Reports from the Pandora Papers have started to trickle through, from 3 October 2021 onwards. The world’s largest example yet of global collaborative investigative journalism was coordinated by the Washington, DC-based International Consortium of Investigative Journalists (ICIJ). The ICIJ worked with 140 media organisations and relied upon the combined efforts of more than 600 journalists from 117 countries. In the UK, the investigation was led by BBC Panorama and The Guardian newspaper and included cross-checking offshore company-owned UK property as listed in the Land Registry against files revealing the identity of “ultimate beneficial owners” of these offshore property-holding companies.
A worldwide total of 11, 903, 676 leaked documents, including emails, images and spreadsheets, obtained from fourteen financial services providers, provided the material for the Pandora Papers, which came to the unsurprising conclusion, previously reached by the Offshore Leaks project (2013), the Panama Papers (2016), and the Paradise Papers (2017), that global “elites”, including high-profile democratic politicians, the rulers of corrupt and authoritarian states, members of royalty, billionaires, and other “politically exposed people”, including generous donors to political parties and assorted celebrities, are shy about declaring their earnings and assets and then paying their due taxes on the same.
Given the chance, many people, if not most, would choose to avoid paying taxes if they could. Unpopular taxes that disproportionately affected ordinary citizens led to the brief interruption of monarchy in 17th century England, the 18th century Boston Tea Party, several Poll Tax riots over the centuries, and Gandhi’s Salt Satyagraha in the 20th century, just to give a few examples of potentially regime-changing expressions of popular sentiment. It is therefore not a surprise that the world’s wealthy and powerful elites feel the same and have created their own tax avoidance infrastructure, albeit within existing political structures, while bypassing domestic legal restrictions and tax enforcement.
Wealth can be amassed in many ways, ranging from entirely legal to totally corrupt-in which case it can be described as “dirty money”. By definition, dirty money requires laundering, to both avoid criminal investigation and prosecution as well as to evade heavy taxes. Tax avoidance is entirely legal, although at times morally questionable and unethical, and merely exploits loopholes in tax laws and benefits from secretive tax regimes and liberal tax reliefs in offshore as well as, increasingly, onshore “business-friendly” jurisdictions.
The lucrative business of tax avoidance has created a new class of professional intermediaries, who facilitate and then conceal the financial affairs of their paymasters. Participants in this most lucrative chain of transactions include accountants, advisers, bankers, fixers, lawyers, and registration agents.
Money, dirty or otherwise, that is being hidden for either legitimate reasons of privacy or security, or to escape the attentions of tax-collection and law enforcement agencies, finds its way into repositories that are shrouded in secrecy while staying on the right side of the law. Besides investing in high-end art, luxury items such as private jets and yachts, commercial property, professional football teams, and the like, there remains the problem of what to do with any unspent surplus. This excess has traditionally made its way to offshore tax havens, where it is easy to set up shell companies (no office, no employees, no trade) that are listed on the stock exchange, secrecy is guaranteed, and corporation tax is either acceptably low or non-existent. More recently, onshore tax havens have also emerged, for example as trusts in certain American states (Alaska, Delaware, Nevada, New Hampshire, and South Dakota), as well as in international financial hubs, such as Singapore.
The Pandora Papers tell us nothing new about the tax-avoidance practices of the ultra-wealthy. While various names may have been mentioned, it seems likely that in most cases this will not lead to any further action. Until the political will gets stronger and tighter legislation and global cooperation follow, inertia and inaction will perpetuate tax avoidance practices. It cannot, however, be doubted that wealth begets wealth, as accumulated wealth generates more income, and that the wealthier people get the less willing they become to share this with others less fortunate by paying taxes that governments collect.
Ashis Banerjee