The Panama Papers

How to be Rich and Avoid Your Taxes

Arturo Hilario / El Observador

On October 11, 2011 presidential candidate Bernie Sanders warned about the the Panama Free Trade Agreement, which would allow US corporations and those with money to place funds into untaxed shell corporations, thus leaving the hidden wealth intact.

“Its (Panama) entire economic output is only $26.7 billion a year, or about 2/10’s of 1 percent of the American economy. So I think no one is legitimately going to stand here and say that trading with such a small country is going to significantly increase American jobs. Then why would we be considering this trade agreement with Panama? What’s going on there?”

This past week a coalition of reporters and media outlets began to publish their findings on a 2.6 terabyte leak of information from Panamanian law firm Mossack Fonseca, which has led to unprecedented character blows to various nations leaders past and present by exposing their offshore accounts.

These tax haven accounts safely hid the money trails of these individuals from being taxed appropriately by their governments. Those that have been brought to light include entertainment stars, world leaders, business moguls and even Chinese nobility, which has led to its government censoring any internet traffic regarding it (even non specific hashtags like #panama are being blocked).

Within the 11.5 million documents in the Panama leak are more than 140 individuals who are or, at one time were, politicians. Politician’s family members make up a large portion of the known names in the data. Russian president Vladimir Putin has worked with, and is related to, some of those in the files. Iceland’s Prime Minister Sigmundur David Gunnlaugsson and his wife had accounts through Fonseca. After much chagrin and backlash from Icelandic citizens, he formally stepped down from his position on Tuesday. By Wednesday a new Prime Minister was chosen.

Beyond the politicians were many well known business moguls and athletes. Members of FIFA governing party were named, as well as Footballers Willian (full name Willian Borges da Silva) and Lionel Messi and his father. FIFA has said they will financially back up their superstar Messi in light of these findings. Even legendary filmmaker Stanley Kubrick was included in the leak, with trusts in his 3 daughters names, likely created after his death in 1999. His daughters took over his holdings and his 18-bedroom Childwickbury Manor, which is also property of one of these shell corporations set up through Mossack Fonseca.

The reports were created by world media outlets working with the Washington-based International Consortium of Investigative Journalists (ICIJ). Initially an anonymous tipster reached out to the German newspaper Süddeutsche Zeitung a year ago, with the intention of leaking financial information which they would find to be of much interest. What they ended up receiving was what could be called a score of a lifetime.

As far as legality goes, inactive shell companies are very much legal, and the argument of why these account are legal has come back to the forefront of world governments minds.

One of the leaks was a memo from a Mossack Fonseca partner which read: “Ninety-five per cent of our work coincidentally consists in selling vehicles to avoid taxes.”

So far the effects of the Panama Papers leak has been in some places swift, in others just beginning. As of this writing the Chinese government still continues to deny the documents and claim it is an act of US propaganda. The Guardian exposed that UK Prime Minister  David Cameron admitted to profiting from his late father’s offshore trust fund, which is included in the Panama Papers.

In the 2011 speech where Sanders addresses President Barack Obama about the Panama Trade Agreement he adds, “our country is losing up to $100 billion dollars a year as corporations stash their money in postal addresses in Cayman Islands, Bermuda, and in Panama.”

With elements of  world powers dodging their country’s taxes, the fervor over the leak has pushed some countries to pursue their politicians for answers. What will happen is to be seen, but these legal accounts have shown were the wealthy hide their money, and that there is a fundamental problem if most of the people in the world do pay their taxes while other citizens find ways not to.