Panama Papers Leaks

What are “Panama Papers”?

All through Monday, 4 April, 2016, Twitter and other social media sites were buzzing about the Panama Papers. This is a reference to a leak of some 11.5 million internal documents from a Panama-based law firm called Mossack Fonseca. This Panamanian organisation specialises in incorporating shell companies, operating in a number of tax havens including British Virgin Islands, Switzerland, Seychelles, Cyprus, and Panama. The documents revealed were leaked through an encrypted channel to Sueddeutsche Zeitung, a Munich-based media organisation and were the basis of a massive investigation undertaken by the International Consortium of Investigative Journalism (ICIJ).

This investigation revealed offshore holdings and tax frauds of hundreds of rich and famous people around the globe including political leaders, actors, sportsmen, and industrialists. In what has been described as one of the largest probes in the world, the tax irregularities of about 140 important politicians have been revealed.

Why Does this Concern India?

According to the ICIJ revelations, about 500 Indians have been named by the Panama Papers as those who own a stake in many of these offshore (shell) companies, trusts, and foundations. About 234 Indian passports were made available as part of the dealings related to the incorporation process. Indian Express, partnered with ICIJ, to look into the Indians involved and has been able to verify about 300 addresses among the 500. Some 36,000 of the documents leaked, detail out the involvement of Indians through the past years in the formation of illegal stashes abroad. These rich and famous individuals have made use of these tax havens to hide their wealth and evade taxes.

This is a major concern since Indian nationals were not allowed to float overseas companies or trusts prior to 2003. By 2004, RBI norms changed and for the first time, Indian nationals were allowed to transfer funds up to USD 25,000 abroad as investments under the Liberalised Remittance Scheme. These investments, the RBI clarified, could be in the form of procurement of shares but individuals were not allowed to float companies till about 2013. Most of the ‘companies’ revealed by the Panama Papers were set up long before 2003. Only in 2013 did government norms allow an Overseas Direct Investment window, meaning that Indians could enter into joint ventures abroad.

Indians Named in Panama Papers

Some of the celebrities named in Panama Papers include:

  • Amitabh Bachchan – The Indian superstar actor was allegedly appointed as the director in at least four shipping companies in the Bahamas. These companies were all set up in 1993. While the capital of these companies range between USD 5000 and USD 50000, records show deals worth millions of dollars made by these companies.
  • Aishwarya Rai – According to the leaked papers, Aishwarya Rai, one of leading actors in India and Amitabh Bachchan’s daughter-in-law, was named director in a firm called Amic Partners Limited in the British Virgin Islands in 2005. Her parents and brother were also major stakeholders. Later, her status was changed to that of a shareholder. The company was dissolved in 2008.
  • Sameer Gehlaut – Indian entrepreneur and owner of the Indiabulls realty group, Sameer Gehlaut is believed to have acquired “three top London properties” through shell entities in Jersey and the Bahamas. Family members have been named in these corporations (and others in the UK, Delhi, and Karnal). These are now being developed into hotels and residential projects.
  • KP Singh – DLF promoter, KP Singh, his wife, and other family members are revealed to have acquired companies in the British Virgin Islands, stashing away about USD 10 million through these deals.
  • Vinod Adani – Vinod Adani, brother of Gautam Adani – founder and chairman of the Adani group – was also named in the Panama Papers.
  • Shishir Bajoria – Industrialist and trader
  • Ashok Garware, Aditya Garware, Sushma Garware – Industrialists
  • Onkar Kanwar – Chairman of Apollo Group
  • Harish Salve – Lawyer, former Solicitor General of India (1999 – 2002)
  • Anurag Kejriwal – Former leader of the Delhi Loksatta Party
  • Iqbal Mirchi – Underworld don
  • Rajendra Patil – Industrialist, son-in-law of Karnataka Minister
  • Mallika Srinivasan – Wife of Venu Srinivasan (TVS CMD)

Tax Evasion Dragnet

Tax evasion has been a touchy subject with the NDA government. The Panama Papers revelations come at a time when the NaMo government has taken a hard stand against tax evaders and offshore accumulation of wealth. Even as he assumed his role as the Prime Minister, Narendra Modi ordered a Special Investigation Team (SIT) to look into funds stashed away in foreign countries by Indian nationals. The SIT is in the process of finalising its report. In 2015, the Indian government had asked people holding similar offshore accounts to come forward and declare their undisclosed assets with minimum penalty after signing the FATCA with the US. The government collected about INR 2428.4 crore under the anti-black money declaration window which closed on 30 September 2015. What remains to be seen is the action that Finance Minister Jaitley and his team will take following the sensational revelations by the ICIJ.

Celebrities from Other Countries

Apart from the Indians on the list, the Panama Papers reveal a number of high-profile personalities from across the world to be involved in accumulating wealth offshore. Pakistan Prime Minister Nawaz Sharif and his children, Hussain Nawaz Sharif, Hasan Nawaz Sharif, and Mariam Safdar, are among those found to have owned firms in the British Virgin Islands. Chinese President Xi Jinping, who had initiated an anti-corruption campaign in China, is also allegedly linked to numerous offshore activities.

A number of people liked to Russian President Putin have also been named. Soccer star Lionel Messi (and his father) and about 20 other soccer players and owners of major soccer clubs also seem to be involved. While Putin himself has not been named, the links are to those very close to him and about USD 2 billion is believed to have been “shuffled” using this cover. About 12 current and past heads of state (including the King of Saudi Arabia) have been named in the Panama Papers.

Database regarding 200,000 offshore accounts goes viral

The Panama Papers affair has gone a notch higher with database of documents relating to 200,000+ offshore accounts posted over the internet. Last week, the owner of Panama papers, Panama-based law firm Mossack Fonseca, issued a “cease and desist” order for preventing the database from getting circulated in the public. However, the organisation possessing the documents, the International Consortium of Investigative Journalists (ICIJ), moved ahead to post the accounts’ details online.

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