On April 3, a team of almost 400 journalists, organized by the International Consortium of Investigative Journalists, and German newspaper Süddeutsche Zeitung released a report on 11.5 million documents referred to as the Panama Papers. These documents, considered the largest data leak in history at 2.6 terabytes of data, are files on companies and business people around the world who used Panamanian law firm Mossack Fonseca to funnel money into offshore tax havens.
Mossack Fonseca was founded by Jürgen Mossack (whose father was a Nazi SS officer during WWII—fun fact) and Ramón Fonseca Mora in 1977. The firm helps business people set up offshore shell companies and keep financial dealings and investments under wraps. Mossack Fonseca was not quite a familiar name until the Panama Papers were released last week.
Clients of Mossack Fonseca used the law firm to hide money in offshore tax havens, remote places where tax rates are very low or nonexistent, so that they could avoid having to pay taxes to the governments of their own countries. While only some American executives have been exposed as of yet, a number of big names and celebrities worldwide, including Vladimir Putin, Lionel Messi, Jackie Chan and Simon Cowell (the list goes on and on) are under attack for hiding funds.
The prime minister of Iceland, Sigmundur Davíð Gunnlaugsson, was reported by the Panama Papers to have hidden money offshore. The people of Iceland protested, and two days later the prime minister resigned. David Cameron, prime minister of the U.K., has been similarly exposed, and the people of Britain are also protesting—who knows what the result could be.
Why would wealthy individuals and companies want to obscure their financial dealings? In the Panama Papers, it has been revealed that international banks and businesses worked with a close relative of Bashar Al-Assad to fund the Syrian government, assisting them in committing war crimes against their own people. An American businessman was also revealed to have been selling underage orphans in Russia into prostitution, and this pedophilia and sexual assault was known by Mossack Fonseca—they did not report it to authorities*. The firm has also been linked to the drug trafficking industry among other shady financial dealings.
In the realm of American politics, many people are reflecting on the Panama Papers leak and holding it up as a shining example of Bernie Sanders’ platform and intuition regarding financial justice. People are pointing to his seemingly prescient opposition to the U.S.-Panama trade deal of 2011, which was criticized as it could make tax evasion and money laundering easier.
Use of offshore tax havens itself is not illegal, though it may seem grossly unjust, so what will happen to the people who used the services of Mossack Fonseca? While there are situations like what happened in Iceland, most likely, these people will not face any significant consequences. Those with the ability to pass laws to prevent shady financial dealings like this are also at the top of the societal food chain, and might not see any reason to do anything about it.
But tax evasion is a real problem. If wealthy individuals actually paid their taxes, governments could gain $200 billion a year—money that could fund infrastructure, healthcare and contribute to eradicating poverty, something present in all nations. The money necessary to lessen social ills, make college affordable and provide universal healthcare should not be hard to come by—it's out there, it is simply hidden by wealthy individuals who only want more for themselves.
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