Why you should care
Because 13 million leaked financial records have revealed the offshore activities of some of the world’s most powerful people and companies.
This is an OZY Special Briefing, an extension of the Presidential Daily Brief. The Special Briefing tells you what you need to know about an important issue, individual or story that is making news. Each one serves up an interesting selection of facts, opinions, images and videos in order to catch you up and vault you ahead.
WHY YOU SHOULD CARE
What are the Paradise Papers? Dirty secrets and abusive capitalists haven’t sounded this alluring since Fifty Shades of Grey. The so-called Paradise Papers — a reference to the scenic locales that double as the world’s most tax-friendly jurisdictions — are a massive trove of over 13 million leaked financial records that reveal the offshore activities of some of the world’s most powerful people and companies.
Where do they come from? The files come largely from the company registries of 19 tax havens and two offshore service providers, including Appleby, a law firm founded in Bermuda that helps corporations and wealthy individuals set up companies in offshore locations with favorable tax laws. Around 380 journalists collaborated to examine the 1.4 terabytes of data, which were originally acquired by the German newspaper Süddeutsche Zeitung.
What do they reveal? While the vast majority of offshore investments are legal, the Paradise Papers shine a spotlight on how multinationals and high-net-worth individuals use complex structures to avoid paying higher taxes, and implicate everyone from the Queen of England to Russian oligarchs to corporations like Nike and Apple. A similar leak of the Panama Papers last year resulted in scandals, investigations and embarrassment, including the downfall of then prime ministers of Pakistan and Iceland.
WHAT TO KNOW
The shipping news. Current U.S. commerce secretary Wilbur Ross was appointed by President Bill Clinton to the U.S. Russia Investment Fund during the 1990s to promote American business interests in Russia. And it seems the billionaire never lost his taste for the Russian market, even after he joined President Trump’s cabinet. Newly disclosed documents reveal that Ross retained investments in a shipping firm that has significant business ties to a Russian gas company that is co-owned by President Vladimir Putin’s son-in-law (Ross denies there is anything improper about the relationship).
The royal prerogative. Britain’s Queen Elizabeth II voluntarily agreed to start paying income taxes back in 1992, and apparently Her Majesty enjoys it about as much as the rest of us. Fortunately, she has a team of publicly funded tax advisers who have helped her invest around $13 million of her money offshore, including in a Cayman Islands fund that owns shares in a rent-to-own business called BrightHouse that has been criticized, according to The Guardian, “for exploiting thousands of poor families.” Her son Prince Charles also failed to disclose that his private estate had offshore financial interests that stood to benefit from changes to two environmental agreements that he publicly championed.
Cui Bono? The Paradise Papers have also prompted an investigation into tax avoidance by a Lithuanian shopping mall that was partly owned by a Maltese holding company in which rock star Bono formerly held a stake. The wealthy U2 frontman said he was “extremely distressed” to learn of the connection and that he welcomed investigation into offshore investment.
Extra dark money. It appears that the attacks made by Donald Trump’s campaign on “globalist” rival Hillary Clinton during last year’s election were partly being funded by offshore money. The Paradise Papers suggest that reclusive hedge fund billionaire and Trump donor Robert Mercer used Bermuda investment vehicles to legally avoid U.S. tax in order to build a $60 million campaign war chest.
Big Tech buy-in. Tech giants Facebook, Twitter and Apple are also under scrutiny. The Paradise Papers reveal that Yuri Milner, the Russian billionaire who once owned 8 percent of Facebook and 5 percent of Twitter, was backed by a Russian state–controlled bank, which invested hundreds of millions of dollars in the two American companies. Apple, the world’s largest taxpayer and most profitable company, avoided paying billions more in taxes thanks to stashing around $252 billion in the Channel Island of Jersey.
WHAT TO READ
Who Leaked the Paradise Papers? by Holman W. Jenkins Jr. in The Wall Street Journal
“How the papers came to be stolen and deposited in the hands of the media is one subject that does not stir the investigative juices of the world’s media. The press’ job apparently is to follow where the documents lead, not where they come from. Is this not a blind spot?”
End These Offshore Games or Our Democracy Will Die, by Aditya Chakrabortty in The Guardian
“Take … the cliche that the public in the U.K., the U.S. and elsewhere are at war with their elites. This week proves that the opposite is true — it is the elites who have been fighting trench warfare against their publics, by denying them the revenues they need for their hospitals and schools.”
WHAT TO WATCH
Paradise Papers: Secrets of the Global Elite
“The documents speak for themselves.”
Watch on ICIJ:
Offshore Tax Havens Explained with Piggy Banks
A 2016 Vox explainer on the Panama Papers remains useful in explaining the shell companies and methods behind the tax havens described in the Paradise Papers.
“A government can’t tax what it can’t find.”
Watch on Vox:
WHAT TO SAY AT THE WATERCOOLER
It’s a good time to bust out your favorite accountant joke (“Where do homeless accountants live? A tax shelter.”), or to point out that the amounts involved in offshore tax havens are truly staggering. About 8 percent of the world’s household wealth is held in tax havens, and when you add in large multinational companies, roughly $7.6 trillion — twice the annual federal budget of the United States — may be hidden offshore.