in the Cayman Islands. It also emerged that part of the Queen’s money had gone to a retailer facing charges of exploiting low-income families and vulnerable people.
The leak also showed how Prince Charles had made a big fortune from an investment in a friend’s offshore firm. It also emerged that a former U.K minister who had vehemently defended tax avoidance has a Bahamas trust to protect his wealth. It also appeared that a top Democratic donor in the U.S had used the tax haven scheme to build a vast $8 billion private wealth fund.
Formula One Champion Lewis Hamilton was also adversely mentioned in the Paradise Papers after it emerged he had avoided paying taxes on a €17 million jet. Other celebrities mentioned as part of the tax haven scheme include Harvey Weinstein and Shakira. Gary Lineker had allegedly used an arrangement that allowed him to sell homes in Barbados tax-free.
Summary
Appleby, which facilitated most of the tax haven scheme, has denied any wrongdoing on itself as well as by its clients. While the use of offshore bank accounts isn’t illegal, the fact that such schemes are often used to propagate corruption and launder money has always aroused mixed reactions.