Long before the Pandora leaks, there was the Swiss leaks and in-between have come many including Panama, Paradise, Mauritius, Luanda. As ICIJ in association with newsrooms across the world has been blowing the lid off the murky details of how the wealthy hide their wealth, questions are being asked about the purpose these exposes serve?
Movers and shakers from the world of politics, business, showbiz and sports hit headlines every time a new leak drops. But what after the limelight has shifted?
Government sources say that black money probes are long and arduous, secrecy being at the core of it.
“While the exposes are fodder for headlines for a day, tax investigations are not one-day cricket matches. They go on for many years,” said a government official on conditions of anonymity. He added that India had information about most of the people or entities on the list much before the media exposes. They are gathered through international treaties of financial information exchange.
But many tax experts see value in these ‘leaks’.
“Exposes such as these drill-in the sense of necessity to comply with the laws of the land. Secondly, it creates fear of evasion. Both are extremely critical for governments to fight tax evasion,” said Girish Vanvari, founder, Transaction Square, a boutique tax, regulatory and business advisory firm.
The government today announced that over Rs 20,000 crore of undisclosed income has been detected through investigations into Panama and Paradise papers. This does not include the undisclosed income Rs 8000 crore that the government told Parliament it had detected in 2017, from the Swiss Leaks.
ICIJ's Pandora documents expose offshore dealings of the high and the mighty like King of Jordan, the presidents of Ukraine, Kenya and Ecuador, the prime minister of the Czech Republic and former British prime minister Tony Blair. The files also reveal financial activities of Russian President Vladimir Putin’s “unofficial minister of propaganda” and more than 130 billionaires from Russia, the US, Turkey and other nations.
The leaked records come from 14 offshore services firms from around the world that set up shell companies and other offshore nooks for clients often seeking to keep their financial activities in the shadows. More than 700 Indian people and entities are allegedly linked to these offshore companies or trusts, as revealed by ICIJ through its ‘leaks’ for several years, now.
"Being a beneficiary of an overseas trust, by itself doesn't mean it is an infraction of any law, because you are just a beneficiary until an event happens," a prominent tax consultant from among the big four accounting firms, told Outlook Business on the condition of anonymity. “What needs to be ascertained is whether a particular trust owns property and/or wealth, and is distributing income, which is ill-gotten or simply put black money,” the tax expert added.
The debate is over tax saving versus tax evasion.
But the onus to prove evasion rests solely on the taxman. The government official quoted above lets us into an investigation on a high-profile celeb named in the Panama Papers of 2016. “Five years on, the celeb still claims she’s not the beneficiary of the off-shore company being probed but someone else using her name,” exclaimed the official.
But there are also advantages that government has reaped following the ICIJ investigations.
“What is in the public domain is just the tip of the iceberg. Several tax evasion cases that emanated from the ICIJ leaks are stuck at various courts, many people on the list have already paid up, while many others have chosen the VDIS to come clean,” said Vanvari. VDIS is Voluntary Disclosure of Income Scheme that offers defaulters a chance to come clean by disclosing income and paying taxes at prevailing rates.
“Then there is also the aspect of on-shore trusts versus off-shore trusts. As long as a particular individual or business has legitimate overseas businesses, then there are merits to off-shore trusts,” explained another tax expert to Outlook Business.
The ICIJ analysis of the secret documents identified 956 companies in offshore havens tied to 336 high-level politicians and public officials, including country leaders, cabinet ministers, ambassadors and others.