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Paradise Restricted: Rich Access Only

How the Paradise Papers formed public opinion on tax-avoidance

by Anders Palm Olesen | @_andpol | 5th January 2018

13.4 million confidential electronic documents. 1.4 terabytes of data. When the Paradise Papers came out in November 2017, it was the accumulation of a massive journalistic endeavour. 380 journalists in top-secret offices around the globe had been working for a year at news organizations like The Guardian, The New York Times and Züddeutsche Zeitung. For all this time, they had been living with the secret and kept it from oblivious colleagues, friends and spouses.

The first tell-tales that something big was underway came from an anonymous Reddit-user on 20 October 2017. The original user, PanPthrowaways, is now deleted.

Do not give up. More is coming. from PanamaPapers

In later comments, the user revealed the leaks would relate to “the extremely wealthy and members at the highest levels of governments in developed countries around the world…”. To the excitement of the Reddit-community, the user signed off as “Paradise”.

At the same time, journalists from the International Consortium of Investigative Journalists (ICIJ) could feel the sweat of an approaching deadline. After a year's work, what would their impact be?

The consequences of the 2016 Panama Papers were far-reaching and among other things caused the Prime Minister of Iceland to resign and almost ended the carrier of the famous Argentinean football player, Lionel Messi. He managed to turn a 21-month prison sentence into a fine of $285,000. The former British Prime Minister, David Cameron, also came under scrutiny. All in all, it was one of the first times the depth of the systematized tax avoidance by the world’s rich and powerful became a matter of large-scale public debate.

And with the imminent publication of the Paradise Papers, the journalists at ICIJ once again had the chance of putting rich people’s tax avoidance on the headlines of world media.

The Panama Papers

Investigative journalism's largest leak from 2016 with major high-level political implications. As with the Paradise Papers, the Panama Papers consisted of leaked documents from a tax-avoidance firm. The source (named “John Doe”) had accessed and copied material from the internal database of the Panamanian law firm, Mossack Fonseca. As it happened with the Paradise Papers, the documents were leaked to Bastian Obermeyer and Frederik Obermeier (no relations) of the Züddeutsche Zeitung who shared the material with journalists from ICIJ.

Journalists working on the Paradise Papers/country + members of ICIJ/country


What came out of the Paradise Papers

In contrast to the Panama Papers, the Paradise Papers consisted of leaked documents from not just one but several tax-avoidance law-firms (or “offshore legal service providers”). One of the more prominent of these was Appleby with offices in known tax-havens as Bermuda, Cayman Islands, the British Virgin Islands, Seychelles, Isle of Man, Mauritius, Jersey and Guernsey.

The Paradise Papers brought attention to secret offshore accounts linked to Prince Charles, Queen Elizabeth II, US Secretary of Commerce, Wilbur Ross and the President of Colombia, Juan Manuel Santos. Unlike the Panama Papers, however, the Paradise Papers also brought attention to the tax-avoidance schemes of big international corporations such as Apple, Nike and Glencore.

“Appleby has thoroughly and vigorously investigated the allegations and we are satisfied that there is no evidence of any wrongdoing, either on the part of ourselves or our clients.”

- Appleby’s response to the Paradise Papers printed in The Guardian.

Maybe even more remarkable than the unearthing of large-scale efforts by the ultra-rich to hide fortunes from national tax-regulation, was the lack of public apologies from implicated individuals.

The most peculiar attempt to avoid any comments to the public was probably Lord Ashcroft as he sped through the Conservative Party conference in Manchester in October 2017 with BBC journalist, Richard Bilton on his heels.

Bilton repeatedly asked Ashcroft about his connections to a tax-avoidance scheme exposed in the Paradise Papers, linking Ashcroft to tens of millions of pounds kept in the offshore Punta Gorda Trust. Ashcroft, in return, uttered “oh dear, oh dear, oh dear” for two minutes before taking refuge in a gender-neutral toilet. Lord Ashcroft later denied the accusations of hiding in a toilet from the BBC journalist in a tweet.

The unnatural world of The Rich

“The lives of the richest people in the world are so different from those of the rest of us, it's almost literally unimaginable. National borders are nothing to them... the laws are nothing to them. They might as well not exist,” says Brooke Harrington, a professor at Copenhagen Business School in the NPR-podcast, Hidden Brain.

She wrote the book, Capital Without Borders, about the world of the super-rich and in an article for The Atlantic, she descripes her experience of infiltrating the ranks of an elite-profession without which large-scale tax-avoidance could not exist.

The ‘wealth manager’ is not only hired to circumvent inconvenient laws for the super wealthy. They are by necessity often deeply entangled in intimate family affairs such as mediating disputes over family fortunes, providing dates and matchmaking and finding treatment for drug-addicted children.

It is revelations like these that estranges the public to the alien conducts of the ultra-rich. Not only do they float above the rule of law governing the rest of us – they are also seemingly living by an other-worldly moral codec.

Before digging deeper into the how the Paradise Papers affected public opinion on tax-avoidance, it might be interesting to have a look at some of the statistics behind the world’s richest people.

Where did all the tax-money go? Long time passing

In an interesting compilation of work by the economist, Michael Zucman from Berkely University and in cooperation with Thomas Tørsløv and Ludvig Wier, they find how loss of tax-revenue differs across countries and regions.

Regional corporate-tax loss

Overall, approximately $8.7 trillions are stacked away in tax havens world-wide. That equals 8% of global household wealth. In another recent study with Annette Alstadsæter and Niels Johannesen, they find that a staggering 45% of multinationals’ profits shifted to tax-havens in 2015.

The data from Zucman et al. reveals that the EU loses over 20% of corporate tax to tax havens. Topping the list is Germany with a 32.1% loss followed by France and Hungary – while countries like Bulgaria, Slovakia and Romania seems to have the least amount of tax-loss to tax havens. The US loses an estimated 16.6% corporate tax to tax havens.

There is no doubt that a vast amount of wealth is transferred from the nation-state to the pockets of the super-rich and multinational coorperations. The richer you are, the easier it is not to pay tax. In the eyes of the majority, the Paradise Papers, once again, was a reminder of the world’s imperfect economic system.

Corporate-tax loss per country

Will they ever learn

The question the ICIJ and all the journalists who’d been working on the Paradise Paper-project and the Panama Papers before that must be asking themselves, is to what extent their work had any impact? Sure, a state leader and a top-politician resigns here and there – and yes, the public allows itself an outcry against famous peoples’ money-schemes. But if the public doesn’t hold its politicians accountable to change regulations and close economic loopholes for the super-rich – the wealth-inequality will only continue. What does the people think?

To answer this question, Christian Aid made a survey of 2.051 British adults one and a half week after the publication of the Paradise Papers. Was any significant unwillingness against tax havens noticeable in the public perception? The statistics speak for themselves.

Tax-avoidance is morally wrong

Companies avoid taxes too easily

Amount of people boycotting

Government regulation hasn't gone far enough

A staggering 90% of the respondents believe tax-avoidance is morally wrong. Almost as many, 85%, believe it has become too easy for large companies to avoid paying taxes in Britain. One in four are boycotting a company because it doesn’t pay its fair share of taxes - and another 43% is considering doing so. Finally, 77% of the respondents didn’t think the government had gone far enough in preventing corporate tax avoidance. The optimists, however, point to the fact that one and a half year after the Panama Papers, more than $500 million have been recovered by tax authorities world-wide. And slowly, people are demanding justice.

In July 2017, a remarkable event happened when the people of Pakistan took to the streets of Islamabad. The Panama Papers had shown how prime minster, Nawaz Sharif, and his politically powerful children had money in offshore companies. The crowd gathered in front of the Supreme Court when they heard the news: Prime minister, Nawaz Sharif, had been removed from office.

It might be a slow revolution – but the world’s politicians and decision makers can’t ignore the voice of the people forever. Sooner or later they will have to rewire the inequalities interwoven in the present political fabric.