The International Consortium of Investigative Journalists (ICJI) received confidential documents on Sunday that provided “a sweeping look at an industry that helps the world’s ultra-wealthy, powerful government officials and other elites conceal trillions of dollars from tax authorities, prosecutors, and others.” The Pandora Papers study investigates the world’s “largest-ever journalistic collaboration,” as the title suggests.
The records have exposed who’s who in the world’s offshore financial holdings. From Jordan’s King Abdullah to Queen Elizabeth, Pakistani Prime Minister Imran Khan’s cabinet ministers to former British Prime Minister Tony Blair and his wife, the Pandora Papers include a considerably longer list than the Panama Papers, which were released in 2016.
When the secret paperwork to offshore assets listed at least 380 Indians, including over 60 important individuals and corporations, the slugfest touched home. Among the few names mentioned were cricket legend Sachin Tendulkar, business lobbyist Niira Radia, and Anil Ambani. After declaring bankruptcy, Ambani owns 18 asset-holding offshore entities. Nirav Modi’s sister, a fugitive fraudulent businesswoman, puts up a trust only one month before he departed India. Sachin Tendulkar requested the dissolution of his British Virgin Islands (BVI) business barely three months after the Panama Papers were exposed, according to The Indian Express, which is one of the report’s authors. Radia is a “do not contact” customer of BVI-based corporate service provider Trident Trust Company, which has a dozen offshore entities that have completed transactions such as the purchase of a $251,500 (about Rs 1.87 crore) watch in Dubai.
So, what do these studies have to say about these entities? Is it lawful to create these trusts? Why all the fuss and probes if they aren’t illegal?
What are the Pandora Papers, and why are they important?
The Pandora Papers are a collection of millions of leaked papers that reveal the secrecy surrounding tax-havens. 11.9 million classified papers have been released, providing insight into the shadowy world of offshore financing and exposing the financial secrets of some of the world’s wealthiest individuals. The records come from 14 service providers or organizations that created around 29,000 off-the-shelf entities and private trusts.
The firms named in the leak offer corporate legal and financial services to individuals and businesses. Their clients are generally looking to establish up corporations or trusts in tax havens with lax regulations and strict secrecy rules. Samoa, Belize, Panama, and the British Virgin Islands are among them (BVI). The trusts can also be established in Singapore or New Zealand, both of which provide tax advantages, or in the state of South Dakota in the United States.
What distinguishes Pandora from Panama and Paradise?
The Panama and Paradise Papers, which were released in 2016 and 2017 respectively, mostly dealt with offshore organizations set up by individuals and corporations. Many governments have been pressured to crack down on offshore organizations since the emergence of the Panama and Paradise Papers, with worries about money laundering, terrorist funding, and tax evasion on the rise. They aided in the implementation of meaningful changes in locations like the British Virgin Islands. The Pandora Papers examines how corporations have managed to avoid the laws enacted as a result of the Panama and Paradise leaks.
Why is it necessary to transfer funds to a foreign country?
Money launderers who are already on the radar of investigating authorities use this method to avoid tax and maintain confidentiality from creditors and law enforcement. Offshore jurisdictions do not levy income or corporate taxes, making them a lucrative tax evasion opportunity for those who do not want to pay taxes in their home countries.
The firms referenced in the Pandora Papers were formed overseas and then used to store assets such as real estate and stock and stock investments. When we talk about property, we can refer to cash, stock, real estate, art, airplanes, and yachts. By putting such assets in an offshore corporation, the name of the person who truly owns them, or the “beneficial owner,” can be disguised from the public eye. In many cases, the firms referenced in the documents utilize “trusts” as a legal loophole to explain their hoarding.
A trust is defined as “a fiduciary arrangement in which a third party, known as the trustee, controls assets on behalf of persons or organizations that will benefit from it.” The term “trust” is used to describe how estates and successions are planned. A trust can assist big business families to consolidate their assets, such as financial interests, stock holdings, and real estate property. It is not unlawful to set up an offshore trust. The notion of trusts has a legal grounding with the Indian Trusts Act of 1882. Trusts are not considered legal persons or organizations under Indian law. The law, on the other hand, requires the trust as a trustee’s responsibility to manage and use the assets.