The Bribery and Corruption component of Panama Papers and other offshore
investments
The International Consortium of Investigative Journalists
has published a searchable database that reveals the secrecy of nearly 214,000
offshore entities, created in 21 jurisdictions, from Nevada to Hong Kong
and the British Virgin Islands. The primary reasons for the enormous interest
in the information on offshore companies are the names and details of the
real owners of the often smoky company structures.
With Panama and other exposures, transparency
and accountability issues will haunt those enterprises that are trying
to avoid taxes, greenwash dirty money (money laundering), steal money
from public treasuries or hide liquid assets. In future, they have to
be more careful because eventually the concealments can be tracked down.
Going forward, the world is only going to become more transparent and
accountable.
However, Panama is not the only small country that has enacted tax and
other legislation which makes it attractive for non-resident lawbreakers
or suspicious corporations without any commercial activity, just to have
an 'office' to invest anywhere in the world, using the local banking system.
In addition, the secrecy and lack of transparency make the venture attractive
as the country gains economic advantages, generates revenue and creates
employment in the financial, audit and legal sector.
But not all companies or persons use the facility in order to hide assets
from the authorities. There are legitimate reasons to establish a business
as an offshore entity as long as the real names are used, financial data
are disclosed and taxes are paid and audited disclosures and financial
transactions are reported to the regulators.
An example of such entities are the owners that have a temporary residence
or company in another country or live in a country but have significant
investments in several countries. There can be other relevant reason e.g.
for a pension, insurance or an investment company to limit any legal or
lawsuits in countries where lawyers are trigger happy to sue.
However, such activities are unjustified if the practice is considered
as a prime opportunity for fiscal dumping, tax evasion or bypass a legal
tax framework. When investments are allowed to be made anonymously with
guarantees of anonymity and the legal refusal to share information on
the stakeholders and transactions within the financial services institutions,
all sorts of alarms must be raised.
Disclosure to fight corruption
If tax evasion is an economic problem, questions the integrity of the
ruling elite in some countries, the main issue is, who benefits from the
practice. This is the primary reason why the Panama Papers will likely
lead to criminal investigations into a particular number of business leaders,
public officials and politicians across the globe.
When the secrecy of offshore investments allows companies and individuals
to launder the money earned through illegal activities or encourages the
profitability of bribery, fraud, and corruption, organized crime is involved
in recycling illegal gains, gambling or online lotteries, foreign real
estate investment, investment in art, narcotics and other means of dealing
with illegal money.
Investing in offshore tax havens is considered the simple way to dispose
of the illegally 'earned' cash through bribes. After the transaction is
registered anonymously, the recipient can purchase real estate anywhere
in the world, or use the money for family members or others in the corruption
supply chain.
The full dataset is also available for download.
https://panamapapers.icij.org/blog/20160509-offshore-database-release.html
