It is the largest document dump in history. Some 13.4 million documents that have been scoured by hundreds of journalists working in tandem across the globe. They were prised from the servers of Appleby Group Services, an offshore law firm based in the Caribbean tax haven of Bermuda. Appleby has offices across the idyllic islands, but the space where it does most of its work is in
the grey area of aggressive tax minimisation strategies. Appleby's expertise allows individuals and multinational corporations alike to game tax codes, avoid oversight and shift billions of dollars offshore each year.
Why is this trove such a big deal? For starters, there are many recognisable names mentioned in it, including Queen Elizabeth II, Prince Charles, the Duke of Westminster, the billionaire tech investor Yuri Milner, singers Madonna and Justin Timberlake, Formula One champion Lewis Hamilton and about half of Donald Trump's cabinet. The Papers also reveal the aggressive exploitation of regulatory loopholes by several major corporations including Walmart, Disney, Uber,
Nike, and
Apple.
But while the practices documented in these records may be considered embarrassing they remain, for the most part, legal. And therein lies the rub. So as with the Panama Papers that came before, the Paradise Papers aren't simply an exercise in naming and shaming; the goal is to spur efforts to reduce tax avoidance. This week, for instance, there have been suggestions that tax havens should be blacklisted, something that would probably be far easier said than done. But even if it could be done, a comprehensive European Union blacklist of tax havens would at best only have a reputational impact; that's
hardly a powerful deterrent when billions of dollars are at stake.
Offshoring is accelerating the collapse of many developing countries' tax bases. It deprives Germany of a sum that would equal roughly 30% of its total corporate tax revenue, money that should be spent on government services and programs. Across Europe in 2014 it is estimated that some
€78b was lost in tax revenue. The UK's Opposition leader Jeremy Corbyn pointedly asked the Queen to apologise and recognise the damage that these practices inflict.
At the heart of the problem is the fact that many governments are complicit in this behaviour. Dutch authorities are now investigating a decision - made without the supervision of tax specialists - to allow
US giant Proctor and Gamble to move more than €500m offshore, saving the latter nearly €150m in taxes. The situation is further complicated by the fact that some of those who push the limits of tax minimisation occupy senior government roles themselves. Just days after the document dump British representatives sought to
water down EU blacklist efforts. And in the US Commerce Secretary Wilbur Ross uses a labyrinthine
tangle of shell companies to disguise his stake in a shipping giant, Navigator Holdings, which has contracts with Russian companies linked to the Kremlin.
It remains to be seen whether these leaks can become the catalyst for genuine regulatory change.
