How the Global Rich Exploited Secretive Offshore Tax Havens?

On June 21, the second set of Panama Papers was released by media agencies, bringing the spotlight back to the offshore financial dealings. Dubbed as Panama Papers: The Aftermath, the latest leaks are said to comprise more than 1.2 million new documents, of which, at least 12,000 are linked to Indians. The new leaks revealed how Mossack Fonseca, the Panamian law firm which was at the epicenter of the 2016 leak, attempted to cover up its deceptive attempts in response to the global crackdown, thus confirming the existence of clients earlier exposed, and also unmasked its new customers.

Over the past few years, the series of media revelations on the international tax frauds by celebrities, politicians, and criminals mainly involving secret offshore havens (based on leaked internal documents), has sparked unprecedented developments such as massive public outrage which mandated the government agencies across the world to kick start investigations into tax evasions in their respective countries. Apart from the Panama Papers, other such significant media exposes on how the global rich exploited secretive offshore tax havens are Paradise Papers (published in November 2017), Bahama Leaks (September 2016), Swiss Leaks (2013), and Liechtenstein scandal (2008).

Read More:The Tilted Global Scales: Tax Havens and Financial Secrecy

While Indian elites and politicians are listed in almost all such leaks, so far, only nominal enquiries are being conducted in India. During the 2014 elections, the BJP leaders have relayed their campaign mostly on the claim that they will bring back black money from foreign tax havens. However, after taking over power in May 2014, the Narendra Modi led government has chosen to appease corporates and elites with lackluster attitude towards tax evasions, in spite of further offshore leaks being revealed during the regime.

Read More: New Panama Paper Leak Finds 12,000 Indians Guilty of Illegal Offshore Dealings

A collaboration of media outfits including the International Consortium of Investigative Journalists(ICIJ), German newspaper Süddeutsche Zeitungand The Indian Expresswhich exposed the first Panama leaks in April 2016 have also analysed the recently released second lot of leaked papers. The first leaks which comprised of 11.5 million documents of Mossack Fonseca’s client records, exposed how the firm had flouted rules in setting up anonymous offshore companies for clients around the world.

The latest leaks confirmed the firm’s dealings with prominent Indians (who were earlier listed) including Shiv Khemka, Amitabh Bachchan, Jehangir Sorabjee, DLF Group-promoter K.P. Singh and his family, Anurag Kejriwal, Navin Mehra of Mehrasons Jewellers, and Hajra Iqbal Memon and his family among others, and added new names to the list – Ajay Bijli (and his family), owner of PVR cinemas, Kavin Bharti Mittal, CEO of Hike Messenger and son of Airtel's Sunil Mittal, Jalaj Ashwin Dani, son of Asian Paints promoter Ashwin Dani among others.

Read More: Vijay Mallya’s Offshore Paradise

The 2016 Panama Papers investigation included the names of world leaders such as the Russian President Vladimir Putin’s inner circles, Sigmundur David Gunnlaugsson, the then Iceland Prime Minister, family of then Pakistan Prime Minister Nawaz Sharif, and the new leaks exposed the firm’s association with Argentine footballer Lionel Messi, Argentina's President Mauricio Macri's family and shell companies owned by French jeweler Pierre Cartier.

While the first set of Panama Papers revelations were based on the documents that exposed the internal workings of the firm from late 1970s to 2015, the new papers exposed the firm’s business from early 2016 through the end of 2017, a few months before the firm collapsed.

Panama Papers prompted large scale investigations across the world. By the end of 2016, governments and companies in 79 countries had opened 150 inquiries, audits, or investigations into the law firm, its intermediaries, or clients. In India, as of June 21, 2018, government agencies investigated 426 persons, leading to the detection of undisclosed foreign investments of about Rs.1140 crores.

Paradise Papers

Paradise Papers refers to a leak of 13.4 million files related to two offshore firms – Appleby (renamed as Estara), a legal services provider that operated in 10 jurisdictions and Asiaciti, a Singapore based corporate service provider. The papers cover the period from 1950 to 2016. There are also details from 19 corporate registries maintained by governments in secrecy jurisdictions– Antigua and Barbuda, Aruba, the Bahamas, Barbados, Bermuda, the Cayman Islands, the Cook Islands, Dominica, Grenada, Labuan, Lebanon, Malta, the Marshall Islands, St Kitts and Nevis, St Lucia, St Vincent, Samoa, Trinidad and Tobago, and Vanuatu.

Read More: India Tripping on Black Money in Tax Havens

The financial data set out the myriad ways by which companies and individuals had avoided tax using artificial structures. The files included names of prominent personalities like Queen Elizabeth II, lead vocalist of U2 band Bono, American singer Madonna among others. Amid the Indians, the well-known names include Vijay Mallya, Harsha Moily, BJP Member of Parliament Ravindra Kishore Sinha, the then-Minister of state Civil Aviation Jayant Sinha, and Congress leader Sachin Pilot. With a total of 714 Indians surfacing in these files, India ranked 19thout of 180 countries in terms of the number of names represented in the data.

Bahama Leaks

In September 2016, ICIJ released a set of nearly 1.5 million documents from the Bahamas corporate registry which included the names of directors and owners of some 175,000 companies, foundations, and trusts registered between 1990 and 2016.

According to the Indian Express, the leaks “lift the veil of secrecy that the Bahamas offers to multinational corporations and also rich and powerful individuals, by revealing the names of office bearers, shareholders or beneficial owners of the offshore entities”. Some of the Indian names included in these files are Anil Agarwal of the Vedanta Group, Kabir Mulchandani of the erstwhile Baron Group, Fashion TV India promoter Rajan Madhu, and Aman Gupta, chairman and chief executive of Finnish water brand Veen Waters, among others.

Swiss Leaks

Swiss Leaks refers to the data from HSBC Private Bank, Geneva, secreted away by Hervé Falciani, a former HSBC employee-turned-whistleblower. The data covers accounts of more than 100,000 individuals and legal entities from more than 200 countries, mostly ranging from 1988 to 2007. Reportedly, in June 2011, French authorities sent a list of 700 odd bank accounts in HSBC private bank related to Indians, following which the government agencies began to probe and the process is still underway.

Industrialist brothers Mukesh and Anil Ambani, and Jet Airways Chairman Naresh Goyal among others who are listed in these leaks are under the scrutiny of investigation.

Liechtenstein scandal

The scandal broke out in 2008 when a bank employee sold incriminating data to various countries, containing names of account holders. The data exposed details on how banks in Liechtenstein helped their clients from across the world to evade tax obligations in their respective countries. Following this, in 2009, under the Indo-Germany Double Taxation Avoidance Convention, German government handed over to India, a list comprising details of Indians having accounts in Liechtenstein's LGT bank. Among the various trusts that allegedly stashed money in LGT bank are the Ambrunova Trust and Marline Management, Manichi Trust, Ruvisha Trust, Dainese Stiftung Trust, Dryade Satiftunf Trust, Webster Foundation, and Urvashi foundation. Although 10 years have passed since the scandal broke out, the probe initiated by Indian tax agencies on these trusts is still underway.