Explainer | What are the ‘Paradise Papers’ and why should you care?

The leak is a trove of 13.4 million files taken mostly from the offshore law firm, Appleby.

The files were leaked to Suddeutsche Zeitung, the same German newspaper that took hold of the Panama Papers in April, 2016.

About 100 different media outlets worldwide are poring over the details.

“There’s a new global industry that caters to money that moves around the world,” Drew Sullivan, a journalist with the International Consortium of Investigative Journalists (ICIJ), said. “This money moves through tax havens and it’s moved to evade taxes to hide assets, to steal money.

“It’s used by organised crime; it’s used by large businesses.”

What has been discovered so far?

Day one of the disclosures, Sunday, revealed that some big names are involved - among them 120 politicians.

Donald Trump’s Commerce Secretary Wilbur Ross has been named.

“[He] has a stake in a shipping firm that receives millions of dollars a year in revenue from a company whose key owners include Russian President Vladimir Putin’s son-in-law and a Russian tycoon sanctioned by the US Treasury Department as a member of Putin’s inner circle,” said a report in the ICIJ, which received the leak from the German newspaper.

On Monday, Ross said that it was “totally wrong” he did not disclose the links.

Stephen Bronfman, Canadian Prime Minister Justin Trudeau’s friend and adviser, is reported to have used offshore havens to avoid tax at home.

“The disclosures are likely to generate political heat for the Canadian premier, who swept to power in October 2015 partly on his promise to tackle economic inequality and take on tax avoidance,” reported Britain’s Guardian newspaper, which was among the media organisations that received the leak.

The Duchy of Lancaster, the private estate of the UK’s monarch, is also allegedly involved. The estate of Elizabeth II invested millions of dollars in medical and consumer loan companies, the files show.

While the estate’s finance officer said in a statement that the “Duchy was aware” the fund was run offshore, the ICIJ said that it has “never disclosed details of its investments”.

There is no suggestion the Queen’s estate acted illegally.

Queen Noor of Jordan; Uganda Foreign Minister Sam Kutesa; Brazil Foreign Minister Campos Meirelles and Yuri Milner, a Russian billionaire investor with large stakes in Facebook and Twitter are also named.

Bono, the lead singer of the Irish rock band, U2, invested in a Maltese company that bought a mall in the Lithuanian city of Utena via a local holding company in 2007.

In a statement issued by the musician, Bono, 57, admitted he was “extremely distressed if even as a passive minority investor… anything less than exemplary done with my name anywhere near it.”

The papers show the singer invested in a company called Nude Estates Malta that paid £5.1 million for the shopping centre in northeast Lithuania. Foreign investors in Malta pay five percent tax on profits.

Lewis Hamilton, the Formula One world champion, reportedly avoided paying European taxes on his private jet, using an Isle of Man scheme.

The law firm at the core of the Paradise Papers, EY and Appleby aided Hamilton, as well as many others, set up artificial leasing businesses, through which they were able to rent jets for their own use.

Documents show a £3.3 million VAT refund was given after the Bombardier Challenger 605 jet was imported into the Isle of Man in 2013.

In Malta, the long-serving boss of the Malta Financial Services Authority, Prof. Joseph V. Bannister, kept hidden a directorship in a British Virgin Islands company that invested in a Russian mining venture.

ACP is an investment vehicle for ACPI, of London.

Bannister has claimed that he was a non-executive director of the firm and that his request for resignation in 2015, was finally processed in June 2016.

But he told Le Monde that the reason he never declared this interest was because he “was never asked to”.

Bannister was appointed MFSA chairman in 1999.

He also said his “past involvements” came with the blessing of successive prime ministers.

The law firm Appleby insists there is no evidence of wrongdoing.

Why should anyone care?

While in most cases, putting your money offshore and outside of your country’s financial regulations is legal, many argue hiding from the tax man is unfair. Critics say governments have been slow to deal with it.

The amount of money involved is huge. Boston Consulting Group estimates $10 trillion are held in these offshore financial centres.

Most of us know them as tax havens, but few of us actually use them. That’s because around half of that $10 trillion sum involves not the rich, but the mega-rich. Think 0.001 percent of households. But it is more than inequality and a lack of fairness.   

The offshore financial system is incredibly secretive - enabling the wealthy and powerful to hide their dealings and somehow break the law.

“It’s very difficult when somebody’s using five or six different offshore jurisdictions to get a true picture of what they’re really doing,” said Sullivan, a journalist with the ICIJ. “And countries need that because law enforcement is not easy to cross borders, but crime can cross borders.”

Leader of Britain’s Labour Party Jeremy Corbyn also criticised tax avoidance, promising that if his party wins the next election it would clamp down on tax havens and end loopholes.

Caroline Lucas, co-leader of the UK’s Green Party, tweeted: “Every year the political establishment try to play down tax avoidance and every year our public services suffer more cuts.”