714 Indian included in Paradise Papers disclosure by ICIJ

714 Indian included in Paradise Papers disclosure by ICIJ

The International Consortium for Investigative Journalism (ICIJ) released the Paradise Papers into the public domain on 5th November. 714 names of Indian people in business, politicians, actors have been brought to light who have offshore accounts in tax havens. It comes 18 months after the Panama Papers leak in April 2016. Panama paper leaks fallout led to the resignation of the Prime Ministers of Iceland and Pakistan. The leak exposed the problem of global tax avoidance brought about by the opaque movement of global financial capital.

Impact on India of the Paradise Paper Leak:

The Paradise Paper leak includes Minister of State Jayant Sinha, BJP MP Ravindra Kishore, Congress leader Sachin Pilot, Amitabh Bachchan again, Vijay Mallya like of 714 people of India. India ranks 19th in the number of names included in the Paradise papers. Indian Company Sun Group is Appleby’s second largest client. Powerful people from every sector including people in business, politicians, entertainers, have been named in both the major leaks. Earlier, the Panama papers leak included the names of Amitabh Bachchan, Aishwarya Rai Bachchan, Ajay Devgan, Vinod Adani, DLF CEO Kushal Pal Singh.

The government has set up the Multi-Agency Group (MAG) which would be headed by the Chairman of Central Bureau of Direct Taxes(CBDT). The group would include representatives from Enforcement Directorate, CBDT, Reserve Bank and Financial Intelligence Unit.

The MAG set up in 2016 to investigate into the Panama Papers has identified 426 cases of Indians or persons of Indian origin out of which it filtered 147 actionable cases. Undisclosed funds of Rs.792 crores have been detected and further investigation is underway.

What are the Paradise Papers and Panama Papers:

The Paradise Paper leak is the second biggest data leak sizing 1.4 Terabyte and comprising 13.4 million documents related to offshore investments. The documents contain financial statements, loan agreements, emails, trust deeds and other documents from the last 50 years.  The data primarily is linked to two firms – a Bermuda based offshore law firm Appleby and a family owned trust based in Singapore called Asiaciti. 19 other tax havens involving people and companies from 180 countries have been disclosed. These tax havens are used by the global rich to transfer their wealth abroad to avoid paying their fair share in taxes.

Panama Papers were the biggest ever data leak. It contained 2.6 terabytes of information leaked from a single law firm based in Panama, Mossack Fonseca. The 11.5 million documents of corporate law firm exposed the fraud, tax avoidance and breaching of international sanctions. Its clients indulged in through the law firm’s shell companies. These shell companies were legal according to Panamanian law.

Many high profile people from all over the world were named in the Panama Papers whose impact was significant. Prime Minister Sigmundur Davíð Gunnlaugsson of Iceland had to resign due to the public outcry that followed after his name appeared in the leaks. The then PM of Pakistan Nawaz Sharif and his daughter and son in law were also named to the list. The Pakistani judiciary disqualified Sharif’s candidature in July 2017 as he did not disclose the employment in a UAE based company in his nomination papers. He stands ousted as the Prime Minister of the country and is being tried in the court in the corruption scandal.

The Luxembourg Leaks in 2014 and Bahamas Leaks and Swiss Leaks are other data leaks related to offshore tax avoidance documents in these tax havens. They have been released through the ICIJ and the German Newspaper Süddeutsche Zeitung.

How do tax havens help the rich and powerful to avoid taxes:

The countries or territories which have a low tax or no tax policy and provide services with anonymity to non-resident clients are called tax havens. Individuals or corporates may establish ‘shell companies’ with no employees or office and transfer funds here to avoid taxes at the source. The primary promise of a tax haven is secrecy. These shell enterprises are almost impossible to trace back to the actual owner. Now, they are not illegal as such, but the air of secrecy that it encourages attracts black money, drug money to be laundered and to avoid legitimate tax.

Oxfam, in its report on income inequality in 2016, said that the rich do not pay their fair share and this is the reason for the widening gap between the incomes of rich and poor. Some of the biggest tax havens are Luxembourg, Cayman Islands, Bermuda, Bahamas, Mauritius and more.

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