The Panama Papers

If in the past two months you haven’t heard about the Panama Papers then you must have actually been living under a rock.

The Panama papers are the largest leak in the history of data journalism. 11.5 million documents, 2.6 terabytes of data, have been leaked to the journalists of Süddeutsche Zeitung, a German daily newspaper. There was so much data that the journalists shared the information with the ICIJ, the International Consortium of International Journalists, who in turn shared it with 400 journalists from 80 different countries. What is surprising is they managed to keep the information under raps for a whole year while they sifted through the data. Only in April did the first articles start being published regarding the Panama Papers. These documents exposed the rich and powerful who use an intricate network of offshore companies to hide their wealth from authorities and the public eye.

Almost everyone who is famous or powerful were implicated. From Lionel Messi to Putin, from European politicians to the Middle Eastern ruling class. Some of the most interesting stories don’t involve despots or dictators but democratically elected politicians from Europe. There is the case of David Cameron who owned shares in his late father’s offshore investment company or Sigmundur Gunnlaugsson the prime minister of Iceland who failed to disclose that his wife’s offshore company owns bonds from three defunct Icelandic Banks that his government is negotiating with, a clear conflict of interest. He was the first casualty of the leaks as he was forced to resign last month. There is now a famous interview of him walking out when a journalist asks him about his wife’s company.

Fans of Real Madrid can rejoice that at least their golden boy, Cristiano Ronaldo, wasn’t mentioned in the Panama Papers unlike his counterpart in Barcelona who has been mired in tax evasion court cases since last year. Messi was already in trouble with the Spanish tax authorities. He is accused of evading tax in the tune of 4.5 million Euros that he owes the Spanish Government. The Panama papers reveal just how he managed to hide his money. It was shown that from 2005 Messi sold his image rights to offshore companies situated in different South American countries. If any company is interested in using Messi in their advertising, then they will have to pay the fees to these offshore companies and the Spanish Government can only look on. Of course, Messi and members of his family own these offshore companies so essentially Messi sold his image rights to himself.

But some of the leaks show a very dark side to offshore companies. Documents showed that from 2011 to 2013 the Syrian government was using offshore companies, provided by Mossack Fonseca, to avoid sanctions and purchase fuel needed by the Syrian air force. Mossack Fonseca’s response “We did not know that Assad and his allies were using and abusing our services”. The Panama Papers also exposed a scheme by Heritage Oil Corp; a US based Oil Company, to avoid paying taxes to the Ugandan Government. In 2010 Heritage Oil sold 50% of its stake in Ugandan Oil fields to a local company for $1.5 billion. Under Ugandan tax law, Heritage Oil owes the Ugandan Government $400 million in Capital Gain tax. So what does Heritage Oil do? Thanks to Mossack Fonseca all it took to avoid paying its Capital Gain tax was the switch of an address from the Bahamas to Mauritius who does not have a capital gains tax. The Ugandan government has been in courts trying to force Heritage Oil to pay what its due ever since.

Will the Panama Papers spell the end of offshore tax heavens? Now don’t get me wrong, establishing an offshore company is a completely legal practice. But the leaks showed that 95% of Mossack Fonseca’s business was to help its clients hide assets from the tax collector.

If the subject interests you, I suggest visiting Sueddeutsche Zeitung and ICIJ’s website regarding the leak. If you enjoy reading spy thrillers, works of fiction or fantasy then the Panama Papers are for you. The Panama Papers expose CIA operation in the 80’s like the Contra affair where the CIA used offshore companies to sell weapons to the Iranian government.

Are you a football fan? Other than Messi the Panama Papers exposes even further misconduct by FIFA. One member of FIFA had established alone over 400 offshore companies.

Are you a World War II buff? The Panama Papers shed light on a painting that has been missing for 52 years since the Nazi occupation of Paris. Now it has surfaced right here in the dry-dock of Port Franc in Geneva Switzerland. The painting is being held there as the grandson of the original owner sues the current owner, Helly Nahmad, the famous American art dealer.

I can continue with the story for another 10 pages but I don’t want to rob you, the reader, from that “Ooooh!” moment. Truly the Panama Papers are stranger than a work of fiction.

Author: Abdullah Kaki, Master in International Business student, 2016

 

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