Hundreds of world leaders and politicians use financial constructions through tax havens, potentially avoiding tax. This is evidenced by leaked documents held by the International Consortium of Investigative Journalists (ICIJ). These include the King of Jordan, the Presidential Family of Azerbaijan, the Prime Minister of the Czech Republic, the Presidents of Ukraine, Kenya and Ecuador and the Pakistani Prime Minister circles. Demissionary Finance Minister Hoekstra has also been named.
The consortium involves dozens of international media including The Guardian, Le Monde and The Washington Post. The documents now leaked, coming from fourteen letter bus companies, have been baptized the Pandora Papers. In 2016, the Panama Papers came out through the consortium and the Paradise Papers in 2017. According to the ICIJ, this is the largest collection of leaked documents to date.
The media involved in the consortium stress that it is often not illegal to run money through letterbox firms or so-called offshore constructions. “But these things often mean that profits from countries with a high tax rate, where they are earned, are relocated to companies that exist only on paper in countries with low tax rates,” says the ICIJ. “The use of offshore constructions by politicians is particularly contentious because they can be used to keep politically unpopular or even illegal activities hidden from the public.”
Real Estate Deals
The documents show that Jordanian King Abdullah II owns $100 million property in London, Washington and Malibu. Czech Prime Minister Andrej Babis bought a chateau in France for $22 million through an offshore company. Volodymyr Zelensky, the President of Ukraine, sold a 25 percent stake in an offshore company during his election campaign to a friend who now works as his top advisor.
Azerbaijan President Ilham Aliyevs family owns some £400 million in real estate in the United Kingdom. One of the real estate objects was sold for £67 million to the British royal family.
People affiliated with Pakistani Prime Minister Imran Khan are also mentioned in the documents. Khan campaigned against his predecessor Nawaz Sharif several years ago because Sharifs children had interests at offshore companies. Khan welcomed the Panama Papers in which Sharif was mentioned and eventually forced it to resign. The Pandora Papers show that Pakistans current water supply minister has tried to store money at an offshore company. Khans finance minister owns four offshore companies.
Kenyan President Uhuru Kenyatta also spoke out against these constructions in 2018: “The possessions of each official should be made public so that the people can ask questions about them and wonder: what is legitimate? If you cant answer yourself, you have questions to answer. Me too.” Now Kenyatta and family members appear to have possessions in several mailbox firms.
Minimum Tax Rate
The structures often run through countries and islands in South and Central America. However, the Netherlands is also known internationally as a tax haven. According to NGO Tax Justice Network, only the British Virgin Islands, the Cayman Islands and Bermuda play a bigger role as a tax haven.
Various initiatives are being taken internationally by governments to tackle tax avoidance. The Organisation for Economic Cooperation and Development (OECD) agreed this year that there should be a minimum tax rate worldwide. This is particularly designed to tax multinationals.
Companies will then have to pay at least 15 percent tax everywhere. It should provide an extra $125 billion in tax revenues. Development organization Oxfam called that percentage too low.