It is an irony, or a joke if you will, that the release of the Paradise Papers, exposing the offshore holdings of political leaders and their financiers as well as household-name companies that slash taxes through transactions conducted in secret, has coincided with the anniversary of demonetization, another grandiose project that raised expectations of Himalayan proportions but achieved results that are of no real consequence.
The Paradise Papers documents include nearly 7 million loan agreements, financial statements, emails, trust deeds and other paperwork from nearly 50 years at Appleby, a leading offshore law firm with offices in Bermuda and beyond.
Just like the rich and famous from other parts of the world, more than 700 Indians, some off them well-known and some others not so well-known, including politicians, industrialists and celebrities, figure in the documents for alleged offshore investments and operations.
And most interestingly, it did not take even a day’s time for the government to constitute a joint panel of top tax and financial crimes agencies to investigate leaked financial documents that suggest show potentially illegal offshore dealings of of Indians, brought out by the latest release by an international consortium of investigative journalists, who have done a commendable job so far — more commendable than the bravado put up by governments around the world, including India. Nobody expects the high-powered panel to achieve anything more than its counterpart, if there was one, pressed into service in the wake of the bigger shocker that later became a household name: the Panama papers.
Some 500 Indians were named in the leaked Panama papers and the Supreme Court had ordered the constitution of a multi-agency investigation team comprising members of the CBDT, RBI and the Financial Intelligence Unit. But there is very little by way of achievements to show so far.
To be fair to the entities helping to do tax engineering for their clients, including politicians, multinational corporations and others, they do a better job than the tax sleuths that pursue leads provided by such leaks, especially in the last mile to the successful conclusion of the investigations, with the result that these probes end up nowhere.
The promise of tax havens is secrecy – offshore locales create and oversee companies that often are difficult, or impossible, to trace back to their owners. While having an offshore entity is often legal, the built-in secrecy attracts money launderers, drug traffickers, kleptocrats and others who want to operate in the shadows. Offshore companies, often “shells” with no employees or office space, are also used in complex tax-avoidance structures that drain billions from national treasuries.
These tax-dodging agents provide nuts-and-bolts legal help to corporations that seek to reduce their taxes in the countries where they do business. For instance, Appleby, the firm that is the focus of the Paradise Papers, is not a tax adviser, but plays a role in tax programs used by companies across the world. They work with top-flight international banks such as Barclays, Goldman Sachs and BNP Paribas to help their clients in disguising ill-gotten wealth. (IPA Service)