Explained | What is the Pandora Papers exposé?

An investigation based on one of the biggest ever leaks of financial documents exposed a hidden world of shielded wealth belonging to billionaires

Millions of leaked documents dubbed the Pandora Papers and a worldwide journalistic partnership on Sunday claims to have uncovered financial secrets of current and former world leaders, politicians and public officials in 91 countries and territories, including India.

The International Consortium of Investigative Journalists (ICIJ), which involved the BBC and The Guardian newspaper in the UK and The Indian Express in India among 150 media outlets in its investigation, claims it obtained a trove of more than 11.9 million confidential files to find secret financial dealings of many super-rich.

Also Read | After Panama Papers, Pandora's box opens, exposing global elite

Let's take a look at what are the Pandora Papers and what is the significance of these findings:

What are the Pandora Papers?

The Pandora Papers are the latest in a series of mass ICIJ leaks of financial documents, from LuxLeaks in 2014, to the 2016 Panama Papers -- which triggered the resignation of the prime minister of Iceland and paved the way for the leader of Pakistan to be ousted.

Pandora Papers investigation is the world’s largest-ever journalistic collaboration. The investigation is based on a leak of confidential records of 14 offshore service providers that give professional services to wealthy individuals and corporations seeking to incorporate shell companies, trusts, foundations and other entities in low- or no-tax jurisdictions, according to the International Consortium of Investigative Journalism (ICIJ).

The latest bombshell is even more expansive, porting through nearly 3 terabytes of data — the equivalent of roughly 750,000 photos on a smartphone — leaked from 14 different service providers doing business in 38 different jurisdictions in the world. The records date back to the 1970s, but most of the files span from 1996 to 2020.

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The Pandora Papers leak comes at a critical time in the world when politicians and the people are debating over a compliant tax system.

What is in the exposé?

An investigation based on one of the biggest ever leaks of financial documents exposed a hidden world of shielded wealth belonging to hundreds of politicians and billionaires. It exposes hundreds of world leaders, powerful politicians, billionaires, celebrities, religious leaders and drug dealers who have been hiding their investments in mansions, exclusive beachfront property, yachts and other assets for the past quarter-century based on a review of nearly 12 million files obtained from 14 firms located around the world.

Read | Pandora Papers leak exposes offshore dealings of super rich, including Indians

The latest investigation dug into accounts registered in familiar offshore havens, including the British Virgin Islands, Seychelles, Hong Kong and Belize. But some of the secret accounts were also scattered around in trusts set up in the US, including 81 in South Dakota and 37 in Florida.

The Pandora Papers are a follow-up to a similar project released in 2016 called the Panama Papers compiled by the same journalistic group.

How many Indians are named in the expose’?

In total, the ICIJ found links between almost 1,000 companies in offshore havens and 336 high-level politicians and public officials, including more than a dozen serving heads of state and government, country leaders, cabinet ministers, ambassadors and others.

Also Read | Key personalities named in Pandora Papers exposé

According to ICIJ, over six Indians have been named by the Pandora Papers that include business icon Anil Ambani, iconic cricketer Sachin Tendulkar, Nirav Modi’s sister who stashed wealth in secret offshore accounts.

Other than the Indians, it also named famous world leaders in its secret documents. It exposes offshore dealings of the likes of the King of Jordan, the presidents of Ukraine, Kenya and Ecuador, the Prime Minister of the Czech Republic and former British Prime Minister Tony Blair. The files also reveal the financial activities of Russian President Vladimir Putin’s “unofficial minister of propaganda” and more than 130 billionaires from Russia, the US, Turkey and other nations.

What are offshore trusts? Is it legal in India?

A trust is an arrangement where a third party, who is called a trustee, hold assets of the individual or the company that is to benefit from it. It helps large business families to consolidate their assets, financial investments, shareholding, and real estate property.

Also Read | Pandora Papers: From Sachin Tendulkar to Shakira, financial dealings of the global elite exposed

Setting up a trust outside India is legal. Under the Indian Trusts Act, 1882, an individual or a company can have a trust as an obligation of the trustee to manage and use the assets settled in the trust for the benefit of 'beneficiaries'. India also accepts trusts that are set up outside the country, or on other tax jurisdictions – offshore trust.

However, the issue with offshore trusts is when they are created in other countries with a totally different tax system, they do not need an office or employees in that company. They are mostly used to avoid any legal responsibilities for the real owner, this is exactly what the Pandora Papers has also highlighted.

What is a tax haven?

A tax haven, in simple terms, is a country or an independent place where taxes are levied at a low rate. Tax havens offer huge fiscal advantages to the citizens from other countries who seek to reduce their tax burdens. Till now, there is no proper list of such tax havens in the world. The countries can decide with whom they want to sign the taxation agreements.

The ICIJ's analysis of the secret documents identified over 956 companies in offshore havens tied to 336 high-level politicians and public officials, including country leaders, cabinet ministers, ambassadors and others. More than two-thirds of those companies were set up in the British Virgin Islands, a jurisdiction long known as a key cog in the offshore system.

Because of the complexity and secrecy of the offshore system, it’s not possible to know how much of that wealth is tied to tax evasion and other crimes and how much of it involves funds that come from legitimate sources and have been reported to proper authorities.

Can offshore trust be considered as a resident Indian?

In India, there is a blurred line on offshore taxation. According to the rules in the country, resident Indians, if they are ‘settlors, ‘trustees’, or ‘beneficiaries’ are supposed to report their foreign financial interests and assets. However, non-resident Indians (NRIs) are not required to do so.

India considers an offshore trust to be a resident of India only if the trustee is an Indian resident.

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