On April 3rd, 11.5 million confidential documents were released to the world. These documents came from one of the world’s most secretive law firms, a Panamanian company, Mossack Fonseca. The leak has come to be known as the Panama Papers leak, and is the largest leak of confidential documents, surpassing the WikiLeaks leak in 2010. Panama is widely considered to be a tax haven, or a country which has little to no taxes or banking secrecy laws. Generally speaking, people who have reason to hide their money use tax havens, often to cover up the illegal nature of the money. Many affluent individuals store their assets in tax-free shell companies (inactive companies).
The released documents detail how their clients laundered money, evaded sanctions, and perpetrated tax evasion. Most of Mossack Fonseca’s clients were all incredibly wealthy and high profile, and implicate 12 current and former heads of states, such as UK Prime Minister David Cameron, Indian actor Amitabh Bachchan, and Chinese actor Jackie Chan.
The Panama Papers leak has caused political turmoil in Asia and Europe. Iceland’s Prime Minister Sigmundur Gunnlaugsson, for example, was revealed to have a shell company through which he and his wife funnelled millions of dollars. In response to widespread protest, he stepped down from his post. Chinese President Xi Jinping had previously sworn to take on the “armies of corruption.” However, his brother in law is one of the figures implicated in the Fonseca leak, tarnishing Jinping’s anti-corruption campaign. Finally, President Vladimir Putin was also named in the Panama Papers. The Russian government claims that President Putin was the object of these attacks. While that has yet to be proved, there is a two billion dollar paper trail that names people close to Putin.
In response to the leak, many countries have created inquiry units to investigate how many of their citizens manage to avoid taxes. World leaders associated with the scandal have distanced themselves, claiming that the leak was a result of foreign plots to discredit them. Many point out the hypocrisy of the governments, who seem to be “exempting themselves from the fiscal rules they imposed on their subjects or electorate.”