The Panama Papers have revealed how some of the most powerful companies across the globe have used offshore bank accounts to preserve their wealth and avoid paying taxes.
The papers leaked millions of confidential documents from the Mossack Fonseca law firm based in Panama, disclosing the names of several international politicians, business leaders and celebrities.
Some of the most prominent names revealed included President Vladimir V. Putin of Russia, the father of Prime Minister David Cameron of Britain, relatives of President Xi Jinping of China and members of the Chinese Communist Party Politburo Standing Committee, reports the New York Times.
It is legal in most jurisdictions to benefit from exemptions and discounts permissible by local laws. Most revenue services automatically provide these discounts. Tax rules differ in each country. Countries compete to acquire investors by providing lower tax rates.
How the rich get richer
The Group of Seven and the OECD are attempting to integrate company taxation. Although progress has been made, there have been so many conflicts of interests that a settlement won’t likely be reached anytime soon. Attention is currently centered on how major companies around the world, like Google, Apple and Starbucks, are able to register their profits in countries with lower than normal tax rates.
The Panama Papers have highlighted how rich people are able to reduce the amount of taxes they have to pay or avoid paying taxes altogether. Although some methods are legal, others are dishonest and fraudulent. Tax avoidance is sometimes legitimate, but tax evasion and money laundering are not, notes the Japan Times.
Officials told the Indian Express that the greatest challenge in the world of cyberspace is authentication:
“As you move more and more business and government processes online, security is a key concern. For financial transactions, what we do today is a two-factor authentication. In other words, there are two separate ways of confirming identity. This improves security and reduces fraud. For instance, today, you have a credit card and a PIN (Personal Identification Number), both sent separately to you. The card is known as ‘what you have’ factor of authentication. PIN is the second ‘what you know’ factor of authentication.”
Numerous people listed in the Panama Papers have denied stridently that they violated any laws. Vladimir Putin claims that the accusations that his friends and family shoveled $2 billion to numerous shell companies were an “American plot” to weaken Russia’s unity.
Addressing the scandal
The Panama Papers also provided new information on at least 33 people and groups who have been blacklisted by the United States, including Mexican drug lords and various terrorist organizations.
“’The files contain new details about major scandals ranging from England’s most infamous gold heist, an unfolding political money laundering affair in Brazil and bribery allegations convulsing FIFA, the body that rules international soccer,’ the ICIJ wrote in the Panama Papers overview of the leak on Sunday.”
In addition, more than 500 Indian figures are on the Mossack Fonseca’s list of offshore companies. Meanwhile, major tech companies like Apple, Google and Miscorsoft have denied requests made by the Government of India to “let their proprietary software allow matching of a user’s fingerprint or iris scan as captured in the mobile instrument with his or her biometrics as stored in the Aadhaar database” writes the Indian Express.
The Panama Papers also revealed that some global banks, such as HSBC, UBS and Crediot Suisse, have collaborated with Mossack Fonseca to make offshore accounts.