In the last twenty-four hours, you must have heard a lot about the Panama Papers. What are they? Why is everyone talking about them?
Well, thankfully the internet is a wonderful place, and a few helpful citizens have written easy-to-understand essays explaining what these papers contain. Here’s one helpful summary from Reddit user thousandecibles:
In business, you can avoid taxes by investing in something. If a company makes one million dollars, but spends 500,000 on investing in new technology for their product or something like that, they’re only taxed from the remaining 500,000 because that’s all of their “profit.” (I’m not a businessman so I’m not sure on the complete legality of all the kinds of spending but I think this is a basic summary). This is all normal and fine; all companies require investing in order to grow their company.
So a company in Panama basically made a business in creating fake businesses. Companies could “invest” million of dollars and then it wouldn’t be taxed, because according to legal documents it isn’t profit, it’s an “investment,” which is untaxable, and then they would get their money back from the fake business. So imagine if that $500,000 of investments from my above example was fake, and after awhile 90% of the money was given back to the business (I’m assuming the Panamian company took a cut of the money as payment). 2.6 TB of data in total, over 11 million documents and over 200,000 fake companies. According to the website that published the news of the leak, they were contacted by an anonymous source with encrypted files with the data sometime in 2015. Here’s am exerpt from the article:
Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (SZ) and submitted encrypted internal documents from Mossack Fonseca, a Panamanian law firm that sells anonymous offshore companies around the world. These shell firms enable their owners to cover up their business dealings, no matter how shady.
Apparently there’s several trillion dollars of money that should’ve been taxed and wasnt. Not sure if that means trillions that should’ve been taxed off of, or trillions of dollars of straight tax money, but either way it’s a LOT.
Many political leaders (many seem to be in the Middle East), and celebrities are involved as well. To prevent any one person from being blamed for the leak, hundreds of news organisations are going to release further full details tonight (that’s what Ive heard, not sure how true it is) but the list apparently has thousands of people/companies on it. There’s 11 million documents though, and even though hundreds of journalists have been going through the data for months, there’s still information that has yet to come to light.
This goes much farther than tax evasion, and includes Syrian war crimes, human trafficking, and more. Here‘s a video explaining it.
Too Long; Didn’t Read? Big names in business, politics, and sports used fake companies to evade trillions of dollars worth in tax money.
We hope this helped you make sense of the situation. To add to this, the Prime Minister of Iceland, who figures in these papers, is already being pressurised to quit and the Editor in Chief of Süddeutsche Zeitung has responded to the lack of United States individuals in the documents by asking everyone to “Just wait for what is coming next”.
Well, it sure does look like this is the biggest leak in history.
Update: Check out this helpful video to make sense of the Panama Papers.