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The Pandora Papers Scam

Written by Naina Mahajan, a grade 6 student.

Recently, news about more than 12 million documents revealing many hidden and sometimes rather shady dealings of the world’s rich and elite, has been in the spotlight for a while now…

By I Kid You Not , in World News , at October 13, 2021 Tags:

Written by Naina Mahajan, a grade 6 student.

Recently, news about more than 12 million documents revealing many hidden and sometimes rather shady dealings of the world’s rich and elite, has been in the spotlight for a while now. These documents have been dubbed “Pandora Papers”, whose reference stems from Greek mythology.

In a nutshell, Pandora was a girl who was given a jar by the Gods and was told never to open it. Curiosity got the better of her, she opened it, and all the evil, nasty and bad spirits were released. The story was titled “Pandora’s Box”.Hence the title “Pandora Papers” for documents revealing hidden and unethical stuff about some people – including prominent world leaders, politicians, corporate executives, celebrities and billionaires.

What are the Pandora Papers?

The Pandora Papers is a 2.94 terabyte (1 terabyte is equal to 1000 gigabytes) collection of various files exposing the hidden offshore dealings of rich elites from more than 200 countries and territories. It took the ICIJ (International Consortium of Investigative Journalists) more than a year to structure, research and analyze the more than 11.9 million records in the leak. It is the largest such leak released to date, even larger than the Panama Papers (2016, 2.6 TB leaked) and the Paradise Papers (2017, 1.40 TB leaked) leaks. It is being investigated by over 600 journalists from 150 media outlets (like BBC, the Guardian, Indian Express, etc.) in 117 countries.

Before we get to the main case, there are some important terms to explain:

Shell Company is a company that does not itself own or do anything but is used to hide another company’s or a person’s (sometimes illegal) activities. These people or companies use shell companies, as, well, a shell, to hide what they’re actually doing. Think of it as a smokescreen.

Offshore Company is one that is based in a different country from the one where most of its business is conducted, usually for tax reasons. So, a company might be from India but is based in, say, Belize, because the tax is lower there.

The Case of the Leaked Papers

The information about the papers was obtained by the ICIJ (based in Washington D.C). They began the investigation based on a leak of confidential, not-to-be-revealed-to-the-public records of 14 offshore service providers. These service providers help wealthy individuals and corporations who want to include offshore companies, trusts, foundations among others, in low- or no- tax areas. These offshore companies that rich people and companies sometimes set up are mostly used to avoid paying taxes – namely income tax and corporate tax.

Income tax is the tax the government levies on people based on their income levels, or how much they earn.

Corporate tax is the tax the government levies on the income of a company or a corporation.

Rich people have to pay a lot of income and/or corporate tax because they earn a lot too.

Tax Evasion vs Tax Avoidance

At this point, I should mention the difference between tax avoidance and tax evasion.

Both have cropped up during the investigation, but there are differences.

Evasion is illegal. It means not paying the taxes that are due. Avoidance, on the other hand, is when someone arranges their financial affairs in such a way that taxes aren’t due.

Tax Havens

A tax haven is a country or independent area where taxes are levied at a low rate. Examples of tax havens are places like the British Virgin Islands, Cayman Islands, Panama, etc.

Shell Companies

When people invest in shell companies, they don’t do it in their name, to remain anonymous. They normally hire expensive wealth managers, tax advisors, or lawyers. These hired professionals then set up the company on a tax haven in their name, thus keeping the identity of the original person secret. These companies have bank accounts of their own, which the original person often might use to buy expensive things.

Who are the people mentioned in the papers?

More than 330 politicians were exposed by the leak from more than 90 countries and territories. Famous people like Sachin Tendulkar, Kiran Mazumdar-Shaw, Shakira, Jackie Shroff, Elton John, Ringo Starr, and many others were mentioned in these papers. Before you get worked up about your favourite cricketer or singers being engaged in some kind of illegal activity, let me tell you that not everyone mentioned in the papers was actually doing something illegal. Unethical and immoral, sure, but not necessarily illegal.

Well, I would like to end by stating that delving into the Pandora Papers was like opening a Pandora’s box, but I think it was not all that bad that we opened it.

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