Just read about the Panama papers very briefly and can’t really get a full grip of what it is, just the gist…
In: Economics
Rule 2.
Better to check r/outoftheloop.
To enable international trade, there must be taxation laws that allows money to flow from one country to another without taxation.
Now, imagine that you would want to use this basic idea to entirely avoid paying taxes.
What do you need then? You need a flow of money that is difficult to oversee. You need someone who helps you move money to and from countries where it’s difficult – if not impossible – to ask a bank who the money belongs to.
Panama is a country where it’s somewhat difficult to look into where money comes from and where it goes.
A law firm in Panama has specialised in tax evasion setups (entirely legal, based on the basic idea of free flow of money. Often illegal or at least immoral in your country of residence to make use of this kind of services) and they have been doing it A LOT.
Someone in their staff with access to legal and financial documents (electronic documents, I assume) blew the whistle on them and gave a really large set of documents to an international corporative organisation for reporters.
The reporters, from several different countries, looked into the documents FOR MONTHS. And then, on the very same day, they all released information about their rich celebrities, royalties, politicians (including some prime ministers) and some organisations that are trying to play the poverty- and/or moral-card all the time. Internationally. Globally.
The result, except the bit where a lot of national tax authorities now have proof of tax evasion and sometimes tax fraud, was that a whole lot of people were publicly shamed. Some politicians resigned. Some complies have tossed out their CEO’s and some celebrities are now left without their contracts. And so on.
Pretty interesting few days, that was.
You know rich people?
You know how they like money?
Turns out that pretty much all of them were evading paying taxes on that money. Like, a lot of taxes. Billions of dollars, even.
Rich people tend to stay rich by avoiding paying the taxes that poor people do.
One of these tricks is storing the money outside of the country where the tax should be paid. Places like Panama are “tax havens” where money can be hidden without tax being paid.
The Panama papers was a leaked set of documents exposing specific instances of this crime by high-profile people.
It was a giant leak of documents from a Panama-based financial services company that mainly dealt with wealthy people’s private bank accounts in tax havens using shell companies. You know the stereotype of the ‘Swiss bank account’ being used to hide large sums of money in foreign countries where your home government couldn’t tax it? That’s basically this, but mainly in Caribbean nations nowadays.
People named in the documents included heads of state, relatives of royals, government officials, businessmen, celebrities, and more. The majority of them were from Europe, the Middle East, and South America, with the highest ranking person named being King Salman of Saudi Arabia. Lots of people involved in FIFA were named, including their President.
While this is generally scummy, it’s not necessarily illegal in and of itself in most countries due to loopholes(hell, the fact that it’s legal is why so many people went for it in the first place). However, some of the shell companies set up were involved in things like fraud, organized crime, and terrorism.
One of the more notable things that resulted from the investigation was a political crisis in the Mediterranean island nation of Malta. Maltese journalist [Daphne Caruana Galizia](https://en.wikipedia.org/wiki/Daphne_Caruana_Galizia), who was in the middle of investigating ties between shell companies the Panama Papers to both the Maltese government and organized crime, was killed by a car bomb. It’s believed that she was killed by the mob with the aid of a prominent Maltese casino owner who had shell companies mentioned in the Papers. Investigations into her death not only revealed that several cabinet ministers were involved in shell companies in the Papers, but that the Prime Minister had also tried to stymie the murder investigation to protect his reputation. General outrage over both his cabinet’s corruption and his stonewalling the investigation led to his resignation in 2019.
It was basically proof that a lot of the richest people and biggest companies in the world are engaged in complex schemes of fraud, money laundering and tax evasion via offshore shell companies.
It was a ton of leaked documents from a Panamanian law firm called Mossack Fonseca that confirmed widespread tax evasion and fraud by a wide range of corporates, celebrities and politicians worldwide,
Latest Answers