Secret files show how the world's wealthy hide their fortunes
This week we are closely watching the disclosures emerge from the Pandora Papers, a massive leak of secret data about the illicit financial activities of the super-wealthy from 200 countries. In the days to come, we will learn more about the tax avoidance of billionaires and the ways states like South Dakota and Florida have become U.S. tax havens.
Here
are Five Things You Need to Know:
1.
The Largest-Ever Journalistic Collaborative, More Significant Than the Panama
Papers
The
Pandora papers are a massive expose about the secret shell games and tax
avoidance schemes of the world's ultra-wealthy, from over 200 countries. This
massive undertaking involved 600 journalists from 117 countries and was
coordinated by the International Consortium of
Investigative Journalists (ICIJ) in what they describe as the
"largest-ever journalistic collaborative." See initial
coverage here in The
Washington Post and The
Guardian, two of the key media outlets part of the consortium.
Five
and a half years ago, the ICIJ released the Panama Papers, which focused on a
leak from a single law firm, Mossack Fonseca. According to Gerald Ryle,
director of the ICIJ, the Pandora Papers are the "Panama Papers on
steroids." See a summary prepared by the ICIJ here.
The
Pandora papers draws on leaks from confidential records at 14 different
offshore wealth service firms in Switzerland, Singapore, Cyprus, Samoa,
Vietnam, Hong Kong, as well as firms in well-known tax havens such as Belize,
Seychelles, Bahamas and the British Virgin Islands (BVI). These firms
help wealthy individuals and corporations to form trusts, foundations,
incorporate companies, and establish other entities in low- or no-tax
jurisdictions.
The
Pandora Papers analyzed 12 million files from these firms including leaked
emails, memos, tax declarations, bank statements, passport scans, diagrams of
corporate structures, secret spreadsheets and clandestine real estate
contracts. Some reveal the real owners of opaque shell companies for the first
time.
2. The Global Implications Are Huge and Politicians Will Be Embarrassed
The
Pandora Papers are truly a global story, with major implications for many
countries. Some of the largest revelations involve Russian nationals with
connections to Vladimir Putin and elites from Latin America. For example,
journalists from the Spanish daily El Pais,
exposed the "Secret Vault of Mexican Billionaires." In
Mexico they found over 3,000 wealthy and powerful Mexicans in the 11.9 million
leaked files, with connections to current and previous presidents. They
discovered a common pattern of wealthy Mexican elites using a single Panamanian
law firm, Alcogal (Aleman, Cordero, Galindo & Lee), along with shell
companies and trusts in the British Virgin Islands, and real estate purchases
in Miami and around the US.
The
Pandora Papers will hopefully turn up the heat on the politicians that maintain
the wealth-hiding status quo. The files list over 330 current and former
politicians and world leaders from 91 countries that are implicated in
transactions. This is twice the number implicated in the 2016 Panama Papers.
Political
leaders include King Abdullah II from Jordan and former British Prime Minister
Tony Blair (according to The
Guardian, Jordan blocked the ICIJ web site hours before the Pandora
papers release). This explains why existing political bodies seem incapable of
closing down systems that enable wealth hiding and tax dodging.
"It
demonstrates that the people that could end the secrecy of offshore systems...
are themselves benefiting from it," said Gerald Ryle, director of the
ICIJ. "So there's no incentive for them to end it."
3.
The US is Exposed as a Global Tax Haven
U.S.
citizens are under-represented in these leaks, largely due to where the service
providers are located. No U.S. wealth-advisory firms were part of the leaks.
Nonetheless over 700 companies revealed in the Pandora papers have ties to
beneficial owners connected to the United States.
The
Pandora Papers do, however, expose how the U.S. has become a global destination
for global wealth, some of it ill-gotten. The Panama Papers, the Paradise
Papers (Bermuda and Singapore) and Luanda Leaks (Angola) all reinforced the
misperception that most of these financial shell games take place "off
shore," in secrecy jurisdictions and tax havens in small countries with
weak banking laws.
But
the Pandora Papers show that the U.S. and states like South Dakota now rival
notoriously opaque jurisdictions in Europe and the Caribbean in financial
secrecy. The states with the most active trusts revealed in the files were
South Dakota (81), Florida (37), Delaware (35), Texas (24), and Nevada
(14).
4.
Shady Billionaires from Around the World Are Going to South Dakota
Findings
suggest that South Dakota has sheltered billions in wealth linked to wealthy
individuals previously accused of serious financial crimes and labor
violations. Two examples: Brazilian orange juice baron, Horst Happel, was
fined $88 million in 2016 for underpaying his workers. In 2017, he moved
substantial wealth to a trust in South Dakota. Carlos Morales Troncoso
was the former vice-president of the Dominican Republic. He ran a sugar company
called Central Romana sugar company that was accused of human rights
violations. He set up trusts for his daughters in the Bahamas that were moved,
after his death, to South Dakota. The reason global money is flowing to the
"Mount Rushmore State" is because of their low taxes and advantageous
dynasty trusts.
5.
The Pandora Papers Will Boost the Case for US Tax Reform
The
Pandora Papers will hopefully give a boost to the US Congress in passing a
progressive tax plan to fund the Build Back Better program—and that includes
money for IRS enforcement to ensure the wealthy pay their fair share.
As The Guardian reports: "The Pandora papers also place a revealing spotlight on the offshore system itself. In a development likely to prove embarrassing for US President, Joe Biden, who has pledged to lead efforts internationally to bring transparency to the global finance system, the US emerges from the leak as a leading tax haven. The files suggest the state of South Dakota, in particular, is shelter billions of dollars in wealth linked to individuals previously accused of serious financial crimes."
Chuck Collins is
a senior scholar at the Institute for Policy Studies where he co-edits Inequality.org, and is
author of the new book, "Born on Third
Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth
Home, and Committing to the Common Good." He is
co-founder of Wealth for the Common Good, recently merged with the Patriotic
Millionaires. He is co-author of "99 to 1: The Moral
Measure of the Economy" and, with Bill Gates Sr., of
"Wealth and Our
Commonwealth: Why America Should Tax Accumulated Fortunes."