Pandora Papers expose offshore dealings
Biggest ever leak of financial documents, numerous political leaders implicated

The finances of some of the world’s rich and powerful have been revealed earlier this month in the largest financial document leak in history.


The documents — dubbed the Pandora Papers — consist of 2.9 terabytes of data including 11.9 million files. The papers exposed a global network of offshore companies that enables the rich to conceal their wealth and evade taxes using popular tax havens throughout Europe, the Middle East, Central America and the Antilles.


The International Consortium of Investigative Journalists received and shared the leaked files with various media outlets. Over 600 journalists spent more than eighteen months analyzing the data before beginning publishing their findings Oct. 3.


The papers name over 100 billionaires, alongside celebrities and business leaders. In many cases, the owners of secretive shell companies were identified for the first time.


Thirty-five world leaders have also been implicated in the leak, including current and former presidents and prime ministers. The hidden finances of more than 300 government ministers, military generals, judges, mayors and public officials in over 90 countries have also been leaked.


Hundreds of Canadians’ assets have been exposed in the papers.


Lax tax laws “not taxing wealth the way they should”


While establishing offshore companies is not illegal in itself, their secrecy provides cover for those looking to evade taxes, launder money and commit fraud.


According to Radhika Desai, a political studies professor and director of the Geopolitical Economy Research Group at the U of M, “the heart of the matter” is the tax code itself.


“People try to distinguish between […] tax evasion, which is bad, and tax avoidance, which is perfectly legal,” said Desai.


“In reality, even if you paid every last penny of your tax, our tax laws are so lax that they allow a lot of people to become obscenely rich, particularly from financial profit and rentier profit, that is to say, from unproductive income.”


The legal use of tax havens to avoid paying taxes is estimated to cost governments billions of dollars in lost tax revenue.


Numerous political leaders and their associates from around the world have had their financial secrets exposed, including the Qatari ruling family, the King of Jordan, the Czech prime minister and the family of Kenyan president Uhuru Kenyatta.


While little attention has been paid to Canadians in the Pandora Papers, some of the names listed in similar financial leaks in 2017 included former Canadian prime ministers Brian Mulroney, Jean Chrétien and Paul Martin. There was no evidence to suggest that their offshore investments were illegal.


Desai did not “wish to minimize” the actions of those named in the papers, but argued coverage of these financial disclosures focuses too much on individual crimes.


“[This draws] attention away from the fact that it is perfectly possible to get obscenely rich without contravening tax laws, because our tax systems are not taxing wealth and very, very high incomes in the way that they should,” she argued.


When the Panama Papers were released in 2016, many nations launched investigations, recovering more than $1 billion in lost tax revenue, removing implicated politicians from office and prosecuting tax evaders.


The Canada Revenue Agency (CRA) identified nearly 900 Canadians named in the Panama Papers. No one named in that leak has been charged and as of April 2019, only five criminal investigations were underway.


In the Panama Papers, Canada itself was also revealed to be a tax haven for some due to the country’s lenient anti-money laundering laws.


So far, the CRA has assessed taxes and penalties on 40 Canadians totalling $29 million, but they cannot confirm whether those funds have been recovered.


$15 billion a year in tax revenue is lost to offshore tax havens according to CRA estimates.


“An extremely punitive attitude” toward petty tax evasion


In contrast with the massive losses estimated by the CRA, Desai observed “people have an extremely punitive attitude toward petty tax evasion” and revenue loss that happens on a much smaller scale.


Last year, the government proposed a bill that threatened fines and even possible jail time for people who deliberately lied on their application for the Canada Emergency Response Benefit, though they eventually backtracked following public outcry and resistance from the NDP.


The CRA also received thousands of anonymous tips accusing others of abusing emergency aid programs designed to help people through the COVID-19 pandemic.


“I’m not endorsing petty tax evasion, but […] it’s a bit like encouraging small people to attack each other instead of uniting them to look at how they are being collectively shafted by the big people,” said Desai.


“The real scandal is our tax system itself, which permits all too many people to get obscenely rich without making any serious social contribution — on the contrary, by engaging in activities that are actively harming society.”