Paradise Papers
The Paradise Papers are a set of over 13.4 million confidential electronic documents relating to offshore investments that were leaked to the German reporters Frederik Obermaier and Bastian Obermayer, from the newspaper Süddeutsche Zeitung. The newspaper shared them with the International Consortium of Investigative Journalists, and a network of more than 380 journalists. Some of the details were made public on 5 November 2017 and stories are still being released.
The documents originate from the legal firm Appleby, the corporate services providers Estera and Asiaciti Trust, and business registries in 19 tax jurisdictions. They contain the names of more than 120,000 people and companies. Among those whose financial affairs are mentioned are, separately, AIG, then-Prince Charles and Queen Elizabeth II, President of Colombia Juan Manuel Santos, and U.S. Secretary of Commerce Wilbur Ross.
The released information resulted in scandal, litigation, and loss of position for some of the named, as well as litigation against the media and journalists who published the papers.
Background
On 20 October 2017, an anonymous Reddit user hinted at the existence of the Paradise Papers. Later that month, the International Consortium of Investigative Journalists approached the offshore law firm Appleby with allegations of wrongdoing. Appleby said that some of its data had been stolen in a cyberattack in the previous year and denied the ICIJ's allegations. After media outlets started reporting on the documents, the company said there was "no evidence of wrongdoing", and they "are a law firm which advises clients on legitimate and lawful ways to conduct their business", and they "do not tolerate illegal behaviour".Appleby stated the firm "was not the subject of a leak but of a serious criminal act", and "this was an illegal computer hack". The company added: "Our systems were accessed by an intruder who deployed the tactics of a professional hacker".
The documents were acquired by the German newspaper Süddeutsche Zeitung, which had also obtained the Panama Papers in 2016. According to the BBC, the name "Paradise Papers" reflects "the idyllic profiles of many of the offshore jurisdictions whose workings are unveiled", so-called tax havens, or "tax paradises".
The data breach comprises some 13.4 million documents—totaling about 1.4 terabytes—from two offshore service providers, Appleby and Asiaciti Trust, and from the company registers of 19 tax havens. Süddeutsche Zeitung journalists contacted the ICIJ, which has been investigating the documents with 100 media partners. The consortium made the data available to these media partners using Neo4j, a graph-database platform made for connected data, and Linkurious, graph-visualization software. This allowed journalists across the globe to undertake collaborative investigative work. The documents were released by the consortium on 5 November 2017.
Companies named
According to the papers, Allergan, Allianz, Apple Inc., Facebook, Global Vantedge, McDonald's, Nike, Inc., Siemens, The Walt Disney Company, Twitter, Uber, Walmart, and Yahoo! are among the corporations that own offshore companies. According to The Express Tribune, "Apple, Nike, and Facebook avoided billions of dollars in tax using offshore companies."Among the Indian companies listed in the papers are Apollo Tyres, the Essel Group, D S Construction, Emaar MGF, GMR Group, Havells, Hinduja Group, the Hiranandani Group, Jindal Steel, the Sun Group and Videocon.
Apple
A great deal of the company's intangible property was exposed around the time of an internal Apple Inc. reorganization of three Irish subsidiaries. The company's 2015 gross domestic product showed a 26% increase, and close to $270 billion of intangible assets suddenly appeared in Ireland as the year began – more than the entire value of all residential property in the country. This may indicate that Apple took advantage of a tax incentive known as a capital allowance, which gives Irish companies generous tax breaks for buying intangible property – essentially intellectual property like patents. In other words, Apple transferred them to a subsidiary located in Ireland for the tax incentives, and didn't have to pay any tax on the transaction in Bermuda either, on the value it declared on the property when it sold them to itself.Following a 2013 US Senate investigation, which featured testimony by CEO Tim Cook, Ireland announced that henceforth Irish companies would be required to declare tax residency somewhere in the world. Apple had been paying a lower rate of corporate taxes in Ireland in a so-called sweetheart deal. This attracted the attention of EU regulators as many multinationals were doing the same thing. As the tax break in the Netherlands came to a scheduled end, Apple's law firm, Baker McKenzie, researched island tax havens, asking Appleby officials in numerous jurisdictions to confirm "that an Irish company can conduct management activities... without being subject to taxation in your jurisdiction." Two of the subsidiaries moved to Jersey and took intellectual property with them. The third is receiving tax breaks in Ireland for buying Apple IP from another Apple subsidiary.
The Jersey Financial Services Commission issued a statement regarding Apple on 7 November 2017. The JFSC confirmed that the two Apple subsidiaries referred to by the media are not Jersey-registered companies and their understanding is that Apple funds relating to these entities have not been remitted to or held in the Island.
The JFSC states that it has not seen any of the documentation that the International Consortium of Investigative Journalists claims to hold following the Appleby data breach. If the ICIJ possesses data of a criminal or regulatory nature which relates to business activities in Jersey then the JFSC requested that this information be shared with them and, if there is any evidence of regulatory wrongdoing, they would then investigate and take action if appropriate.
The Government of Jersey also issued a statement of similar effect on 7 November 2017.
The jurisdiction of Jersey has recently been independently assessed as fully compliant with international regulatory guidelines on tax transparency.
The EU, under the leadership of Jean-Claude Juncker, threatened to sue Ireland over its tax deals, although Juncker himself had approved similar tax deals in his own country, Luxembourg. Apple paid all of its taxes in Ireland as required by that country, so Ireland is appealing the EU decision. HP, Nike, Microsoft and others use the same tax arrangements in Ireland, Luxembourg and other countries, but Apple is frequently cited as a media example. Irish companies are required to pay taxes in Ireland, but if they convince authorities that they are "managed and controlled" from abroad, the companies may win an exemption.
As of November 2017, Apple held $252 billion offshore. However, Apple has previously publicly stated that it reinvests post-tax earnings into the global economy via investment funds held offshore.
Avianca
, founder of Synergy Group, is linked to an offshore conglomerate used for the aero-commercial holding business with ramifications in Bermuda, Panama, and Cyprus. Efromovich used a Panamanian offshore that hid more than 20 firms located in tax havens. The conglomerate was used by Synergy Group's subsidiary Avianca Holdings in the purchase of MacAir Jet, now Avianca Argentina, an aircraft company owned by Macri Group, for an amount of $10 million, allowing Avianca to make headway in the low-cost carrier business in Argentina. The Argentine government accepted the offshores as a financial guarantee to assign air routes to Avianca. The whole operation of assigning air routes was investigated by the Argentine federal justice system in a case called "Avianca" in which the President of Argentina Mauricio Macri and other officials were imputed.DST Global
A Russia-owned firm, VTB Bank, put $191 million into DST Global, an investment firm part of Mail.ru Group and was founded by Russian billionaire Yuri Milner, which used it to buy a large share of Twitter in 2011. A subsidiary of the Kremlin-controlled Gazprom funded an investment company that partnered with DST Global to buy shares in Facebook, reaping millions when the social media giant went public in 2012. Twitter similarly went public in 2013. The US government sanctioned VTB in 2014 because of the Russian military intervention in Crimea, but DST Global had by then sold its stake in Twitter. Four days after the Facebook IPO, a DST Global subsidiary sold more than 27 million shares of Facebook for approximately $1 billion.Glencore
In 2009, Glencore, an Anglo–Swiss multinational commodity trading and mining company, loaned $45 million to Israeli billionaire Dan Gertler in exchange for his help with officials of the Democratic Republic of Congo in negotiations over a joint venture with state-owned Gécamines at the Katanga copper mine.One of the Katanga board members was Glencore major shareholder Telis Mistakidis, a former employee whose stock options made him a billionaire in the IPO. Glencore, which had effectively taken over Katanga, agreed to vote for the joint venture. The loan document specifically provided that repayment would be owed if agreement was not reached within three months. Gertler and Glencore each have denied wrongdoing. Appleby had worked for Glencore and its founder Marc Rich on major projects in the past, even after his indictment in 1983. Rich was indicted in the United States on federal charges of tax evasion and making controversial oil deals with Iran during the Iran hostage crisis. He received a controversial presidential pardon from U.S. President Bill Clinton on 20 January 2001, Clinton's last day in office.
A separate ICIJ project found that tax auditors in Burkina Faso accused a Glencore subsidiary of deducting from its taxes "fictitious" payments to other Glencore subsidiaries, and of selling the zinc from its mine in unrefined form to minimize its revenue. Its CEO told shareholders before this that it expected a spike in demand, which did materialize. The mine is owned by Nantou Mining SA, which is owned by Merope Inc, a Bermuda shell company set up by Appleby with directors provided by the firm. Glencore sold Merope in April 2017 but before that, it was 100% owned by Glencore Finance Ltd, which was, according to a document from the Paradise Papers leaks, 100% owned by Glencore Group Funding Ltd of the United Arab Emirates, an entity in turn 100% owned by Swiss firm Glencore International AG, itself a wholly owned subsidiary of Glencore plc, registered in Jersey.
Documents were also discovered discussing Glencore's desire to keep its substantial stake in SwissMarine a secret, and that although the subsidiary's annual report showed revenues of $1.9 billion in 2014, Glencore did not mention the subsidiary in its disclosures to the London Stock Exchange or in any other public filing because, it said, it did not consider this a significant investment.
The Australian branch of Glencore has been demonstrated to have carried out some $25 billion in cross-currency interest rate swaps, complex financial instruments the Australian Taxation Office suspects of being used to avoid paying taxes in Australia. The Australian High Court recently held that documents revealed in the Paradise Papers leak could be used by the Australian Taxation Office to assess Glencore's tax obligations, despite legal privilege.