The release of 11.5 million documents has shamed several world leaders; however the news has largely been ignored by the US.
What are the Panama Papers?
The Panamas Papers are a series of 11.5 million documents which contain details of financial information for more than 214,000 offshore companies associated with Mossack Fonseca, a Panamanian corporate service provider and law firm.
The documents revealed the identities of the company’s directors, shareholders, and some financial transactions. At the time of the publication the documents identified government leaders/ heads of state of Ukraine, Argentina, United Arab Emirates, Iceland, and Saudi Arabia.
The leaked documents have caused outrage worldwide as they reveal tactics used by the wealthy to avoid tax via the use of offshore tax havens and shell companies. Mossack Fonseca is the world’s fourth largest provider of foreign services.
The leaked documents have been received and analysed by 400 journalists worldwide. In April 2016, the first news story was published regarding the leaked documents along with 149 of the records, a year after the leak of the official papers.
What was the US’s reaction in light of the scandal?
President Obama has been openly critical of the Caribbean tax haven; he discussed the issue during his 2008 election campaign. In 2010, the United States brought in the Foreign Account Tax Compliance Act.
The act was meant that financial firms worldwide are required to report any accounts held by US citizens around the world to the Internal Revenue Service. However, the United States has refused the Common Reporting Standard, which was set up by the Organisation for Economic Cooperation and Economic Development.
The standard meant that while other nations are required to report offshore financial information of American citizens back in the United States, this action will not be reciprocated.
News of those involved is not being reported in the United States, despite the naming of four Americans as participating in offshore shell companies along with the passports of 200 individuals.
Why hasn’t there been much interest?
Many speculate that the Panama papers have not created much interest in the United States because the scandal has not touched many American companies or individuals. Whereas, the list had many high profile names from the other countries; therefore creating a stronger reaction.
There was also only one US newspaper company involved in the investigation by the International Consortium of Investigative Journalists.
The four named Americans in connection with offshore shell companies are –
- Benjamin Wey – President of the New York Global Group. He was accused of using Mossack Fonseca to disguise transactions between publically traded US shell companies and Chinese operating companies
- Igor Olenicoff – Appeared in the documents as a shareholder for Olen Oil Management Limited. He was sentenced in 2007 for tax evasion and again in 2014 for making replicas of sculptures
- Anthony Gumbiner – The chairperson of the Hallwood Group Inc. He was already active for four years before committee conducted the enhanced background checks on him.
- John Michael Crim – Crim, an author of two self-published books, was guilty of being involved in a plot to use fake trusts to cheat the IRS. He defrauded the IRS of $10 million in 2008, in his statement Crim had also detailed how he brought business to Mossack Fonseca in an interview
Why are only few Americans implicated?
Rich Americans are known to avoid Panama as a tax haven. Instead, they prefer to conduct business in Bermuda, Singapore, or the Cayman Islands.
Panama was used more as a Haven in the 1980s, however after George H.W Bush overcome Manuel Noreiga, a military dictator, in 1989; Americans started to avoid the country and moved their money elsewhere.
This move of money happened at the same time Bermuda, Singapore, and the Cayman Islands changed their laws to match English common law which made them appear attractive to affluent Americans and lawyers.
The total loss of tax revenues amounts up to nearly $200 billion a year.
What is public opinion in the US?
Only one-third of the Americans of the 1000 people that took the survey was following the case closely, and the remaining two-thirds were either not interested or not aware of the story at all.
Out of those who were following the story, 89% feel that the accusations were true, and 71% believe that the person who leaked the story to the press is a ‘hero’. Only one third stated that they would be outraged if the accusations turned out to be true.
Three-quarters of people polled believed that the level of corruption in US politics is at similar levels to other nations while 3 in 4 people would like to see the Internal Revenue Service and the Department of Justice examine the documents for evidence of any Americans who may have broken the law.
The Department of Justice has stated that they will be launching an investigation.