Tax havens can be utilized by businesses to benefit from the low taxation rates for foreign investors. However, they can also be used to hide an individual’s personal wealth as well as tax avoidance. Through the work of the International Consortium of Investigative Journalists (ICIJ), close to 12 million documents, including emails, bank statements, and passport copies, have been leaked regarding the flow of money and property in this shadow economy.
These documents, known as the Pandora Papers, expose the hidden financial affairs of the world’s ultra-rich, who have been avoiding a great deal of taxation. They include 330 politicians from 90 countries, multiple media figures, and celebrities. These high-profile individuals include King of Jordan Abdullah II, former British Prime minister Tony Blair, President of the National Bank of Pakistan Khan Arif Usmani, Brazilian Minister of Economy Paulo Guedes, Colombian singer-songwriter Shakira and Canadian racing driver Jacques Villeneuve.
Their use of tax havens is mainly through offshore companies and shell companies. Offshore companies are legal entities in different countries. These companies are often located on foreign lands such as the British Virgin Islands, Belize, and the Bahamas. Like shell companies, they are often used to maneuver financial assets. Across the globe, specialized firms will set up these companies under an actual entity, although there is no real enterprise. Its entire purpose is to circulate an individual’s wealth. Many of the 1% have been able to move their money across the world through hidden jurisdictions while paying little to no tax on these funds. These funds cumulate to a whopping 32 trillion dollars. In addition to an accumulative flow of money, real estate is also a staple in the Pandora Papers. Many have purchased properties, ranging from New York, Malibu and London, under their offshore company.
Although their actions are not illegal, they leave a bitter taste in most people’s mouths. Some might say it illustrates the lack of ethics behind tax dodging. The ICIJ insinuates that the Pandora Papers might be the tip of the iceberg of more financial secrecies to be uncovered in the years to come.
By Claudia Bruscia