It has been described as the biggest data leak in history, with an estimated 11.5 million files leaked from the database of the Panama-based law firm Mossack Fonseca.
The documents reveal the elaborate ways in which corporations operate offshore tax havens using anonymous ‘shell companies’. The use of offshore structures is legal but there is the risk that they can be used as a way of avoiding tax or to launder money if the structures are misused. The offshore holdings of individuals whose names have been associated in the leak include politicians, criminals, drug traffickers, billionaires, celebrities and sports stars. Twelve current and former heads-of-states have been named in the papers, and Icelandic Prime Minister Sigmundur Gunnlaugsson is facing a vote of no confidence from opposition parties in light of the revelations.
Hundreds of Australians are linked to companies incorporated by Mossack Fonesca, including convicted fraudsters and former Australian Tax Office (ATO) officials. Wilson Security, the company subcontracted to run security for Australia’s offshore detention regime, has also been mentioned in the documents.
The Sydney Morning Herald has reported that ATO is currently investigating more than 800 Australians who have associations with Mossack Fonseca.
Dr Mark Zirnsak, director of the synod’s Justice and International Mission (JIM) unit and spokesperson for Tax Justice Network Australia, said Australia lags behind countries like the US in tackling corporate crime.
“We don’t get good outcomes from the market when we reward tax dodgers. The worst thing is thinking this is something that can’t be tackled,” he told The Australian.
A key step towards increasing transparency is requiring real owners of companies to be disclosed in a public register rather than concealed behind front companies.
“This is certainly an area where more reform in needed. Even just basic stuff like companies having to publish all their subsidiaries,” Dr Zirnsak said.
Mossack Fonseca operates by registering ‘shell companies’ in tax havens on an industrial scale. These are companies that only exist on paper, with no office and employees. Though legal, the anonymity provided by this system is open to abuse by money launderers and criminals.
The human impact of tax avoidance is substantial. The lives of millions of people are made more difficult when money is siphoned away from essential services they rely on.
The Tax Justice Network estimates that more than $30 trillion are invested in offshore tax havens. This exacerbates global inequality and directs money that could be used for poverty alleviation, education and health services into the hands of wealthy elites.
Tax avoidance has been on the federal government’s agenda and the Panama Papers is likely to increase the pressure on the Turnbull government to clamp down on corporate tax avoidance.
“Increasingly we are going to live in a world which is more transparent and tax dodging is going to become less acceptable,” Dr Zirnsak said.
“There’s a growing awareness people should pay the tax they’re required to.”