‘Money flows like water and finds a way to leak. The only difference is we can control the water flow but not the minds of people with wrong intentions who hold the money.’
The world finance systems have been covering the loopholes in the plans for ages globally. Still, the scammers familiar with the systems have always found a way to hide money from legitimate methods.
What are Pandora Papers?
The pandora papers exposed a leak of 12 million documents that revealed the foreign secret financial affairs of hidden wealth, tax avoidance, and money laundering cases. The exposed were 35 world leaders, 330 politicians, 300 public officials in more than 91 countries, and a global group of fugitives, con artists, and murderers.
Those include current and former presidents, prime ministers, and government officials – the world rich and powerful.
The document leaks revealed real owners of more than 29,000 offshore shell companies.
The people of power who could help end the offshore system instead benefit from them. At the same time, comparatively, the government takes very few measures to stop such scams from happening.
Biggest Journalism Partnership
The international consortium of investigative journalists who revealed the scam included 600 journalists from 117 countries, and 150 news outlets spent two years investigating the sources to dig up the court record and other public documents from numerous countries.
The records leaked are from 14 foreign offshore companies worldwide that set up shell companies and other offshore nooks for clients who seek to keep their financial shadows a secret. The records hold information three times the dealings of the revealed names as any of the previous scams.
Consequences of The Scam
Making trust funds offshore is legal only when disclosed to the tax department, and the concerned department is aware of it. But the rich find shortcuts to evade taxes that pose a significant risk to the country.
When the rich find such shortcuts, the ordinary individuals who pay their taxes duly will have a problem knowing that the elites are evading taxes with expert advice; they exploit the system’s loopholes.
Fleeing the tax regulations impacts the government by depriving it of the tax revenues and critical funding for public services for a developing country like India.
But in critical economic situations, the people have started resenting each other to threaten the societal balance.
Loopholes in tax systems, unless addressed and information is known to the people, the chances of withholding money laundering is unlikely. Governments must also expand the kind of disclosures required to monitor such transactions and enforce them strictly.
The Regulation of Offshore Trade Practices
$11.3 trillion invested in the tax havens offshore, according to a 2020 study by the Paris-based Organization for Economic Cooperation and Development. It is impossible to know if the wealth is tax evaded or related to other crimes in tax haven countries’ investments.
It isn’t easy to track the sources of the money if its seeds are legitimate. The offshore shell companies do not work in isolation.
They partner with other companies that provide privacy and keep secrecy around the globe by giving multiple interlocking layers of companies and trusts.
These complex arrangements take higher fees to protect the clients.
Abolishing Tax havens will help to ensure that the government has a track record of tax revenue.
The Purpose of Pandora Papers was
1. Individuals hide their real identities and distance themselves from offshore entities. To make it harder for the tax authorities to reach them.
2. To protect cash, shareholdings, real estate, art, aircraft, yachts, and other investments from creditors and law enforcement.
To ensure effective investigation of such cases, they will have to proactively engage in foreign jurisdictions and obtain information from relevant taxpayers.
The ministry has announced that the Indian government is part of an inter-governmental group that ensures collaboration and experience sharing to address tax risks associated with such leaks effectively.
The US is the most prominent player in the alien world, and it is the best country to start ending offshore financial abuses. The New York-based banking systems monitor the cash flow and international transactions because of the de facto status of the dollar.
It has also forced the banks based in Switzerland to hand over the information related to the Americas overseas account.