When the rich and powerful stash their money in tax havens, they’re essentially buying secrecy. Those wealthy enough to organise their financial affairs in places such as the Cayman Islands and Monaco expect to be shielded from public scrutiny.
Yet public scrutiny is precisely what awaits some of the clients of 14 offshore providers whose data is contained in the Pandora papers. Leaks such as these raise valid questions about the balance between confidentiality, privacy and the public interest.
What exactly is in the Pandora papers? Why did the Guardian decide to explore the leaked data? And how did we decide what to publish?
In terms of volume, this is the largest trove of leaked offshore data in history. It comes from offshore service providers operating in Anguilla, Belize, Singapore, Switzerland, Panama, Barbados, Cyprus, Dubai, the Bahamas, the British Virgin Islands, Seychelles and Vietnam.
The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which is not identifying its source. The ICIJ gave 600 journalists around the world remote access to the leaked data to facilitate the largest journalistic collaboration in history. They include reporters from the Guardian, BBC, Le Monde and Washington Post.
The Pandora papers are the largest trove of leaked data exposing tax haven secrecy in history. They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people. The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which shared access with the Guardian, BBC and other media outlets around the world. In total, the trove consists of 11.9m files leaked from a total of 14 offshore service providers, totalling 2.94 terabytes of information. That makes it larger in volume than both the Panama papers (2016) and Paradise papers (2017), two previous offshore leaks.
Where did the Pandora documents come from?
The ICIJ, a Washington DC-based journalism nonprofit, is not identifying the source of the leaked documents. In order to facilitate a global investigation, the ICIJ gave remote access to the documents to journalists in 117 countries, including reporters at the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline and the Australian Broadcasting Corporation. In the UK, the investigation has been led by the Guardian and BBC Panorama.
What is an offshore service provider?
The 14 offshore service providers in the leak provide corporate services to individuals or companies seeking to do business offshore. Their clients are typically seeking to discreetly set up companies or trusts in lightly regulated tax havens such as the British Virgin Islands (BVI), Panama, the Cook Islands and the US state of South Dakota. Companies registered offshore can be used to hold assets such as property, aircraft, yachts and investments in stocks and shares. By holding those assets in an offshore company, it is possible to hide from the rest of the world the identity of the person they actually belong to, or the “beneficial owner”.
Why do people move money offshore?
Usually for reasons of tax, secrecy or regulation. Offshore jurisdictions tend to have no income or corporation taxes, which makes them potentially attractive to wealthy individuals and companies who don’t want to pay taxes in their home countries. Although morally questionable, this kind of tax avoidance can be legal. Offshore jurisdictions also tend to be highly secretive and publish little or no information about the companies or trusts incorporated there. This can make them useful to criminals, such as tax evaders or money launderers, who need to hide money from tax or law enforcement authorities. It is also true that people in corrupt or unstable countries may use offshore providers to put their assets beyond the reach of repressive governments or criminal adversaries who may try to seize them, or to seek to circumvent hard currency restrictions. Others may go offshore for reasons of inheritance or estate planning.
Has everyone named in the Pandora papers done something wrong?
No. Moving money offshore is not in or of itself illegal, and there are legitimate reasons why some people do it. Not everyone named in the Pandora papers is suspected of wrongdoing. Those who are may stand accused of a wide range of misbehaviour: from the morally questionable through to the potentially criminal. The Guardian is only publishing stories based on leaked documents after considering the public interest. That is a broad concept that may include furthering transparency by revealing the secret offshore owners of UK property, even where those owners have done nothing wrong. Other articles might illuminate issues of important public debate, raise moral questions, shed light on how the offshore industry operates, or help inform voters about politicians or donors in the interests of democratic accountability.
Mining a leak of this size is a huge and complex task. It includes banking records, incorporation documents, correspondence and records showing the true ownership of shell companies. The 6.4m documents and 1.2m emails in the trove are written in English, Spanish, Mandarin, Korean, Russian and Greek.
Exponential growth of offshore industry
In deciding to review the leaked files, the Guardian began from the starting point that tax havens deserve scrutiny and that leaks of this kind have in the past proven a major public service.
Moving money offshore is not in or of itself illegal, and there are legitimate reasons why some people do it. However, the offshore industry has grown exponentially in recent decades, driven by wealthy individuals and corporations in search of sophisticated mechanisms for avoiding tax.
While much of this may be legal, some of it is not; these secretive jurisdictions have also proved attractive to fraudsters, money launderers and tax evaders.
Tax havens are estimated to cost governments anywhere between $400bn and $800bn (£293bn to £586bn) every year in lost tax revenues from corporations and individuals. That may be an unfathomable sum, but it is real money that is not being spent on schools, hospitals or the transition to a low-carbon economy.
The Tax Justice Network ranks the UK as both one of the biggest tax losers from the offshore industry and perhaps its greatest enabler. The so-called “spiderweb” of British crown dependencies and overseas territories accounts for roughly a third of global tax losses borne by other countries.
The Pandora papers follow in the footsteps of two previous seismic leaks facilitated by the ICIJ. The Panama and Paradise papers, in 2016 and 2017, prompted global debates about the ethics of offshore finance and helped bring about some genuine reforms in places such as the British Virgin Islands.
They also upheld the law and saved the public purse, enabling governments to recoup more than $1.36bn in back taxes and penalties. The Pandora papers promises similar global repercussions, but it is different to its predecessors in important ways.
It arrived in the middle of a global pandemic that has led to record levels of peacetime government borrowing. Already ordinary taxpayers are having to bear the brunt of tax rises that will linger for decades to come. Against this backdrop, the moral case for analysing leaked data to investigate the secrecy, complexity and unfairness of the offshore economy seems greater than ever before.
But we have always considered tax avoidance and evasion to be a subject of genuine public interest. Important legal, societal, fiscal and moral issues are in play. Governments also need to be held to account, and it is the role of journalism to inform political debates around the need to reform legislation, rules or practices.
When a team of Guardian reporters began the daunting task of combing through the Pandora papers several months ago, they were guided by these principles.
Holding the powerful to account
The Pandora papers will go further than any previous journalistic investigation in history in shedding light on the financial affairs of political elites, including 35 current and former heads of state and more than 300 public officials. We believe these political figures and their wealthy donors deserve particular scrutiny, not least so voters can make informed choices.
It is right and proper for journalists to hold politicians and their backers to account over their promises, and to ask if their own financial affairs present a conflict of interest when it comes to reforming the offshore economy.
We will also be reporting on the role played by the bureaucrats who prefer to remain in the shadows – the offshore providers, accountants and London lawyers who help set up and service these offshore structures.
It is important to note that not everyone named in the Pandora papers is suspected of wrongdoing. Those we have chosen to highlight may stand accused of a wide range of misbehaviour: from the morally questionable through to the potentially criminal.
In some cases, we’ll be drawing on leaked documents that arguably should not be private at all – such as those showing the true owners of companies or UK properties that the government has repeatedly said should be made public. What is clear is that all the stories we publish have been carefully selected by us for what we believe to be proper public interest reasons.
The leaked documents the Guardian is relying on are an infinitesimal fraction of the 2.94 terabytes of data in the Pandora papers. They are the needles we found in the haystack. The holes they have pierced in the vast and hidden offshore economy may be pin-sized, but they let the light in.
Guardian Newsroom: The Pandora papers
Join Guardian journalist Paul Lewis and guests in this special livestreamed event looking in-depth into the Pandora papers investigation. On Monday 18 October, 8pm BST | 9pm CEST | 12am PDT | 3pm EDT. Book tickets here
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