The most shocking thing about the Pandora Papers—a massive trove of financial documents leaked to the International Consortium of Investigative Journalists—isn’t the sheer volume of the revelations they contain. Nor is it particularly surprising that so many current and former politicians and heads of state (more than 300 public officials in 90 countries) are named in them. It isn’t even the appearance of global political luminaries like former British Prime Minister Tony Blair, former Italian billionaire Prime Minister Silvio Berlusconi or Chile’s billionaire President Sebastián Piñera, among many others: following the previous release of the Panama Papers in 2016 and the Paradise Papers in 2017, we’re used to that.
What’s most shocking about the leaks is how much of the unconscionable offshore hoarding of wealth they reveal is completely legal. For the world’s super-rich elite, as long as bribery or money laundering aren’t involved, offshore tax evasion and money stockpiling are pretty much fair game.
In article after article about the leaks, journalists take pains to emphasise varieties of the statement that “there are perfectly legitimate reasons to have an offshore bank account/offshore company”. And they’re right: if you count yourselves among the class of people who have the means to move your wealth “offshore” in various ways, then there’s a whole legitimate system of wealth management that has been set up to serve your interests.
This system of offshore wealth management exists separately from the more “plebeian” system the rest of us rely on. Ordinary people by and large leave their savings in banks and superannuation funds. They are compelled to open their accounts to scrutiny to access bare-bones welfare payments, and any interest their money might accrue will be subject to taxation. Their retirement funds are exposed to risks from fluctuations in the stock market and so on. The super-rich, in contrast, can stash their wealth securely, anonymously and tax-free in the world’s network of tax havens.
US NGO the National Bureau of Economic Research estimates that almost a tenth of the world’s wealth is held in offshore accounts. The Pandora Papers add weight to this claim, and expose many individual cases of unfathomable greed.
King Abdullah II of Jordan is estimated to have a personal wealth of US$750 million, and the leaks expose his extensive offshore property portfolio, worth a cool US$100 million. While the king acquires luxury beachfront mansions in Malibu, more than a million Jordanians languish below the poverty line. Of course, the King’s lawyers were quick to assure the world that “HM [His Majesty] has not at any point misused public monies or made any use whatsoever of the proceeds of aid or assistance intended for public use”. He is one among many despots with many zeroes on the end of their offshore bank balances.
Kenyan President Uhuru Kenyatta, a scion of the powerful Kenyatta political dynasty, possesses a family net worth of more than US$500 million. The leaks show that he and his family have set up a number of offshore companies, including one registered in Panama with at least US$30 million worth of stocks and bonds, as well as investments in real estate in the UK and Hong Kong. Congolese President Denis Sassou-Ngeusso—whose son famously stole US$50 million from the state treasury in another offshore accounts scandal—has set up a series of British Virgin Islands accounts to conceal his ownership of diamond mines and construction and real estate companies.
It’s not just in the Global South that political leaders are engaging the services of the offshore wealth industry. Tony Blair and his partner managed to avoid paying US$400,000 in tax by purchasing an office building in London via an offshore company. Former French Finance Minister and IMF head Dominique Strauss-Kahn received millions in “consultancy fees” from Russian and Chinese firms—paid directly into an account in the United Arab Emirates.
Russian President Vladimir Putin’s oligarchic associates Gennady Timchenko and Konstantin Ernst—of oil and media wealth respectively—have had revealed hundreds of millions of dollars’ worth of loans from Kremlin-linked banks funnelled through offshore accounts, and the US$100 million in secret wealth of Putin’s reputed mistress Svetlana Krivonogikh was also exposed. These revelations are just the tip of a very large iceberg.
According to the Guardian, which has access to the full trove of information, 400 Australians are named in the Panama Papers. This includes, writes senior business reporter Ben Butler, “senior figures from the finance and property industries”. Shamefully though, the Guardian has “chosen not to identify them”. For the mainstream media, it seems, the privacy of super-rich individuals who stash their wealth offshore matters more than actually, for once, making them account for themselves before the public.
Why do the world’s governments continue to allow this to happen? Surely it can’t be that difficult to crack down on these much abused loopholes? To put it more sharply: how is it possible that most of the shady practices exposed in the Panama Papers are perfectly legal?
The answer is that capitalist states exist to serve capital, and when tax codes are written, the interests of big corporations and super-rich individuals will be prioritised over everything else. Which politician is going to alienate their mates and donors by forcing them to repatriate their offshore wealth (particularly, as is the case with many politicians, when they have offshore wealth of their own)?
No doubt, in the aftermath of these latest revelations, there will be a few more superficial gestures towards clamping down on offshore tax evasion. Nevertheless, as long as the competitive system of global capitalism exists, a few things seem certain: there will always be some countries that choose to offer themselves as ideal (i.e. tax-free) destinations for the wealth of the global elite; there will always be an army of lawyers, accountants and others desperate to cream a bit off the top of that wealth by helping the rich shift their money to those places; and, finally, capitalist governments will always prefer cutting funding to welfare and vital services rather than actually imposing anything close to a fair tax regime on their wealthiest constituents.
To change all this will require much more than a bit of tinkering with tax codes here and there. What the Pandora Papers show, above all, is the need to mount a challenge to the entire rotten system.