Paradise leak: Ethics stinks, money doesn't
Politicians and multinationals grandmasterеd tax avoidance schemes
10 November, 2017
Just 18 months since the Panama Papers leak, here is another set of information on black money. A new release of confidential papers, dubbed the Paradise Papers, was made public last week. A trove of 13.4m records exposes well known practices and, ostensibly, legal. But their morality stinks, and quite strongly as well. The leaked documents show how deeply the offshore financial system is entangled with the overlapping worlds of political players, private wealth and corporate giants, including Apple, Nike, Uber and other global companies that avoid taxes through increasingly imaginative bookkeeping manoeuvres.
The papers are connected to 19 tax heaven countries which provide flexible financial solutions on minimum tax rates. This includes most of the papers from Bermuda-based offshore law firm Appleby. Another leading firm is from Singapore – AsiaCity Trust. Last year, the release of the Panama Papers caused a huge sensation across the globe, exposing a hidden world of wealth held offshore. For their work, the global network of more than 200 investigative journalists in 70 countries ICIJ won the Pulitzer Prize for explanatory reporting.
One offshore web leads to Trump's commerce secretary, the 79-year-old Wall Street tycoon Wilbur Ross, who has a stake in oil and gas shipping company Navigator Holdings that has received more than $68m in revenue since 2014 from a Russian energy firm, Sibur, partly owned by the son-in-law of Russian President Vladimir Putin. Two of Sibur's owners are subject to some form of US sanctions. The US commerce department says Ross has not done anything illegal and never met any of the figures under sanctions.
Queen Elizabeth II has invested millions of dollars in medical and consumer loan companies, Appleby's files show. While the Queen's private estate, the Duchy of Lancaster, provides some details of its investments in UK property, it has never disclosed details of its offshore investments. The records show that, as of 2007, the queen's private estate invested in a Cayman Islands fund that in turn invested in a private equity company that controlled BrightHouse, a UK rent-to-own firm criticised by consumer watchdogs and MPs for selling household goods to cash-strapped Britons on payment plans with interest rates as high as 99.9%.
The files reveal that Stephen Bronfman, Canadian PM Trudeau's adviser and close friend, teamed up with Liberal Party stalwart Leo Kolber and Kolber's son to quietly move millions of dollars to a Cayman trust. The offshore manoeuvres may have avoided taxes in Canada, the US and Israel, according to experts who reviewed some of the 3,000-plus files detailing the trust's activities.
The documents show that, in reality, many big US multinationals pay income taxes at very low rates, thanks in part to complex corporate structures they set up with the help of a global network of elite tax advisers. They transfer intangible assets to tax havens and adopt other aggressive avoidance strategies that are costing around the world as much as $240bn a year in lost tax revenue, according to a conservative estimate in 2015 by the OECD.
In this regard, Apple has led the field. Despite almost all of its design and development taking place in the US, the iPhone-maker has for years been able to report that about two-thirds of its worldwide profits were made in other countries, where it has used loopholes to access ultra-low foreign tax rates.