The Pandora Papers are the latest and most extensive collection of leaked documents (over 11.9 million) published by the International Consortium of Investigative Journalists (ICIJ). The records primarily focus on exposing how prominent individuals worldwide avoid taxes through the use of shell companies and offshore accounts, among other (allegedly) unscrupulous business practices. The papers implicate 35 current or previous heads of state and more than 3300 other public officials, billionaires, and celebrities.
The Papers are focused on offshore companies owned by several high net-worth individuals around the world. While offshore companies and shell corporations have legitimate uses (albeit somewhat murky ones), they were the focus of the investigations because of their potential to be used for tax evasion (and, allegedly, tax fraud). This is because shell corporations allow large corporations or individuals to realise lower tax rates in foreign countries. This is usually done by setting up a company in a region with a low tax rate, usually referred to as tax havens. These territories’ lower corporate taxes act as incentives for investment from other countries and large corporations, boosting their economies. The thousands of companies discussed in The Papers are largely from the British Virgin Islands (BVI), Panama, and Seychelles.
These companies are called shell corporations because they don’t usually conduct any business and exist largely on paper. This allows them to be used as fronts to mask income as well as avoid taxes. For example, the ICIJ found reports that the King of Jordan owns 36 companies, which he used to purchase properties worth more than $106 million. Through the use of these Panama- and BVI-based corporations, the King not only avoided having to pay taxes in Jordan but also kept the purchase of these properties secret (until now).
Another way these corporations can be used to avoid taxes was demonstrated by Tony Blair, the former British Prime Minister. They started by establishing a new company in the UK, which then bought a BVI-based company that owned a London building. While this may sound normal, since Blair’s company bought another company and not the building itself, they altogether avoided the property taxes that should have been paid.
All in all, the Pandora Papers exposed how different public officials and affluent individuals from all over the world cover up their business dealings and alter the taxes they owe to their government, uncovering the traces of a cumulative fortune of over $600 billion.
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