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On October 3, the International Consortium of Investigative Journalists (ICIJ) released what it called its “most expansive exposé of financial secrecy yet”. With 11.9 million leaked documents and 2.9 terabytes of data, the Pandora Papers surpassed even the 2016 Panama Papers leak, (11.5 million documents and 2.6 terabytes of data).

The author:

Lev Yuriditsky

Head of Intelligence

Among others, the leaks included 35 world leaders, including current and former presidents, prime ministers, and other heads of state, along with numerous celebrities and high profile business leaders.

The responses from world leaders — those named in the leaks and those not mentioned —  ranged from denial and defensiveness to expressions of concern and calls for action, investigations, and legislation. In terms of the former, Jordan’s King Abdullah II, for example, denounced the leaks as a “campaign against Jordan”, while the prime Minister of Cote d’Ivoire referred to the Pandora Papers as a “malicious use of information”. Czech Prime Minister Andrej Babis, for his part, implied that the timing ahead elections that same week was part of a political plot against him. Naturally, these denunciations, and those reacting similarly, are coming from some of the more noteworthy names included in the leaks.

The EU tax commissioner, Paolo Gentiloni, on the other hand, stated that the European Commission will propose new legislation by the end of this year to address the issue of tax avoidance and tax evasion.

The US promised to “crack down on the unfair schemes that give big corporations a leg up”, while the Russian government described the leaks as being made up of “unsubstantiated claims” and pointing a finger at the US for being “the world’s largest lagoon”. Indeed, despite US President Joe Biden pledging that he will work to improve international transparency and combat corruption, the country’s own South Dakota emerged from the Pandora Papers as a leading tax haven, especially for trusts..

The question now is, what will happen?

In order to forecast the ramifications of these leaks, it’s worthwhile to  recall the aftermath of the Panama Papers. Probably the most famous of these kind of leaks, the issue of tax avoidance and evasion, as well as the use of offshore havens, became front and center in the public discourse and led to calls for and implemention of reforms throughout the world. Indeed, not long after the Panama Papers were published, protests broke out in various countries, while several world leaders and prominent politicians either stepped down or were removed. Legislation was also passed by various governments to make obfuscation of wealth more difficult, while those used as offshore locations pursued laws requiring greater transparency. This includes Panama itself, as well as New Zealand, the UK, and the US.

At the same time, the very fact that the Pandora Papers exist five years on,is cause for skepticism, not to mention that various other, albeit smaller leaks published in between. One  explanation this is that political change tends to be slower paced. In other words, even in jurisidictions where there is an appetite for these kind of reforms, it can still take years to pass and implement relevant legislation. At the same time, there is not insigificant pressure against change. For one, many politicians who would be the ones responsible for pursuing such change may also benefit from opacity, whether personally or in terms of their country’s own interests.Indeed, the economic benefit to the tax havens, whether we’re talking about South Dakota or Bermuda, is immensely valuable, affording them significant revenue streams and especially important to those that otherwise have few exports or industry. It is difficult to incentivize or even justify increased transparency to constituents when it means reducing or evening cutting off a notable source of income.

In summary, the Pandora Papers my have a similar legacy as its predecessors. More light was shed on offshore tax havens and the fact that they are still widely utilized, both for legitimate and illegitimate reasons, as well as ongoing efforts to hide wealth. This will give further momentum to the already existing public demand for a crackdown on the common practice among political leaders and global elites to evade taxes and hide their assets, likely triggering investigations by various countries to regain lost tax revenue and even possibly indict those breaking local laws. However, it’s a mistake to believe that all or even most loopholes will be closed for all of the reasons mentioned above. Indeed, the complicated nature of financial crime and use of offshore jurisdictions, including in ways that do not break any laws, as well as competing interests makes reform harder. The fact that leaks are frequently the impetus for change also means that pressure might wane when the news cycle moves on — until, of course, the next one.


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