Pandora papers: what’s in the box?

A trove of information on the hidden assets and covert dealings of the world’s rich and powerful has been revealed in the biggest leak of tax haven data in history.

Over 600 journalists in 117 countries – members of the International Consortium of Investigative Journalists (ICIJ) – have spent months looking over the “Pandora papers”, which were published on Sunday. The papers relate to offshore financial schemes in countries including the Cayman Islands, Switzerland, Dubai, Panama, and Monaco. More stories are set to be published this week.

The cache of 11.9 million files includes 6.4 million documents, three million images, over a million emails, and just under half a million spreadsheets. The 2.94 terabytes of data is larger than the 2.6 terabytes of the famous 2016 Panama papers leak, and the 1.4 terabytes of the 2017 Paradise papers.

What do the documents show? And why does it matter?

What do the documents show?

The documents reveal a web of companies that are set up in “tax havens” or secrecy jurisdictions such as the Cayman Islands and the British Virgin Islands. These offshore companies – often with unidentifiable owners – are then used to own property or assets in other countries. Offshore entities can be used to pay little to no corporation tax, or to avoid property taxes in other countries.

Is this illegal?

No – and yes. Tax avoidance (using loopholes to avoid paying certain taxes) is entirely legal. The UK government is rather bitter about this, declaring that it involves “operating with the letter, but not the spirit, of the law”.

But there are many reasons beyond tax avoidance for someone to set up an offshore company – to protect their assets from political instability or criminal activity, for example.

Tax evasion, however, is illegal. Tax evasion is intentionally concealing income from government authorities.

Beyond tax evasion, offshore entities and shell companies have been linked to concealing the proceeds from criminal activity.

Who is named in the papers?

Many powerful political figures. Ilham Aliyev – the Azerbaijani president – and his family have been named; the files reveal they have traded nearly £400 million of UK property. The Queen’s crown estate paid £67 million for one of their properties. Their names appeared alongside King Abdullah II of Jordan, who has traded $100 million of property in London, Washington, and Malibu. Also named was the PM of the Czech Republic Andrej Babiš, and a law firm founded by the Cypriot president Nicos Anastasiades. Anastasiades says he has had no active role in the firm since 1997.

The Ukrainian president Volodymyr Zelenskiy – elected on a platform of anti-corruption – transferred his 25 per cent stake in an offshore company to a friend months before he won the election.

A major donor to the Conservative party, Mohamaed Amersi, was revealed to have facilitated a deal which involved a $220m payment from a Swedish pharmaceutical company to a company owned by the daughter of the former president of Uzbekistan, Islam Karimov. US authorities later established the payment had been a bribe. Boris Johnson has responded to the revelations by saying that all donations were “vetted”.

Tony and Cherie Blair are also named. The papers make it clear that the former prime minister and his wife saved £312,000 in stamp duty when they bought a £6.5m office in Marylebone. As they bought the offshore holding company rather than the building itself, they did not have to pay the tax. This is a legal loophole.

Why does this matter?

Whilst much of the activity revealed in the pandora papers is not illegal, the documents do show that many high-profile and high net-worth individuals are not paying taxes which other citizens cannot afford to avoid.

The role of London in this offshore financial world has also been emphasised: not only is the capital home to many of the service providers of these offshore schemes, but the amount of property in the city owned by such companies also raises questions.