The Panama Papers: The Larger Picture


St. Marteen Harbor, Dutch Caribean 

April 11, 2016 (San Diego) First, what are the Panama Papers?

Part 1 of 2

The Panama Papers are a collection of documents leaked to the German the German newspaper Süddeutsche Zeitung, whichwas shared with the International Consortium of Investigative Journalists (ICIJ). This source was  working for a Panamanian legal firm called Mossack-Fonseca. The business engages in the creation of off shore companies which are used to both  create off shore investment accounts and to avoid paying taxes in their home countries. Some forms that these accounts take, such as bearer share accounts, where the owner of the share does not have to be identified, have been used in the past to shelter owners from both Illegal activities and paying taxes.

They are used to hide money and also to put funds in for investment. They are part of the capital flight that affects governments, including the United States, around the world. How large is the leak?  This leak was 11.5 million files, detailing the financial deals of this Panamanian firm. So far this investigation has involved many news outlets, all over the world, The internet has made this work possible, as they are able to share files and information across borders.

What is an Off Shore Account?

Of shore accounts are set by investors in what are known as tax shelters According to Vox : “The economist Gabriel Zucman estimated in his 2015 book, The Hidden Wealth of Nations, that worldwide more than $7.5 trillion is squirreled away in offshore tax havens — 8 percent of the world’s financial wealth. While some of it is properly declared to world governments, about 80 percent, or $6 trillion, is never taxed at all.”

Some of these funds are used to launder funds. The legal mechanisms to prevent this are not very strong and allow for people to hide money and to make sure that dirty money is cleaned up. While money laundering laws have become stronger over the decades, they are not as strong as they could be. This allows doe capital flight, which affects some regions more than others. For example, Latin America has a capital flight approaching 35 percent, the Middle East as high a 50 percent, and the United States is closer to 20 percent.

There are clear effects on nations due to these shelters, This is the real big picture, according to Professor Gabriel Zucman in the Hidden Wealth of Nations.

“Tax havens are at the heart of financial, budgetary, and democratic crises. Let’s take a look: In the course of the last five years alone in Ireland and Cyprus— two offshore centers with hypertrophic financial systems— banks have gone almost bankrupt, plunging thousands of people into poverty. In the United States, Congress has revealed that one of the largest companies on the planet, Apple, avoided tens of billions in taxes by manipulating the location of its profits. In France, the budget minister had to resign because he had cheated on his taxes for twenty years through hidden accounts. In Spain, the former treasurer of the party in power went to jail after having revealed a hidden system of financing through accounts in Switzerland. Accepting the status quo seems irresponsible “

These effects are serious and could send whole regions into both social and economic crisis. These economic crisis can translate into social unrest, or even open revolution. When people lose trust in the economic system, the social contract starts to fray. Thomas Picketty, a French economist, has put it in these stark terms:

“Tax havens with their financial opacity are one of the key driving forces behind rising wealth inequality, as well as a major threat to our democratic societies. Why is this so? Quite simply because modern democracies are based on a fundamental social contract: everybody has to pay taxes on a fair and transparent basis, so as to finance access to a number of public goods and services. Of course, there is ample room for disagreement about what “fair” and “transparent” taxation means. But if some of the wealthiest individuals and some of our largest corporations use tax havens and fiscal dissimulation in such a way that they avoid paying taxes almost entirely, then it is our basic social contract that is at stake. If middle-class taxpayers feel that they are paying higher effective tax rates than those at the top of the pyramid, if small and medium-size businesses feel that they are paying more than our largest companies, then there is a serious risk that the very notion of fiscal consent— which is at the core of modern democracies— will fall apart altogether. And if a rising fraction of the population, at the bottom and in the middle of the pyramid, feels that the system is not working for them, and that they are not being well treated by the global economy or by their government, then many might reject the very notion of interclass solidarity and of a fair fiscal and social state.”

This is not just having an effect in the Middle East, or Latin America. The Panama leak is already having specific effects in Europe.

The Prime Minister of Iceland has resigned. 

Currently there are demands for the whole government to stand down as well, The coalition government has pledged elections in the Autumn. There will be more investigations and demands from the people of Iceland.

Prime Minister David Cameron is under pressure to resign after he was found to have shares in an offshore company formed by his father, This is  Blairmore Holdings. He has not stepped down. So far he has offered to publish his tax information going back to 2009. This is according to the UK Independent.

In the big picture in the United States, so far we have not seen names of anybody in the political realm The closest we get, so far, is the Podesta group, managed by Tony Podesta, who is in the Clinton orbit, and has been for yearsthis is according to Salon.

“In March, the Podesta Group registered with the U.S. government as a lobbyist for Sberbank.

The bank plays an enormous role in the Russian economy. It controls almost 30 percent of Russia’s aggregate banking assets, employs a quarter-million people and “is functionally an arm of the Kremlin, although it’s ostensibly a private institution,”

The group also has ties with the Saudis.

Another name that did appear in recent Panama Papers documents is Denise Rich. From the article at the ICIC:

“Among nearly 4,000 American names is Denise Rich, a Grammy-nominated songwriter whose ex-husband was at the center of an American pardon scandal that erupted as President Bill Clinton left office.

A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, played a key role in the campaign that persuaded Clinton to pardon her ex-spouse, Marc Rich, an oil trader who had been wanted in the U.S. on tax evasion and racketeering charges.”

There are real effects. The size of the money sloshing around is larger than the US Sovereign debt, which stands at $19 trillion. It is definitely larger than the Federal Budget, which stands at $3.8 trillion. The size of this belies the idea that we need to continue to punish the middle and working classes by contracting social programs. It also breaks the fundamental Social Contract.


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2 replies


  1. New Financial Rules in Place: Panama Papers – Reporting San Diego
  2. Rex Tillerson Incoming Secretary of State Director of Bahamas Based US-Russian Oil Company – Reporting San Diego

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