On Sunday, a massive leak of millions of documents known as the Panama Papers was made public thanks to the hard work of dozens of media organizations. The leak showed how wealthy individuals—including more than 140 politicians—used a shady law firm in Panama to conceal their assets and avoid paying taxes.
You've probably heard about this––even if the idea that rich people play by different rules is a common one, it's still illuminating to see exactly what set of rules they do play by. And while the data leak, the largest in history, is still being sifted through by a consortium of investigative reporters across the globe, it's already resulted in the Prime Minister of Iceland being forced to resign after his name appeared in the Panama Papers.
There are likely more revelations yet to come—on Tuesday, it was reported that people tied to the French far-right party National Front were named in the papers. And earlier this week, the digital editor of Germany's Süddeutsche Zeitung, which was the first publication to get its hands on the 11.5 million documents, tweeted, "Just wait for what's coming next."
Few people know what that could be, but in search of someone who could make a reasonably educated guess, I called up Arun Pillai-Essex, who works as an analyst at the political risk firm Verisk Maplecroft in New York. That means his job is to monitor and predict trends that ripple through the world's invisible power structures. He explained why corrupt Americans will probably be shielded from the scrutiny now being heaped on their foreign counterparts, and how the fallout has differed in North America, Europe, and Asia.
VICE: What sticks out to you about how the Panama Papers are playing so far?
Arun Pillai-Essex: You can't separate the issue of tax avoidance from the issue of global income inequality that has been occurring over the past 15 years unabated. That issue is at the height of public concern for many countries around the world, not just in North America and Western Europe, but also in emerging markets. When you look at these Panama Papers, the revelations are obviously explosive, but they kind of feed into this narrative that the tax regime for normal people and for those ostensibly at the top of the political and economic ladder differs substantially. Because a lot of these structured offshore accounts are legal, as you know, in some cases they are egregious examples of people hiding income derived from various corporate interests.
But a lot of the time they're perfectly aboveboard, which is kind of troubling and speaks to how the international tax regime has so many loopholes within jurisdictions and they're willing to exploit them. The Panama Papers are also particularly timely because this revelation is coming when there is this sentiment of tremendous economic injustice and global growth has slowed down, and at least in the US, we've been experiencing depressed wages since about 2008, 2009. So it's just a further example that the issues of tax, and income, and inequality are intertwined.
In terms of the immediate impact on global elites and the security dynamic across the world, how do the Panama Papers compare to the Snowden leak about the NSA?
Those were more significant to a certain extent, because it had to do with the leaking of potential US allies and had so much to do with Iran and Saudi Arabia. It had a lot more impact for US foreign interests, while this is just another example that well-connected individuals across the world enjoy privileges. I think in governments where there's strong press freedom and progressive tax structures, you're already seeing the impact. There was the resignation of the Icelandic Prime Minister following huge protests. What's interesting about that, is that Iceland already had capital controls in place. When you have a country that has capital controls after a financial crisis and a head of state that shielded or hid some of his own wealth, that's obviously an issue.
But the reaction depends on the political environment, right? Everyone's talking about how Vladimir Putin and his allies might be implicated but it seems unlikely to force any resignations over there.
In places like Russia and China, the main press is not really covering it that much. I'm sure there are some liberal-leaning papers that have covered it, but not on the whole. In China, it's certainly been extremely muted. And in China it's interesting, because you have [President] Xi Jinping, whose anti-corruption drive has been one of his main legitimizing tools. And the fact that relatives close to him are accused of evading taxes makes the anti-corruption drive at least appear to be self-serving, which has been what a lot of the critics have alleged.
In countries with press freedom and progressive tax structures, however, this is a big issue. The public is very concerned. You're seeing it in the UK with [Prime Minister David] Cameron's father being implicated and Jeremy Corbyn, the leader of the opposition party, telling Cameron that he should disclose his financial interests. In closed countries like Russia and China, it's not getting as much play in terms of the domestic press. Then in these dictatorships in the Gulf, in Saudi Arabia, Qatar, and UAE, I don't think you're gonna see the revelations causing much of a stir, because these leaders, their net worth is estimated to be in the billions. So I don't think the fact that several million or tens of millions were offshore is going to cause any kind of domestic unrest.
Why has the fallout been relatively muted in the United States, which does have press freedoms and a liberalized democracy?
It's difficult to say, simply because the way the consortium is releasing it is a step-by-step process. That's why we have no prominent Americans that have been implicated in this yet. But there are more than 11 million files and it will take a bit of time to go through, so I think it's way too early to say. With [President Mauricio] Macri in Argentina, he's quickly come out and said there was an offshore relationship that his father had initiated and that his connection was benign and legal. And the body that's in charge of investigating corruption came out and said it was likely to have been perfectly legal.
In Pakistan, it feeds into a larger narrative of there existing a predatory political class and business elite. That perception isn't new. I think in the US it's that maybe no American paper except for one was given access to the documents that it hasn't been as huge of a story here.
Will the Panama Papers have an impact on the US election?
I don't think it's gonna have a direct impact on the US election, but it will provide the prominent spokespeople for economic injustice like Bernie Sanders, and in a bizarre way, Donald Trump, with further evidence. What I think is interesting is that this is a country that really has been targeting tax evasion as compared to Europe. The government has gone after large European banks, they went after the Swiss Banks in 2014, and they've also gone after tax inversion. Obama described tax inversion as the most pernicious of tax loopholes. The Treasury Department took a very significant move today to try and make the benefits of tax inversion almost none. The US has been quite strong on this, but on the flip side, the reason there might not be that many US names is because the US has a large onshore tax evasion industry as well.
So it's pretty easy to evade taxes in the domestic US without offshoring?
It's so easily done. Nevada, Wyoming, South Dakota, there's load of states. You can put in limited liability companies (LLCs) in almost every state in the union. The US is quite interesting because it's been so aggressive, particularly the Obama administration. Early on, Obama spoke about tax evasion at length, about how he wanted to claw back almost $200 billion in lost revenue. On the other hand, it's a country in which individual tax jurisdictions in so many states make it easy to not have to go through a Panama-based legal firm to set up. It's like the US almost has contradictory characteristics on this issue.
It's still possible heads roll or something dramatic happens in subsequent leaks with US politicians or banks, though, right?
In terms of the banking sector involvement, the consortium already came out with the banks that have used it the most. I don't think people are bracing for more names—and again only a sliver of the data has been analyzed––or some kind of earth-shattering revelation that's going to upend US politics. But let's remember that this is the fourth-largest offshore law firm that deals with this sort of thing. Imagine the top three.
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