Why the Panama Papers are so important

April 29, 2016 Commentary, Editorials Print Print
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editorialRecently readers who keep up with current events may have heard about the Panama Papers.

Some may have wondered what exactly these papers were.

Even fewer may have read about tax havens or off-shore accounts, wondering why they should care.

Amar Molinas

Amar Molinas

The answer to the first question is fairly straightforward.

An anonymous source leaked 11.5 million secret documents from Panamanian law firm Mossack Fonseca.

Within this massive cache of documents, there’s information going back decades about more than 200,000 offshore companies, including the identities of shareholders and directors of companies.

The second question is much harder to answer. Some of the most powerful government, and business leaders in the world (and their families and friends) are named in these documents.

But just because rich people did it does not alone mean that it is worthy of attention.

If you believe statements made by Mossack Fonseca, everything it did was perfectly legal. And it is true that many of the things detailed in the Panama Papers are perfectly legal in the jurisdiction where they took place.

Yet a lot of people are angry. A lot of accusations have been made that world leaders and heads of industry have done everything from dodge taxes to cover up human trafficking.

Take Iceland as an example.

More than 20,000 people (out of a population of about 320,000) protested for Sigmundur Davíð Gunnlaugsson, the Prime Minister of Iceland, to resign because he negotiated on behalf of the Icelandic government with its creditors after the global financial crisis (while hiding the fact that he had financial interest in one of the creditor companies called Wintris).

Gunnlaugsson had failed to disclose his interest in the company as he should have when he entered Parliament, and later sold his 50 percent stake in the company for $1 to his wife who owned the other half.

Gunnlaugsson has denied that he committed a crime. But when confronted with his involvement in the offshore company in an interview, he was visibly shaken at being asked about it, and walked out of the interview after mumbling some disjointed responses.

Shortly after, he announced that he would be taking a leave of absence as prime minister, but notably he did not resign.

This is the most visible example of the fallout, but far from the only one.

The Panama Papers leak was so massive that after the initial leak, the newspaper receiving the documents, Süddeutsche Zeitung, enlisted an international consortium of over 400 journalists at 107 organizations in 80 countries to verify and report on the documents.

This group spent more than a year investigating before publishing the first stories based on the documents, in a journalistic endeavor of unprecedented scale.

The International Consortium of Investigative Journalists reporting on the subject can be accessed at panamapapers.icij.org.

Events related to the Panama Papers continue to unfold. Since the initial series of stories was released, governments around the world have called for investigations into tax evasion, and greater transparency in disclosure of offshore holdings.

Journalists and authorities continue to investigate, and on April 12 Panamanian police raided the offices of Mossack Fonseca. The attorney general’s office stated that the purpose was “to obtain documentation linked to the information published in news articles that establish the use of the firm in illicit activities.”

If none of the preceding argument arouses your interest in the Panama Papers, there are a couple of other things worth considering.

First, the involvement of U.S. citizens has been largely absent from the documents.

It would be nice if this reflected our high ethical standards, but it may simply be the case that there are plenty of tax havens within the U.S. in states like Delaware, Montana, and Nevada that make it unnecessary to hide money in Panama and other havens abroad.

Second, the clients of Mossack Fonseca were unable to keep their affairs secret, and the firm reportedly fell victim to a common email attack.

If these wealthy and powerful individuals were unable to do so with their significant resources, can any of us ordinary people hope for digital privacy ever again?

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