Pandora’s Box: The world’s rich and powerful exposed by leak
October 11, 2021
3 min read
What's going on here?
The world’s most rich and powerful, including government leaders and business tycoons, are put in hot water upon the leak of secret financial documents dubbed the Pandora Papers.
What does this mean?
The financial documents in question amass almost 12m files and expose the backdoor financial dealings of more than 300 people from the King of Jordan to Tony Blair. This latest leak is the largest in a series of leaks since 2014, including the FinCen Files, the Paradise Papers, the Panama Papers, and Lux Leaks. Documents which have drawn the most attention from the discerning eye of the public reveal the Qatari ruling family having avoided an £18.5m tax on a London property, and Tony Blair having saved £312,000 in stamp duty on a London office.
Most of the financial dealings involve the use of tax havens. These are countries or independent areas where taxes are levied at a low rate and stretch globally from Switzerland to the Seychelles. People with sufficient wealth to warrant the avoidance of high taxes often work through accountants, lawyers and corporate providers who will buy an offshore company using a fake name. This means they are able to open a bank account in the company name and then make any purchases, let’s say in property in London or New York, for example, from this bank account and through this manage to dodge tax obligations.
The estimated £4bn worth of UK property revealed to be held offshore is by no means illegal as tax avoidance uses legal loopholes to reduce the amount of tax payable. In fact some of the listed people may have genuine concerns for privacy and security for doing business in countries with oppressive regimes. However, the lack of regulations and transparency it holds leaves the door wide open to money laundering and tax evasion, which is illegal.
What's the big picture effect?
Already, some of the more than 300 people involved have unsurprisingly faced allegations of tax evasion, corruption, and money laundering. With some public officials coming up for re-election, including Czech Prime Minister Andrej Babis, this vital information which the general public is now aware of, could lead to the rich and powerful becoming not so rich and not so powerful in the hands of the voter.
However, since much of the findings show no illegal activity, they therefore bring up a question of public interest. Tax havens are suggested to cost the UK between £300bn and £600bn in lost tax revenue, which undoubtedly evidences a two tier global tax system – one tier for the ordinary who strictly follow the rules, and one for the most elite and wealthy who find loopholes to avoid paying their fair share.
The Pandora Papers have been published in the few weeks which saw skyrocketing food and energy prices, major fuel shortages, and a Conservative Party Conference in which Chancellor of the Exchequer Rishi Sunak hinted at raising council tax in line with the proposed cut to universal credit and the 2.5% increase in National Insurance contributions. These contributions aim to generate £12bn a year to fund social care and the NHS in post-pandemic Britain. This makes that £12bn fund look like a fairly measly amount compared to the £300-600bn which could be harvested from money held in tax havens.
So, what will happen next? Promises by the Conservative government to tighten its grip on the registration of offshore accounts by law enforcement agencies have been voiced in the past by David Cameron himself. Whom, in 2015, vowed to dismantle the “dirty money” involved in the UK property market. However, such action has yet to be taken and the pledge to address the issue at this year’s G7 Summit “as soon as parliamentary time allows” doesn’t feel all that promising.
Report written by James Evans
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