Where does the money come from ?
Introduction to the Panama Papers
The Panama papers were released in 2015, they constitue the biggest leak of financial information in history before the recent Paradise papers leak. It first came from the Panamanian corporate service company Mossack Fonseca. The leak revealed a substantial amount of illegal activities including fraud and tax evasion. It especially revealed illegal financial activities carried out by world’s biggest wealth holders, politicians and companies. A leak of that size is a very powerful resource to address the problem of tax evasion. Despite obviously the Panama Papers are not an exhaustve list of the hidden financial activities.
Panama papers in numbers
The Panama Papers are 11.5 millions leaked documents that detail financial and attorney–client informations for more than 214,488 offshore entities. Some 4.8 millions leaked files were emails, 3 millions were database entries, 2.2 millions PDFs, 1.2 millions images, 320,000 text files, and 2242 files in other formats. Journalists from 107 media organizations in 80 countries analyzed documents detailing the operations of the law firm. After more than a year of analysis, the first news stories were published on April 3, 2016, along with 150 of the documents themselves.
The sheer quantity of leaked data greatly exceeds the WikiLeaks Cablegate leak in 2010 (1.7 GB), Offshore Leaks in 2013 (260 GB), the 2014 Lux Leaks (4 GB), and the Swiss Leaks (3.3 GB) of 2015. For comparison, the Panama Papers equals approximately 2’660 GB.
A word about Paradise papers before starting
This website is dedicated to the presentation of a data analysis project concerning the Paradise Papers. The project mainly consists in developing tools to better understand the geographical structure of the off-shore leak. The data employed for this project is taken from the International Consortium of Investigative Journalist (ICIJ) website. You might not have missed the fact that recently a leak of comparable importance with the Panama papers leak has been released: the Paradise papers. The latter has also been released by the ICIJ and beneficiate from the same data formatting as the Panama papers. Therefore luckily we are at one step to extend the implementation of the tools that we are going to show you with the Paradise papers.
Outline of the project
This project aims to compile the information provided by the Panama papers to show the geographical structure of offshore activities. We intend to do so thanks to an interactive map showing connections between the different entities and officers concerned by the leak.
Research questions
- Which countries were the most involved in the offshore activities unveiled in the leak?
- What are the relationships between countries and tax heavens?
- Where does corruption come from ?
We strongly believe in the usefulness of this kind of project in order to get a better understanding of the worldwide organization of the tax evasion phenomenon. We think that it could help society realize the importance of the event. It could therefore push towards the implementation of new tax regulations to prevent such aberrance.
In quest of interactivity
One of the main guidelines for this project was to make it as interactive as possible. It comes from the idea that for a program to have the greatest impact as possible on the general public it needs to show at least as possible of code and it needs to be as intuitive as possible. That is why we are implementing as much effort as possible to release a web app that could be available to everyone. The web app development is discussed at the end of this website where we address the possible future directions to be undertaken. As a matter of transition some jupyter notebook scipts have been implemented which roughly show the kind of features that are intended to be implemented in the web app. The jupyter notebook scripts are available on the github repository of the project.
Tax Evasion
From our analysis it becomes very clear they are few countries able to attract, keep and hide large amount of money from foreign tax authorities. It is clear the main incentive to create offshore accounts/companies is the savings on taxes allowed by a lack of economic policies in those countries.
The pattern to tax evasion becomes almost simple when spotlighted. A company or private individual may create a “Shell company” in the country of his choice, preferably where regulations are weak, for example, no need to name the owner. These shell companies, also called Offshore Entities, are usually limited liability companies and don’t conduct any business, they just own financial assets of their owner. To fullfill a tax evasion, they also need a go-between with a service provider, these intermadiaries usually are law-firms, banks or middlemen that asks an offshore service provider to create an offshore firm for a client. Finally, bearers are the entities receiving shares from an offshore company, unfortunately bearer shares provide one of the deepest levels of secrecy.
Nomenclature:
- Offshore Entity : A company, trust or fund created in a low-tax, offshore jurisdiction by an agent.
- Officer : A person or company who plays a role in an offshore entity.
- Intermediary: A go-between for someone seeking an offshore corporation and an offshore service provider – usually a law-firm or a middleman that asks an offshore service provider to create an offshore firm for a client.
Leading Actors
The map above shows the worldwide distribution of the three main kinds of actors : which are Offshore entities, Intermediaries and Officers. We notice those three differ from each other on a global scale even though some countries are well represented in all three cathegories. Regarding the offshore entities, we must notice the presence of the three economic global powers : USA, China and Russia. But they are, by far, not the more effcicient hosting countries. Indeed, in Europe, Switzerland is leading with more than 37 thousands hosted entities (10 times more than Russia), followed by Luxembourg and Great Britain. In South America, Panama has a large capital of offshore entities. In western Asia, United Arab Emirates is also leading. The Intermediaries are once again most located in Switzerland and Great Britain, as they are known for the privacy of their bank services. Still, the distribution of the intermediaries is very similar to the offsore entities distribution on a global scale. Finally, we notice the southern countries are more involved in the officer distribution. Usually officiers are settled in different juridiction than the company/private individual at the origin of the tax evasion.