Panama Papers (Important) (Download PDF)

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The Panama Papers are the leaked documents of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca revealing the financial confidential details of the Politicians and Public figures. Panama is a country in Central America situated between North and South America. It is bordered by Costa Rica to the west, Colombia to the southeast, the Caribbean to the north and the Pacific Ocean to the south. The capital and largest city is Panama City, whose metropolitan area is home to nearly half of the country’s 3.9 million people.

This is image show in global extent of the panama Papers leak

This is Image Show in Global Extent of the Panama Papers Leak

This is image show in global extent of the panama Papers leak

Overview & Significance

  • The documents show the ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.

  • Tax Evasion- refusing to pay taxes one owes illegally taking advantage of secret accounts to try to hide the money and get away with it.

  • Tax Avoidance-To minimise the tax bill through legal loopholes by hiring experts.

  • People set up their companies in Panama to avoid tax as there is no corporate income tax. The reason this particular form of tax avoidance is growing without bounds is that powerful politicians in powerful countries have fully supported it.

  • In order to gain lucrative market access. powerful countries have created economic “rules of the road” that foreign countries and multinational corporations must follow.

  • The leak of the Panama Papers broadly draw attention to what “everyone knows” and may put public pressure on the powers that be to do something about it.

  • Although Companies or trusts can be set up in offshore locations for legitimate uses such as business finance, mergers and acquisitions and estate or tax planning, according to the global money laundering watchdog, the Financial Action Task Force still the evidence of wealth hidden for tax evasion, money laundering, sanctions busting, drug deals or other crimes remains a major concern.

  • Offshore bank accounts are located outside a client’s country of resident, usually in “tax haven” territories chosen because of financial and legal advantages. These offshore bank accounts are used by the companies or individuals through shell companies to set up purely a vehicle for financial transactions and initially incorporated without significant assets or operations – to disguise ownership or other information about the funds involved.

Concerns for India

  • The papers show that some Indians have set up offshore entities through the Panama law firm. Some of these offshore entities have been floated at a time when laws did not allow them to do so.

  • A technically convenient view shows that companies acquired is not the same as companies incorporated.

  • Some have bunched their annual quota of remittances to subscribe to shares in an offshore entity acquired at an earlier date.

  • Others have received income earned abroad and deposited it in the entity to avoid tax along with opening a bank account to keep payoffs in government contracts, or held “proceeds of crime” or property bought with money made illegally in Trusts/Foundations.

- Published/Last Modified on: July 20, 2019

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