What are the Panama Papers?
Being described as the biggest leaks in history, the Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth-biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC. The leak shows how the Panama-based law firm helped its clients launder money and evade tax.
What is Mossack Fonseca?
Mossack Fonseca is a Panamanian law firm that has long been well known to the global financial and political elite. The firm’s operations are diverse and international in scope, but they specialise in one thing — helping foreigners set up Panamanian shell companies to hold financial assets while obscuring the identities of their real owners. After its foundation in 1977, it has expanded its interests outside of Panama to include over 40 offices worldwide.
And what does Panama Papers reveal?
It implicates 12 current or former heads of state and 61 people linked to current or former world leaders, including British prime minister David Cameron’s father, at least, eight top Chinese officials, and Bollywood’s most famous stars.
The Panama Papers dwarf some of the other leaks in the last decade. The anonymous source sent over 2.6 terabytes worth of records from Mossack Fonseca.
Here are some graphs that would paint even a better picture of the whole story.
What are the biggest highlights of this scam?
- Vladimir Putin’s inner circle appears to control about $2 billion worth of offshore assets.
- The Prime Minister of Iceland secretly owned the debt of failed Icelandic banks while he was involved in political negotiations over their fate.
- The family of Pakistan’s prime minister owns millions of dollars worth of real estate via offshore accounts.
- Ukrainian President Petro Poroshenko pledged to sell his Ukrainian business interests during his campaign, but appears instead to have transferred them to an offshore company he controls.
The International Consortium of Investigative Journalists has a full profile of political figures and their relatives named in the Panama Papers if you wish to know more about it.
Where does India stand in all this?
Over 500, Indians figure on the firm’s list of offshore companies, foundations and trusts. There are also 234 Indian passports (handed over by clients as part of the incorporation process), as per an 8-month long investigation of 36000 files by The Indian Express.
It includes big names like those of film stars Amitabh Bachan and Aishwarya Rai Bachan. Other names include DLF owner K P Singh and nine members of his family, the promoters of Apollo Tyres and Indiabulls and Gautam Adani’s elder brother Vinod Adani.
Two politicians who figure on the list are Shishir Bajoria from West Bengal and Anurag Kejriwal, the former chief of the Delhi unit of Loksatta Party.
What does R.B.I norms say?
As per RBI norms, no Indian citizen could float an overseas entity before 2003 — in 2004, for the first time individuals were allowed to remit funds of up to $25,000 a year under the Liberalised Remittance Scheme, and this limit stands at $250,000 a year now.
RBI lets individual buy shares under LRS but it never allows them to set company abroad, which it clarified through an FAQ mid-way in September 2010. This is the problem in cases of Panama Papers, companies were set up long before the rules were changed and the purpose was to park foreign exchange in a tax haven according to experts. It was only in August 2013 that individuals were allowed to set up subsidiaries or invest in joint ventures under the Overseas Direct Investment window.
Why is the leak important?
It’s important not just because of the significant amount of information it contains, but it also gives us a fair idea of what’s happening behind our eyes. Once everyone knows about how taxes are evaded, public pressure may push the government to do something about it and recover the long lost money.