What are the Pandora papers?
Pandora papers are a collection of 6.4 billion documents consisting of 3 TB data comprising more than a million images and 1.2 million emails about financial transactions. It is essentially a financial data leak like the Panama papers of 2016 and Paradise papers of 2017 but four-fold in proportion. It began when the ICIJ International Consortium of investigative journalists tipped about substantial dealings of 14 Offshore companies and their direct or indirect owners with proof. ICIJ pitched more than 600 journalists from 117 countries working in reputed dailies to sift through this data of buying and selling between 1996 to 2020 in the short period of two years. The Guardian participated from the UK and The Indian Express from India. They studied, catalogued, and organized this data. It was entitled "Pandora" (inspired by the tale of Pandora's box) as it is unclear how far-reaching the effects of this discovery might be. The list includes the names of several industrialists, celebrities, current and previous Presidents and Prime Ministers, military generals, and influential public leaders from throughout the world. Anil Ambani, Sachin Tendulkar, Satish Sharma, Jackie Shroff, Nirav Modi, Ajit Kerkar, Kiran Shaw, and others are the Indian names. They purchased Offshore companies in tax-haven countries to save money on taxes in their own country. They can buy assets at no nominal tax while paying 'no' tax on the specific commodity in their domicile through the Offshore business.
The Attraction of Tax Havens
Tax havens are countries with no or nominal taxes like the British Virgin Islands, Panama, Bermuda, Luxembourg, Cayman Islands, Channel Islands, Mauritius, etc. These countries do not require the business to be operated strictly in their territory but provide tax benefits regardless. According to the OECD (Organisation for Economic Cooperation and Development), tax havens are nations with no ordinary tax, low transparency, and lack of substantial activities. These countries benefit from corporate investments in business operations that offer employment opportunities to locals. For instance, Switzerland is as famous for its luxury brands as it is for its clandestine banks. Around 11.8% of the adult population in the country is a billionaire. So many business minds can't be born in the same place, so what is the reason for this anomaly? Switzerland benefits by attracting capital to its banks and other Financial Institutions and building a thriving financial sector. These places maintain a certain level of anonymity and low taxation to attract consumers, so the rich flock here. Individuals gain by saving tax which in tax haven nations may range from 0 to low single-digit compared to high taxes in their own countries. Apple uses Ireland as its Offshore haven; it would have owed the US 65.4 billion dollars in taxes if it did not use a tax haven.
Offshore companies and their system
The Pandora papers have revealed that the divide between the haves and have-nots is increasing. Because it's a one-sided sword that the influential people find strange, it's also known as the valley dividing conceptions of capitalism and socialism. For middle-class people who have fewer tax-saving alternatives, the extra money can be used to buy a home or invest in mutual funds or stocks. On the other hand, rich people have an endless supply of ideas, such as forming trusts and benevolent organizations by purchasing shares. The most favoured strategy to avoid tax is to invest in tax savings by buying shell companies, as disclosed by the Panama and Paradise documents before and the Pandora files recently. Individuals buy companies in tax haven countries directly or through a broker and transfer funds to them to stash money or buy highly taxed items such as yachts, diamonds, and villas through these firms. The most contentious name in the Pandora files is Vladimir Putin's alleged lover, who owns a 3.6-million-euro property through a Monaco-based Offshore business. People close to Pakistani Prime Minister Imran Khan's inner circle, as well as former British Prime Minister Tony Blair, was mentioned in the papers. The fundamental question is whether it is fair for the wealthy to have so many ways to keep money while the middle class struggles to cope with the ever-increasing tax burden.
Legal or Illegal or somewhere in the middle?
There is a thin line between what is legal and illegal in terms of offshore transactions, smudged further by definitions of tax avoidance and tax evasion. It is perfectly understandable for anyone to find ways of minimizing their tax returns and (if they are rich) pay a lawyer to scrutinize laws to exploit loopholes. In such cases, the money remains within the country; it just exists in a different form. However, in the case of tax savings, this money goes Offshore which is a direct loss. This debate becomes one between capitalism and socialism, as the supporters of socialism believe the Pandora papers to be one of the downsides of capitalism. When Australian media mogul Kerry Packer was questioned about his involvement in Offshore shell companies back in 1991, he used that trap of words, saying that he was avoiding tax and not evading tax. Evasion is illegal and means not paying tax avoidance denotes arranging affairs such that the taxes are not due. These loopholes need to be fixed for the public revenue to be shared by all. It would be utopian to expect that the laws to restrict companies can be legislated and executed. Uniform laws in the world and some international regulations need to be a consideration. The concept of global minimum tax can be applied to reduce tax competition between countries to attract foreign investment. In July this year, G20 signed the proposal to have a minimum tax rate of 15% for corporate income. It can be generalized to every kind of tax after conscious modifications. The million-dollar question at the end of this is- Whether the governments of different countries be able to retrieve their citizen's money back? If the previous cases are to be trusted, then "no." This data leak though more controversial than the others is not novel. It has always been and will always be human psychology to minimize taxes. However, it is the responsibility of the legislation to strive for equality in terms of public taxation.
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