"Paradise Papers" Leak Shows Dense Network of Offshore Tax Shelters Servicing Political, Economic Elite

By:
Chris Gaetano
Published Date:
Nov 6, 2017
Leak

The 13.4 million leaked documents known as the "Paradise Papers" lays bare a dense network of offshore shell companies linked to over 120 prominent political figures as well as some of the world's largest companies, which concealed assets from tax authorities and the general public as a whole, according to the International Consortium of Investigative Journalists.

Those named so far range from pop stars like U2's Bono to monarchs like the Queen of England to political leaders like Canadian Prime Minister Justin Trudeau and U.S. Secretary of Commerce Wilbur Ross, with many more in-between. While stressing that there are legitimate reasons to set up an offshore shell company, the ICIJ noted that many of the ones revealed by the leak were made to do things like skirt international sanctions, hide involvement in certain ventures, and pull off complex tax avoidance schemes. 

For instance, the files revealed that Stephen Bronfman, a close friend and adviser to the Canadian prime minister, and Leo Kolber, a prominent member of the country's Liberal Party, moved millions of dollars into a Cayman Island trust that allowed them to avoid taxes in Canada, the U.S. and Israel. While this went on, lawyers for both men lobbied against legislative proposals that would tax income from offshore trusts. 

It also found that Queen Elizabeth II invested millions of dollars in medical and consumer loan companies that had later become the target of criticism for imposing extremely high interest rates, sometimes as high as 99.9 percent, on their clients, many of whom were already facing significant financial hardship. Unlike other assets held by the royal family, such as commercial real estate, this investment was never disclosed to the public. 

Meanwhile, Secretary of Commerce Wilbur Ross was found to have used a series of Cayman Islands-based entities to maintain a financial stake in a Navigator Holdings, which itself is a holding company that has Russian energy firm Sibur as one of its top clients. Sibur is generally known as a company with deep ties to the Kremlin, with one of its owners having been sanctioned by the U.S. government in 2014 because of his ties to President Vladimir Putin. When he joined the administration, Ross divested his interests in 80 companies, but the documents show he held on to nine companies, four of which are connected to Navigator and its Russian clients. 

The papers also named Ross's predecessor, Obama appointee Penny Pritzker, who promised to sell her investments to avoid conflicts of interest once she joined the cabinet. The files, however, found that she instead transferred those interests into two Bermuda-based shell companies that used the same mailing address as her own private investment firm in Chicago. 

Major corporations were also named in the leak. In one case, Apple Inc. was found to have been actively shopping for a new tax haven after details of its efforts to avoid tens of billions in taxes by funneling profit through an Irish subsidiary came to light. Apple's lawyers specifically asked via email whether moving to one of six possible new tax havens would allow the Irish subsidiary to conduct management activities without being subject to taxation in those jurisdictions. 

The revelations have been voluminous, and reporters are still combing through the documents for further information. No doubt more information will be forthcoming. 

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