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Panama law firm Mossack Fonesca was hit last week with a data leak of unprecedented size, exposing a web of tax evasion that ensnared many of the world’s elite. The leak, 11.5 million files in total, is the largest in history, and was obtained from an anonymous source by the German newspaper Suddeutsche Zeitung.
The massive trove of data reveals how some of the world’s wealthiest individuals are able to hide their wealth through secretive offshore tax regimes. Twelve national leaders can be found among the 143 politicians that have been uncovered among the documents, including the president of Ukraine, the prime minister of Iceland, and the prime minister of Pakistan.
The schemes that are utilised by Mossack Fonesca are designed to hide wealth from their government, family and the public. Their clients have a variety of reasons to do this, whether it is to simply minimise tax, to dodge international sanctions or to launder money from criminal operations. The firm does this by setting up anonymous ‘shell companies’, existing only on paper, in tax havens such as the British Virgin Isles and Panama itself. These governments allow for the companies to have next to no tax and high levels of secrecy. The fact that schemes such as this were happening was common knowledge, but the Panama Papers have unveiled the scale of the activity and the persons involved.
In the aftermath of the leak Iceland was rocked with protests in its capital of Reykjavik, with thousands of protesters calling for the resignation of the Prime Minister Sigmundur Davio Gunnlaugsson. The prime minister and his family had been caught hiding millions in offshore accounts, something he failed to declare as an interest when he became prime minister in 2013. Within days the prime minister resigned, handing control of the country to the deputy leader of his party.
However Iceland is not the only country that has faced controversy over the Panama papers. According to reports by The Guardian, a 2 billion dollar trail of offshore investments and shell companies leads to Russian President Vladimir Putin. While the president’s name may not appear directly in the papers, many in his inner circle are shown to have earned millions from deals that could not have occurred without his patronage. Putin’s best friend Sergei Roldugin was found to have been placed in charge of a series of assets totalling in 100 million dollars, the income of which appears to have been Putin’s to spend.
While not all of the persons indicted in the documents are conducting illegal activities, the data leak has caused outrage over the place of offshore tax havens within our society. According to economist Gabriel Zucman, 8% of the world’s wealth is hidden in offshore accounts. Such staggering numbers indicate the growing disconnect between the global elites and the rest of society, for whom the panama papers seem to be validation of this contemporary sentiment.