The Pandora Papers Follows The World Wide Money
A massive trove of information called the Padora Papers from “a project involving 150 news organizations in 117 countries and territories” is being released by the Washington Post.
A massive trove of private financial records shared with The Washington Post exposes vast reaches of the secretive offshore system used to hide billions of dollars from tax authorities, creditors, criminal investigators and — in 14 cases involving current country leaders — citizens around the world.
The revelations include more than $100 million spent by King Abdullah II of Jordan on luxury homes in Malibu, Calif., and other locations; millions of dollars in property and cash secretly owned by the leaders of the Czech Republic, Kenya, Ecuador and other countries; and a waterfront home in Monaco acquired by a Russian woman who gained considerable wealth after she reportedly had a child with Russian President Vladimir Putin.
Other disclosures hit closer to home for U.S. officials and other Western leaders who frequently condemn smaller countries whose permissive banking systems have been exploited for decades by looters of assets and launderers of dirty money.
The files provide substantial new evidence, for example, that South Dakota now rivals notoriously opaque jurisdictions in Europe and the Caribbean in financial secrecy. Tens of millions of dollars from outside the United States are now sheltered by trust companies in Sioux Falls, some of it tied to people and companies accused of human rights abuses and other wrongdoing.
The details are contained in more than 11.9 million financial records that were obtained by the International Consortium of Investigative Journalists (ICIJ) and examined by The Post and other partner news organizations. The files include private emails, secret spreadsheets, clandestine contracts and other records that unlock otherwise impenetrable financial schemes and identify the individuals behind them.
The trove, dubbed the Pandora Papers, exceeds the dimensions of the leak that was at the center of the Panama Papers investigation five years ago. That data was drawn from a single law firm, but the new material encompasses records from 14 separate financial-services entities operating in countries and territories including Switzerland, Singapore, Cyprus, Belize and the British Virgin Islands.
The files detail more than 29,000 offshore accounts, more than double the number identified in the Panama Papers. Among the account owners are more than 130 people listed as billionaires by Forbes magazine and more than 330 public officials in more than 90 countries and territories, twice the number found in the Panama documents.
As a result, the Pandora Papers allow for the most comprehensive accounting to date of a parallel financial universe whose corrosive effects can span generations — draining significant sums from government treasuries, worsening wealth disparities, and shielding the riches of those who cheat and steal while impeding authorities and victims in their efforts to find or recover hidden assets.
The Washington Post will be releasing the information in a series of eight articles along with audio and video packages.
Wow!Report
The Panama Papers lady committed suicide by car bomb.
I’m wondering if similar awaits some of these authors.Report
Predictions:
1. As with the Panama papers, this will provide little if any evidence of any kind of wrongdoing by big-name American billionaires.
2. As with the Panama papers, the left will pretend that it proves that big-name American billionaires don’t pay taxes.Report
You can do a great many immoral and unethical things without doing illegal things. Especially if you are super wealthy.Report
The scandal is that it is legal.
As a thought experiment, imagine if it turned out that some single mother on welfare in Chicago, who claimed an income of near-zero, was in fact hiding a comfortable income by routing it through some offshore account.
Imagine conservatives nodding and saying, “Well, no laws were broken so I guess it’s okay.”
I can’t imagine that.Report
I also suspect, as heather Cox Richardson points out, that as the series unfolds in the WaPo there will, in fact, be criminality disclosed.:
https://heathercoxrichardson.substack.com/p/october-3-2021Report
When I go on my Distributist rants… it isn’t so much that wealth is created, it’s that the wealth is increasingly secret and secretly distributed in pathways other than wages.
These are examples of the underground networks of wealth that aren’t distributed via wages or the ordinary forms of capitalism and production.
I’m pretty sure 90%-97.5% of these things are ‘legal’ — good reporting would go beyond the one or two obvious felons being exposed for bribery (usually politicians) and dig into the thousands of unknowns who are part of the managerial class whom you think are being paid like you, only more. They aren’t being paid like you. That’s the story.Report
Remember back in 2017 when Republicans (again) told us that cutting corporate taxes and taxes on the very wealthy would trickle down? And remember when reporters asked CEOs if the they would boost wages or innovate? And the CEOs said “nah, we are going to buy back stock and goose dividends?” And then they did?
All perfectly legal. All unethical. And All part and parcel of a financial elite who both try hard to own politicians AND keep the rabble turned against itself.
But we don’t DARE fund the IRS fully for enforcement . . . .Report
Given fiduciary duty, the CEOs were being ethical.
The failure wasn’t in 2017, it was back when Friedman didn’t get sufficient pushback on his claim.Report
The fiduciary duty is to return a profit, not return a profit at the expense of other things. With that tax cut a healthy profit could have been returned AND wages could have been raised. Well before COVID forced it.Report
But there’s no ethical duty in business to do anything more than return value to shareholders. Last I checked, this is what is taught in all the MBA programs.Report
Given that the corporate form of business was created by the citizens for our benefit, then it seems entirely reasonable that we citizens can attach conditions on their charter which require them to adhere to some framework of ethics.Report
Sure.
Let me know when folks get around to making that change, you’ll have my vote.
Until then, the ethical question is already answered. If you don’t like the answer, you have to get a consensus to agree to change the question. The obvious place to start that is the MBA programs.Report
Yes?
Do you think taxing ‘wealth’ that is hidden and moveable to create a giant bureaucracy of managers to manage the wealth as ‘programs’ is the right path forward?
I’ve said the Republican bullsh*t is bullsh*t and Democratic chickensh*t is chickensh*t. I prefer not to eat sh*t.Report
Why is wealth hidden? To avoid taxation, for the most part.
If you don’t want it hidden, don’t try to tax wealth that is sitting idle.Report
Hidden by valuation ‘estimates’… and hidden hidden.
Taxing wealth is just negotiating your surrender to the wealthy.Report
Remember back in 2017 when Republicans (again) told us that cutting corporate taxes and taxes on the very wealthy would trickle down? And remember when reporters asked CEOs if the they would boost wages or innovate? And the CEOs said “nah, we are going to buy back stock and goose dividends?” And then they did?
I don’t recall what a handful of CEOs may or may not have said. But what I do know is that one of the many problems with the corporate income tax is that it creates a lock-in effect that leads to inefficient internal reinvestment of money that should have been returned to investors. If you think it through and do the math, this should be obvious, but I’ll walk you through an example.
Let’s say you’re the CEO of a company with a market cap of $100 billion. You make good profits, but in your industry, you have limited opportunities for growth. If you reinvest the profits, you can expect to earn about a 7% rate of return for your shareholders. The market rate of return is about 8%. What should you do?
You should pay out dividends or buy back shares. It’s the right thing for shareholders, who would rather get an 8% return on their money, and it’s the right thing for the economy. The only reason you’d want to reinvest the money internally is to expand the company for your personal self-aggrandizement, which would be unethical.
But wait! The government has just instituted a 50% corporate income tax. For every dollar in profits you retain instead of internally reinvesting, your can only return 50 cents to your shareholders. Now it’s a 7% return on internal investment versus a 4% return in the market. Thanks to the distortions introduced by the corporate income tax, profits get reinvested inefficiently in your company, instead of in companies that could make better use of that capital.
Conversely, cutting corporate income taxes reduces this perverse incentive towards inefficient internal reinvestment, freeing mature corporations to return their profits to investors so that they can be reinvested more profitably and efficiently elsewhere.
By the way, you know that’s what happens when dividends are paid out, right? Bill Gates isn’t peeking through the curtains at his mailbox, watching for dividend checks to come in so he can go buy a car or something. He just rolls the dividends back into the pool and reinvests them. There may be a handful of retail investors that do this, but the vast majority of money in the market is managed by people whose consumer spending decisions are not meaningfully affected by dividends and buybacks.
So it’s very unlikely that dividends and buybacks have any meaningful effect on total investment. They only affect where the investment is directed, away from firms with low marginal returns on investment and towards firms with high marginal returns on investment. This is a good thing.
Anyway, mature companies increasing dividends and buybacks in response to a corporate income tax cut is a) expected, and b) good for the economy, and for workers. The idea that this is some kind of smoking gun that proves that corporate income tax cuts don’t work comes from a place of deep confusion.
The argument for corporate income tax cuts was never that corporations would use their tax savings to increase wages just because they can. That doesn’t even make sense. The argument is that cutting corporate income taxes allows capital to be invested more efficiently (as described above), and makes investing in that country more attractive to investors, increasing investment. This is trivially true: Obviously investors are going to invest more in the US when they can keep 79% of their pre-tax returns than when they can only keep 65%. And increasing investment increases the demand for labor, which drives up wages.Report
what the people who call for a profit tax want is for those profits to be “reinvested” in employee salaries and benefits
so that 5% profit margin for the year would go to boosting everyone’s salary by twenty bucks a week
wheeeeeeReport
Gotta admit: When I see the airlines getting bailed out, doing buybacks, and then doing layoffs, my lizard brain says “Burn them to the ground.”Report
That’s nice Kool-Aide – you are missing the part where there’s no record of that ever happening as a result of a tax cut, even now.Report
The overlooked issue with this is that the managerial class is now paid in equity, not wages.
So, the buybacks cover the equity diluted by distribution to the managerial class, and constitutes a conflict of interest when it comes to propping up share prices vs. reinvestment and growth.
It is orthogonal to my original point which is that we don’t realize how equity wealth is transferred throughout the world at the rich-but-not-famous level.
Whether or not corporations should be taxed vs. consumption, say, I’m slightly agnostic… so I don’t dispute the ‘effects’ of taxation on decision making, but making a pretty standard Libertarian argument against corporate taxation wouldn’t change the fact that what we call ‘shareholders’ is itself now a distorted class exerting poor business decisions that favor themselves… and not all the stakeholders involved.
It’s a different critique than one of simple taxation…Report