Treasure Islands: 10 Tax Havens That Leaked This Year

Just as countries the world over try to stop their citizens from using offshore tax havens, those nations have been snuffed out by what are referred to as the “Pandora Papers.” Those papers represent information leaked from offshore law firm Appleby and other offshore firms to the International Consortium of Investigative Journalists (ICIJ). The organization is hosting a conference here in Washington with more than 70 journalists from around the world discussing some of the most impactful investigative stories from the past few months.

The first revelations covered two groups of tax havens — people and companies. Let’s take a look at what the leak revealed about each.

While no country in the world enjoys a perfect reputation in fighting corruption, Panama has been the subject of intense scrutiny for concealing more than $1 billion in assets for many of the world’s wealthy elite. The Panama Papers were written up in several newspapers, including The New York Times and The Wall Street Journal, and have been extensively covered in the United States. A different set of papers also shed light on the role of secret Caribbean accounts, both for wealthy elites and public officials. One of the most notable scandals to erupt in 2018 was over the arrest and detention of an assistant minister of Panama for allegedly stealing money from a state pension fund.

Another country with prominent offshore tax havens, the British Virgin Islands, is not a particularly ideal choice for hedge funds and other individuals who want to avoid paying taxes. Almost $7.5 billion in Bermuda-based assets were uncovered in the last year, which represents about a quarter of total U.S. hedge fund holdings there.

One country with a very high case of tax avoidance is Switzerland. Very limited information was publicly made available on its offshore banking houses, and the reasons for the secrecy are numerous. Its residents have been audited about their tax records for 35 years now, and even lawyers say that businesses should start factoring that into their decision-making. To address this issue, Switzerland has been developing a code of conduct for bankers to limit their information sharing in order to counter the global scrutiny of their offshore practices. Last year, the Swiss government also introduced legislation to change how account holders deal with Swiss banks, including requiring consumers to prove their income level and other information when opening a new account. This will be put to the test next week, when the Swiss Chamber of Depositors (Swiss Bd) will defend the existing rules against opposition from the Swiss National Bank, which is trying to institute client monitoring. (A ruling could come before the end of October.)

Australia is a particularly complex country, and it has spawned a set of peculiar businesses that operate within it. The largest of these are crown corporations that are publicly owned and derive most of their income from a single state. The crown corporations try to avoid taxes, although it is often unclear from the information released which of these companies benefit from this policy.

Another technique that Australian companies use to evade taxes is to simply funnel business through a related company. While it is technically illegal, these “royalties” for an exclusive claim on a product are therefore perfectly legal, and a number of companies use them to drastically cut their tax bills. The information released by the Panama Papers on royalty-related taxes became one of the most widely published articles in the United States.

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