The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Yash Malani, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
The Panama Papers are a leaked set of 11.5 million confidential documents created by the Panamanian corporate service provider Mossack Fonseca that provide detailed information on more than 214,000 offshore companies, including the identities of shareholders and directors. The documents name the leaders of five countries — Argentina, Iceland, Saudi Arabia, Ukraine and United Arab Emirates — as well as government officials, close relatives and close associates of various heads of government of more than 40 other countries, including Brazil, China, France, India, Malaysia, Mexico, Malta, Pakistan, Russia, South Africa, South Korea, Syria, the United Kingdom and the United States of America.
The leak has been dubbed the Panama Papers by the International Consortium of Investigative Journalists (ICIJ), a non-profit group based in the US that originally published them.
The data stretches over 40 years, from 1977 through the end of 2015, including 214,000 offshore entities.
The shadowy financial dealings exposed in the leaks are not in themselves illegal but the ICIJ said the leaks show how “dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues”.The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes.
The total size of the leaked documents dwarfs that of the Wikileaks Cablegate 2010 (1.7 GB),Offshore Leaks 2013 (260 GB), Lux Leaks 2014 (4 GB), and Swiss Leaks 2015 (3.3 GB). The data primarily comprises e-mails, PDF files, photos, and excerpts of an internal Mossack Fonseca database. It covers a period spanning from the 1970s to the spring of 2016. The Panama Papers leak provide data on some 214,000 companies. There is a folder for each shell firm that contains e-mails, contracts, transcripts, and scanned documents. The leak comprises 4,804,618 emails, 3,047,306 database format files, 2,154,264 PDFs, 1,117,026 images, 320,166 text files, and 2,242 files in other formats.
Over 500 Indians figure on the firm’s list of offshore companies, foundations and trusts.From film stars Amitabh Bachchan and Aishwarya Rai Bachchan to corporates including DLF owner K P Singh and nine members of his family, and the promoters of Apollo Tyres and Indiabulls to Gautam Adani’s elder brother Vinod Adani. Two politicians who figure on the list are Shishir Bajoria from West Bengal and Anurag Kejriwal, the former chief of the Delhi unit of Loksatta Party.
From Mumbai ganglord the late Iqbal Mirchi, the list includes scores of businessmen with addresses in nondescript neighbourhoods in Panchkula, Dehradun, Vadodara and Mandsaur. Addresses of individuals, in many cases, The Indian Express found out, led to physical locations, but with no trace of the individual. Or, as in one case, belonged to a tenement in a chawl in Mumbai.
As per RBI norms, no Indian citizen could float an overseas entity before 2003 — in 2004, for the first time individuals were allowed to remit funds of up to $25,000 a year under the Liberalised Remittance Scheme, and this limit stands at $250,000 a year now.
But while RBI let individuals buy shares under LRS, it never allowed them to set up companies abroad, having clarified it through an FAQ mid-way in September 2010. In most of the cases in The Panama Papers, companies were set up long before the rules were changed and the purpose, experts said, was to park foreign exchange in a tax haven. It was only in August 2013 that individuals were allowed to set up subsidiaries or invest in joint ventures under the Overseas Direct Investment window. Indeed, records investigated reveal detailed correspondence between Indian tax authorities and those in British Virgin Islands, Seychelles, Panama or other tax havens seeking shareholder, bank account and asset details of offshore companies set up by Mossack Fonseca for Indians.
It is revelatory that authorities in these tax havens had no choice but to depend on Mossack Fonseca for information since, unlike India, the government is not a repository of ownership details. The Panama Papers come at a time when the Special Investigating Team (SIT) on black money headed by former Supreme Court Judge M B Shah is finalising its new action-taken report.
The worldwide expose also comes just six months after the 90-day “compliance scheme” for declarations of offshore assets and accounts ended on September 30, 2015 and brought just Rs 3,770 crore from 637 declarants.
The window now closed, strict penalties and a jail term have been announced for anyone found to have undisclosed and undeclared foreign assets and accounts.