Panama Papers – The Lowdown
You’ve probably heard of the Panama Papers – let’s face it, you’d have to be living under a rock not to have. If you’re anything like me, you woke up on Monday morning, turned on BBC news and with a fuzzy head were hit with this barrage of information. And have spent the days since trying to untangle what’s actually going on. I think I’ve just about figured what’s going on, so I’m going to try and break it down for you.
The first thing to know is this is not only the next big leak, but the biggest in history. Wikileaks, probably the most famous leak, was approximately 1.7 GB of data. There were some HSBC leaks last year, which amounted to 3.3 GB of data. The Panama Papers is a whopping 2.6TB of data. 2.6 terabytes. That’s roughly 1500 times more information than Wikileaks. To put it in perspective, it’s around 11.5 million documents. That’s a lot of information.
The documents were leaked last Sunday, 3 April, from a still unknown source, to German newspaper Suddeutsche Zeitung. These were subsequently shared across various media platforms, most notably from an English perspective to the BBC and the Guardian. The gist of them is this; a Panamanian legal firm by the name of Mossack Fonseca, and how it has helped people from around the globe avoid tax.
The most important thing to note is that this is tax avoidance, not tax evasion. In case you’re wondering what the distinction is, the main thing you need to know is evasion is illegal, avoidance is perfectly and completely legal. The line Mossack Fonseca are sticking to is that they have done nothing wrong, they’ve complied with international law, they’ve carried out all the relevant checks on clients and operated within the jurisdiction of the borders they traverse. The sad thing is, this is mostly true.
The two biggest names to be mentioned are two titans of global politics; Vladimir Putin and David Cameron. I’ll come to Cameron in a second, as his position seems to be getting worse with each passing day, and each statement he and his team release. But let’s start for a second with Mr Putin.
Known as the former KGB agent turned President of Russia, Putin is someone you can’t fail to be aware of. While he hasn’t been directly named in the Papers, a lot of his close associates have been and the line is that most of what’s happened involving Russians couldn’t really happen without his sanction. And his sanction is estimated to be to the tune of $2bn. Not a bad amount.
As for Mr Cameron, no figures have been mooted in this case, and if you believe what you’re told, nothing illegal has happened. But I for one am very sceptical. As I type, the hashtag #resignCameron is trending, and whilst this is probably a bit much, it gives good insight to the impact of these papers, and how people are becoming fed up with the way those in power act (see Iceland, where their Prime Minister has already resigned, facing overwhelming pressure after he and his wife were named in the papers). The main irony in this case being that several years ago, when it was found out some celebrities were using these types of schemes to avoid tax, Cameron himself called it ‘morally wrong’. Oooops.
This week hasn’t been great for Cameron. He’s been embroiled in the Panama Papers controversy because it’s been revealed his father used Mossack Fonseca in order to create a shell corporation to avoid tax. Cameron initially stated this was a private, family matter, but has since flip flopped back and forth (shocking, I know) and finally, in an interview with ITV on Thursday, admitted that he did hold shares in this company. He has stated that he sold them all before becoming Prime Minister, and that neither he nor his family have benefitted from this in any way. Which may be true, but it begs the question; if you haven’t benefitted in any way, why take the money out of the UK?
All in all, this week hasn’t been great for anyone mentioned in the papers. As I mentioned earlier, Icelandic Prime Minister Sigmundur David Gunnlaugsson has stepped down, as has member of the FIFA Ethics (juxtaposition much?) committee Juan Pedro Damiani. The pressure is mounting on David Cameron, and as more names come out, more scrutiny is faced. The only thing we know for sure now is that this scandal is far from over, and will only continue to grow as more information is revealed.
Keep your ears close to the ground, this is going to be juicy.