In October 2021, there was a big breakthrough in the World of finance. The media called it the “most
expansive expose of financial secrecy”. This was the revelation of Pandora Papers. These papers
include the names of several big renowned personnel. They are inclusive of billionaires, top
government officials, public figures, celebrities, and even sportspersons. Before getting deep into it,
let’s understand how they got their name. The word pandora comes from the Greek idiom opening
the pandora’s box, which means a source of unforeseen trouble. If I say that the selection of the ICT
should be based on IPL, it will open a pandora’s box, i.e., in the coming time the team may have to
face a lot of difficulties. So, the question is what are these pandora papers? Like the 2016 Panama
papers, these papers are also concerned with financial data leaks. They tell us how the top 1%
richest people, avoid paying taxes or don’t pay taxes at all. In the year 2019, ICIJ, which is a body of
journalists was given a tip by an anonymous person. The tip consisted of the details of 14 offshore
companies. It had 11.9M+ files, 6.4M+ documents, and the size was over 2.9TB. It described how the
super-rich is handling their finances to save taxes. Now as this was a big chunk of data is it took a lot
of time to process it. But finally, the team of over 600 journalists was able to compile the data and
present it in front of the general public. This mainly consists of how the fat-cats invest their money in
a tax haven or a country with fewer taxes, to avoid paying taxes in the country they earned the
money in. They often buy certain assets in the name of that company. The list named 35 world
leaders including current and former presidents/vice presidents, more than 300 public officials, and
more than 100 billionaires.
There are various methods to save taxes including but not limited to the formation of shell companies, making a trust, money laundering. But, the pandora papers tell us that the most common way of tax evasion by these loaded people is offshore accounts. Offshore means outside the domestic territory of one’s country, but in this context, it refers to the tax havens. These are the different countries that have less or no income tax, corporate tax and one can form a company while concealing their identity. These tax havens include countries like the British Virgin Islands, Panama, Bermuda, etc. Now let’s come to how they are used to evade taxes. The opulent go to a tax manager or a wealth manager to help them in saving taxes. These tax managers then form a company on behalf of these people in the tax havens. The companies are in the name of these tax managers to maintain secrecy. Then a bank account is open in the name of the company. Then, these people use this account to purchase various luxurious items like private planes, properties in other countries, etc. As this company is registered in a tax haven, they have to pay minimal tax on these items. Plus, they also deposit their surplus cash in the bank accounts of these companies, so they don’t have to pay the taxes in the country they’re residing in. Now the intriguing part of this is that this isn’t illegal in every situation. The rich can pay the wealth advisors or lawyers to find loopholes in the tax system. This brings us to the topic of, tax avoidance vs tax evasion. Tax avoidance means finding loopholes in the existing taxing mechanism to refrain from paying taxes. On the other hand, tax evasion means, adopting illegal methods to save tax. Now definitely there is some intersection between the two, but unfortunately, there is no clear-cut differentiation amongst the two. This comes as the tax laws of every country are very complicated and tangled. So, it’s not right to say that everyone named in these papers is a criminal as these things can also be done legally. But one thing is for sure doing this is immoral and unethical. This can be used by criminals for money laundering and various illegal activities, but it would be wrong to say everyone on this list is a criminal. There might be some who’s, but it’s very hard to determine. Let’s understand it with the help of an example, Vladimir Putin, the president of Russia has his name on the list. He is accused that he bought a property in Monaco, for his supposed lover in the year 2003. The property was bought by a company registered in the British Virgin Islands. It was valued at over 6.3 million euros then, and the girl came from a middle-class background. The question is whether this is legal from the POV of the Russian tax system and whether this is unethical or not. Famous Colombian singer, Shakira Isabel also has her name on the list, convicted of opening three offshore companies in the British Virgin Islands. Some famous Indian names on the list are Sachin Tendulkar, Anil Ambani, Jackie Shroff, etc. Overall, the number of Indians is over 300.
The report doesn’t show us the list of convicts rather it shows us the downside of capitalism. As the concept of capitalism says money begets money. A person who comes from a middle-class background can only join a salaried job or open a business to earn his daily living. If he wants to invest, he would do it in the stock market. But the top 1% who already have loads of money with them, are spending that money to hire tax advisors and find legal ways to avoid tax. That’s the reason why the rich continue to be rich perpetually and similarly the poor continue to be poor. This is a demerit of our economical structure. The options that are open to the ultra-rich of both earning and saving money are far more than the middle class. A salaried employee can’t open a shell company in the British Virgin Islands to save tax. The most viable solution seems to be that we can tell the tax havens to stop keeping such low taxes and be like other countries. But this isn’t possible, these countries are independent and they intentionally keep such low-interest rates so that it can attract the super-rich and they invest in their country. The second solution seems to be to amend the tax laws in every country. But unfortunately, this will only make them more complicated for the common man. This will make it a compulsion for the common man to hire a tax advisor to pay taxes and also make opening/running a business difficult. And the fat-cats can hire even more skilled layers who can still find the loopholes in the system. The topic of global minimum tax again comes into highlight while talking about such issues. In GMT every country should have a minimum % of tax, but let’s see if it becomes a reality. Adding to this the people who’re listed on these papers include the idols of our children. For example, Sachin Tendulkar is a person who’s an inspiration for many budding cricketers and also a source of motivation. Not only that, but he’s also a Bharat Ratna awardee, which is the highest civilian award in India. He should give back to the country where he got everything from and not follow unethical ways. He’s an inspiration for numerous children and the youth shouldn’t get influenced to follow such a path. The people on the list should understand that if this isn’t wrong, this is ethically very wrong.