AROUND 200 TRUSTS WERE CREATED BETWEEN 2000 AND 2019 TO HIDE THE WEALTH OF POLITICIANS, CELEBRITIES AND BILLIONAIRES

Pandora Papers: US a 'go-to' for hiding wealth of world's richest, data leak reveals

 

By Srivats Lakshman  

 

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October 3, 2021

 

 

The world's richest and most powerful have once again been exposed in a massive new document leak. Dubbed the 'Pandora Papers', a cache of 11.9m files exposes how over 300 world leaders, politicians, and celebrities have been hiding their wealth through various tax-havens. Among those named include Russian President Vladamir Putin, pop icon Shakira, King Abdullah II of Jordan, former British Prime Minister Tony Blair and Indian cricket legend Sachin Tendulkar.

The Pandora Papers have been dubbed as the "biggest trove of leaked offshore data in history", surpassing that of even the Panama Papers that exploded in 2016. Among other things, the Pandora Papers reveal the secret assets of some of the world's most powerful people, such as a $4.1 million apartment purchased by Putin's alleged lover in Monaco. Also named is Ukrainian President Volodymyr Zelensky, who allegedly moved his stake in a secret offshore company shortly before his 2019 election victory. 

Notably, no US politicians or celebrities have been named just yet, but that doesn't mean the country is completely off the hook. The International Consortium of Investigative Journalists (ICIJ), which first reported on the documents noted that the nation is a major haven for offshore bank accounts. US-based trusts have been the "go-to" for financial secrecy, handling assets worth over $1 billion across the globe. The massive expose shows just how key the US is to the wealth of the rich and powerful, interestingly in Republican-controlled states. 

What are the Pandora Papers?

The papers contain 2.9 terabytes of data including documents, images, emails, and spreadsheets among other forms of data. It documents how over 330 of the world's richest and most powerful people used offshore tax havens and entities to hide their wealth, and invest in assets so as to avoid paying taxes. According to the ICIJ, the papers "reveal how banks and law firms work closely with offshore service providers to design complex corporate structures. The files show that providers don’t always know their customers, despite their legal obligation to take care not to do business with people who engage in questionable dealings."

Over 27,000 companies have been identified, used as vehicles by the rich to hide everything from property and yachts, to incognito bank accounts and looted Cambodian antiquities. While numerous billionaires have been identified, the focus right now is on politicians. Ukraine leads the way in that regard, with 38 politicians being linked to the papers. The nation is closely followed by Russia, with 19 politicians. Other nations linked include Brazil, India, Khazakstan, China, and the UK. 

As described by The Guardian, "the leaked records vividly illustrate the central coordinating role London plays in the murky offshore world." Along with London, it appears the US has a crucial role to play. The US appears to be a leading tax haven, sheltering billions of dollars linked to "individuals previously accused of serious financial crimes." 

The US' role in offshore taxes

According to reports, it appears the US is a major driver of offshore wealth through trusts house the wealth of billionaires, untaxed. ICIJ identified more than 200 trusts settled or created, in the U.S from 2000 to 2019, connecting people from 40 countries. "US trusts held assets worth a total of more than $1 billion. Those included U.S. real estate and bank accounts in Panama, Switzerland, Luxembourg, Puerto Rico, the Bahamas, and elsewhere," the ICIJ reported. 

Leading the way is South Dakota, with 81 trusts being located in the state. Other major states include Florida (37), Texas (24), and Nevada (14). In what is expected to be a major embarrassment for President Joe Biden, his home state of Delaware also appears to be a key player in the complex system, housing 35 trusts. In all, 15 US states have been identified in the papers. "Over the past decade, South Dakota, Nevada and more than a dozen other U.S. states have transformed themselves into leaders in the business of peddling financial secrecy," ICIJ reported. 

The expose reveals that the US is a major tax haven, alongside other notable tax havens like Panama, Monaco, Switzerland, and the Cayman Islands. The ICIJ has not yet named all those companies or individuals with US-based trusts, but that data is expected to be made available in the coming days. The group is working with major publishers like The Guardian, The BBC, and others to study and verify the data. 

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Why didn’t Jeff Bezos, Elon Musk or Bill Gates' names appear in Pandora Papers leak?

 

By Srivats Lakshman  

 

                                                     Jeff Bezos and Bill Gates  

Over 300 politicians, celebrities, and billionaires have been named in the massive Pandora Papers leak published on October 3. From Secretary of State Rex Tillerson to former Canadian PM Paul Martin and even Queen Elizabeth, a large number of the world's most wealthy and powerful have been publicly named in the explosive report. However, if you look very closely, you'll notice some key names missing.

From Jeff Bezos to Elon Musk, and Bill Gates to Warren Buffet, the names that dominate Forbes' list of richest people are conspicuously absent from the Pandora Papers. In fact, out of the world's 20 wealthiest people, no one is mentioned in the Pandora Papers. Most of those linked to the data leak are politicians or those related to politicians such as Vladamir Putin's close friend Sergey Roldugin.

That's not to say some of the wealthiest people aren't named. From pop idol Shakira to Indian cricket icon Sachin Tendulkar, there are quite a few millionaires linked to the data leak. But the list is missing some of the world's richest people. It isn't an accident though but by design. Experts have a key theory for why names like Buffet, Bezos, and Gates aren't on the list, and it has to do with the global tax system.

Pandora Papers expose tax havens

Before we explore why those names aren't on the list, here's a quick understanding of what the Pandora Papers reveal. The massive data dump, a cache of 11.9m files, exposes the complex and consulted financial web of tax havens, banks, and offshore companies and trusts that rich people use. Through this intricate web, the ultrawealthy can avoid paying taxes while buying yachts, mansions, insurance, and even artwork.

To be clear, having an offshore company isn't entirely illegal, but the papers show how the system is being used by some rather questionable people, including some who have been "accused of serious financial crimes."  It also puts the spotlight on how some politicians are benefitting at a time when global economies are struggling to recover from the pandemic, with a bulk of the recovery borne by ordinary taxpayers. 

To sum it up, the papers show how politicians are using international offshore havens to avoid paying tax, even though they need to. Most accounts linked to the Pandora Papers have been designed to conceal assets and evade taxes on those assets, vital for politicians who are constantly vying for public sympathy and attention. But when you are as rich as Musk, or Buffet, that's not at all an issue. 

Why the ultrawealthy aren't mentioned

According to experts, the reason the world's richest people aren't mentioned in the papers is because they pay so little tax, they simply don't need the intricate system of offshore accounts and havens. A June 2021 Forbes report noted that the 25 richest Americans paid a "true tax rate" of 3.4% on wealth growth of $401billion between 2014 and 2018. That's compared to the 14% the median American household pays in federal taxes.

Because of that low rate of tax, experts told The Washington Post the uber-rich have "less incentive to seek offshore havens" as compared to those mentioned in the papers. Another reason is that they could be using different offshore havens, like the Cayman Islands, that aren't mentioned in the Pandora Papers. It is also possible they could be using other entities and trusts to hide their money, which is yet to surface.

Ultimately though, exposes like the Pandora Papers indicate how politicians and those connected to them are able to benefit from the complex global financial system. Unlike those topping Forbes' charts, they have a greater incentive to hide their wealth because of the nature of their work. It also highlights the economic disparities and raises questions about the characters of those running for office. "These systems don't just allow tax cheats to avoid paying their fair share. They undermine the fabric of a good society," former FBI officer Sherine Ebadi told The Post.