August 17, 2022


Engineer's Line

Pandora Papers. Money Trail Of Super Rich People

9 min read

Some days ago, in the world of Finance, we got to witness a shocking revelation.The Pandora Papers.These papers contain the names of many influential people.Billionaires, top government officials, public figures, celebrities, and evensportspersons like Sachin Tendulkar.

But what exactly has been revealed in these Pandora Papers?.

“The most expansive expose of financial secrecy.”

“The Pandora Papers are especially big ones.””Pertaining to the cross-border deals of these persons…””Off-shore secret…””Off-shore centred…””Off-shore units…”

“Which are not open for everyone to see…”

“It contains the names of more than 300 Indians.”Friends, the word Pandora comes from Pandora’s Box.It is from Greek mythology.’Opening a Pandora’s Box’ is an idiom.

It basically means that you do something,and because of what you did, some unexpected problems are created.

For example, if I say thatreligion can be involved in politics,

it would basically mean the opening of a Pandora’s Box.

By doing this, there would be many major unexpected problems in the future.

Pandora Papers are named after this idiom.

But what are these Pandora Papers exactly?

It is similar to the Panama Papers published in 2016,

the Pandora Papers are a financial data leak.

A financial data leak that shows how the super-rich people of the world,

the top 1% rich people of the world,

how they avoid paying their taxes,

or simply don’t pay their taxes.

Two years ago, the International Consortium of Investigative Journalists received a tip.

The ICIJ is an international network

of more than 100 media organisations spread across more than 100 countries.

It is basically a body of journalists.

They were given the data by someone,

and it was substantial data,

of 14 off-shore companies.

This data had more than 11.9 million files.

Data of more than 3 TB.

6.4 million documents, 100,000 images, and 1.2 million images.

This data showed how the various super-rich people handle their money.

And how they hide their money across different countries.

And basically not paying the taxes.

At a time when the tax burden on the common people keeps on increasing.

These people have so many ways of tax evasion.

Obviously, because of the size of the data, it took some time to process it.

So ICIJ invited more than 600 journalists

from 117 countries,

to participate in this investigation

and to help them process the data.

To filter the important data and to draw a conclusion from it.

All those journalists participated in this investigation.

For example, the BBC from the UK,

The Guardian, a reputable newspaper from the UK.

From India, The Indian Express had participated in it.

And the journalists took about 2 years to process this data.

And finally, they made this expose now.

Many influential people and powerful world leaders were named in these Pandora Papers.

More than 35 world leaders, including

current and former Presidents

Prime Ministers

many governmental public officials,

many ministers in the government

judges, mayors, military generals, of various countries.

Apart from these, more than 100 billionaires, celebrities, rock stars,

and business leaders.

Before going into the details of these names,

let’s understand what does Pandora Papers tell us exactly.

How do these rich people hide their wealth and avoid paying taxes?

What are the techniques?

To be honest friends, there are a lot of ways to do this.

Like creating shell companies,

forming foundations and trusts,

sending the money from one company to the other,

sending it to other countries,

money laundering,

but I would like to focus on one specific way in today’s video.

That is the most common way, according to the Pandora Papers.

Off-Shore Accounts.

Literally, ‘off-shore’ means outside the borders of one’s country.

But in this context, off-shore generally means Tax Havens.

Countries where it is easy to set up companies.

Countries with no Income Tax or Corporate Tax,

or one has to pay a nominal amount in taxes.

Countries where the laws

make it difficult to identify the owners of the companies.

I talked about these Tax Havens in an earlier video as well

it was in the video on Income Tax, if you remember.

So basically, there is no definite list of the countries that are Tax Havens,

but some of the general names that often pop up are

the Cayman Islands, the British Virgin Islands,

Bermuda, countries like Panama, Antigua and Barbuda,

some people even consider Switzerland and Singapore as tax havens.

Let’s understand how it works with an example.

One possible way, which is listed in these Pandora Papers.

What happens is that the rich people

they try to set up off-shore companies in these tax haven countries.

But generally, they don’t want to do it in their names,

to maintain their privacy.

So they go to a lawyer or a tax advisor or a wealth manager.

They give the money to the wealth manager, who sets up a company on their behalf.

In his name.

To hide their names.

And thus an off-shore company is set up.

And this off-shore company has a separate bank account.

And often they use this bank account to buy expensive things.

Like buying properties or private planes or boats.

They buy it in the name of the off-shore company.

So that their real identity would never be revealed.

And because this off-shore company is in a tax haven country,

they would have to pay almost no taxes on all this money.

And they often deposit their money in the account of the off-shore company

so that they have to pay little to no taxes in the country they live in.

Friends, the most interesting thing is that,

it is not necessarily illegal to do it in every situation.

It is not illegal to pay tax advisors and lawyers

so that they could find loopholes in the tax system

so that you can reduce your tax liability.

It is not illegal to do it.

Tax Avoidance and Tax Evasion are different.

And it is very important to differentiate between the two.

One thing that is definitely not illegal

Obviously, there is a grey area between the two.

About what is tax evasion and what is tax avoidance.

It is not so clear cut.

Because the tax system of most of the countries is very complicated.

And when you pay competent lawyers and tax advisors,

it is their job to find loopholes in our tax system.

This is why every person, that has been named in the Pandora Papers,

they are not necessarily criminals.

Not every person has done something illegal.

This can be legally done as well.

But yeah, you can say that

to do this is perhaps unethical or immoral.

But of course, an actual criminal can also use these same ways

for money laundering, to hide his identity,

or for basically doing any illegal activity.

It is equally possible that the people named in the Pandora Papers

have done something illegal or any criminal activity.

But it would depend on person-to-person.

It would depend on the individual case.

What they did exactly.

Let’s take an example.

Like the Russian President Putin named in the Pandora Papers,

allegedly, in Monaco, a small tax haven country in Europe,

a luxury property was purchased there worth €3.6 million.

This property was purchased by an off-shore company in the British Virgin Islands.

Officially speaking, this property was purchased by the company

so it is in the company’s name.

But the Pandora Papers have revealed that the ultimate beneficiary of that company is actually

a woman who is alleged to be Putin’s secret lover.

And it is said that this woman came from a middle-class background

so it is not possible for her to buy this luxury property.

The question then arises did Putin use his money

purchased this property through the off-shore company?

And if so, is it legal or illegal according to the Russian tax laws?

And to go one step further, is it moral or immoral of Putin to have done this?

Similarly, the former British Prime Minister, Tony Blair

and his wife are also named in these Pandora Papers.

That they saved around £300,000 in stamp duty, a type of tax,

because they purchased a property through an off-shore company.

There was nothing illegal in this process.

Because it is allowed to do so in the UK Tax Laws.

Similarly, the famous Columbian singer Shakira is also named on the Pandora Papers’ list.

Allegedly, she has 3 off-shore companies in the British Virgin Islands in 2019.

Apart from these, some of the famous Indians named in this list are

Sachin Tendulkar,

Anil Ambani, Vinod Adani,

Jackie Shroff, Radia, Satish Sharma,

and several Income Tax officers are also named in this list.

And even government officials are named there.

Overall, more than 300 Indians are named on this list.

Other than these, many people from the inner circle of Pakistan’s Prime Minister Imran Khan

are also present on this list.

But as I said, individual cases need to be checked

to find out if someone actually did something illegal

and where it is only immoral.

Talking about morality, in my opinion, this whole revelation of the Pandora Papers

shows a downside of our capitalist system.

Think about it,

if you are from a poor background,

your family does not have much wealth,

what would be your options to earn money and save up?

Mostly, you’d have only one option.

That you get a nice, salaried job.

But if you are from a middle-class family,

and your family has some extra money,

then you can invest that money in the stock market, mutual funds or you can buy a property.

So you get some more options.

And if you are from the upper-middle-class,

then your family probably has enough capital that you can afford

to not get a job

if you want to start your business,

then you would get the capital to start the business.

But if we go one level higher.

If you are from the top 1% rich class.

The people that have been mentioned in the Pandora Papers,

Then you have enough money

to afford to pay expensive tax advisors and lawyers,

who can find legal ways and loopholes in our existing tax system

and they can help you save more money by not paying taxes.

Do you understand what I’m trying to say?

The richer that you get,

the more options you get of earning money, saving up and evading taxes.

At this level, the options that the top 1% have to save money,

they can go to tax haves and buy properties,

can set up off-shore companies,

these options are simply not available to an average person.

Because an average man does not have the money

to pay these expensive tax advisors.

Or to buy properties in other countries.

I talked about it in my video on Capitalism, if you remembered.

The principle of Money Begets Money.

This is a systemic problem.

And it wouldn’t be easy to solve it.

If you try to solve this problem,

you would face 2 main obstacles.

First, there would always be some countries without any Income Tax.

That would have very low tax rates

because those countries need to find their sources of income too.

These small island countries,

like Bermuda, British Virgin Islands, Panama, Antigua,

the government of these countries do not have many sources of income.

And because every government of an independent country can make their own rules,

they keep their taxes very low,

and sometimes even completely eliminate them,

so that the rich go to their countries

buy properties, set up businesses,

so that it would benefit these countries.

And the government of these countries could get a source of income.

That’s why these countries do this.

And it is extremely difficult to stop them from doing it.

The second obstacle comes up when

the tax system is sought to be changed,

and the government tries to close these loopholes.

What happens because of it is

the tax system of the country becomes even more complicated.

So complicated, that for an average person,

without hiring a tax advisor,

without the help of a Chartered Accountant,

filing their own taxes is not possible.

It becomes even more difficult for a common man to do business

because the tax system becomes so complicated.

And of course, the super-rich people

can afford more expensive tax advisors and lawyers,

who could find loopholes in the existing system as well as the new system.

So these are some of the obstacles that one has to face

when one tries to find solutions for the issues like the Pandora Papers.

Fundamentally, this issue is that the rich have so much money

that they find ways to save their money and not pay taxes.

And a common man is forced to pay more tax,

when he has no other option.

To avoid this, realistically,

the solutions that the governments are discussing

are to come up with International Regulations by major countries,

like the USA, European Union, China, and other large economies,

if they come together to formulate some international regulations,

then it may be fruitful.

Another solution that is being talked about is a Global Minimum Tax.

If all the countries agree to a minimum tax rate in every country,

then tax evasion would not be possible.

It is yet to be seen how successful these can be.

And Global Minimum Tax is a topic that deserves its own video.

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