What people in Panama use to wrap their tobacco.
You know, I would come across much better if Microsoft Word had a way of showing how long I resisted the low-hanging fruit before I finally decided to go for the cheap laugh. Yo, Gates! You'll want to get right on that!
3) So - sigh - much as I love being your straightquestioner, I have to ask: what exactly are the Panama papers?
The Panama papers are a number (11.5 million) of documents generated by a Panamanian firm called Mossack Fonseca that were leaked to a consortium of journalists. They -
4) Mossack Fonseca - why does that sound like an Italian soccer team or a Mafia law firm?
You said it, I didn't. As I was explaining before that offensive and unnecessary interruption Mossack Fonseca was -
5) Eleven and a half million documents - that's not that much in our modern information age, is it?
It's 2.6 terabytes of electronic data - more than you could read in 217 lifetimes, even if you were a Robert Ludlum fan. Now, may I continue?
Okay, so -
7) No, wait. One more question before we get into the details of what happened: did Anonymous leak the documents?
No. They were given to a German newspaper that shared them with an organization called the International Consortium of Investigative Journalists. I guess the ICIJ is similar to Anonymous, but without that group's catchy name or penchant for making random cartoon noises.
8) Okay. Thanks. So, you were saying...9) No interruptions. What's the big deal about the leak?
Well...Mossack Fonseca set up what are known as shell companies (no, the term doesn't have anything to do with an old oil company; it originated with ancient Sumerian peanut farmers). The companies produce nothing with zero employees (which, if you think about it, as a perfect example of frictionless capitalism); their sole (if soulless) purpose is to funnel money. If you send money through a series of shell companies, it becomes very difficult to trace.
10) Why would anybody do that?
You mean, aside from the possibility of minimizing their corporate or personal taxes?
11) Really? There are people who do that? Because I love paying me some taxes!
You're not just saying that because you're being audited right now, are you?
Right. So, aside from tax avoidance, there are other reasons for laundering your money through shell companies. Suppose, for example, that you are a multinational arms conglomerate in love with a belligerent Middle Eastern country. You want to share your weapons with it, but Big Daddy International Community will punish you if you do. How can true love flourish in such an atmosphere? Well, you use enough shell companies and Big Daddy IC never needs to know how much money your Middle Eastern corporate lover has given you.
13) Ooh - I love a story with a happy ending. Are there other examples of how shell companies can help people?
Oh, sure. Say you're the President of a small African nation who has devoted his life to the betterment of his people. Of course, you may have imprisoned, tortured and/or disappeared a few of them, but far fewer than were killed in the civil war before you took power and, anyway, the country was stable, wasn't it? You're thinking of retiring, but you can't live off your government pension...in the style to which you are accustomed. What's a poor dictator to do? Shell companies to the rescue! They allow you to get money out of the country - say, from the sale of a resource like oil or diamonds - no more than a couple hundred million dollars - you're not greedy - that, if it were known, would make you a pariah in polite international company. Of course, with a few hundred million dollars - okay, maybe you're a little greedy - you can afford to buy your own polite company, but still.
14) You make it sound so noble...
I hate how good I am at spinning things.
15) Were individuals named in the documents?
Were they ever! Hundreds of people, including at least 29 billionaires on the Forbes list, were named in the documents. For instance, British Prime Minister David Cameron was reported to have held shares in the Blairmore Investment Trust, a tax shelter created by his father, for over a decade.
16) How did the Prime Minister respond to the allegations?
At first he denied that he had owned the shares. Then, he admitted that he had owned the shares, but said that it was nobody's business. Then, he admitted that the public had a right to know how a Prime Minister who had promised to wage war on tax havens had benefited from one, but that he had done nothing illegal. I may have missed a couple of his positions - there was a time when his press releases were coming faster than John Holmes.
I know - you'd think a politician with Cameron's experience would have settled on one response and stuck to it.
18) I meant - oh, never mind. Who else was named in the documents?
Russian Whatever Title He Can Get Away With Today As Long As He Maintains His Hold On Power Vladimir Putin and many of his cronies were implicated in spiriting billions of dollars out of the country.
19) How did Putin deal with the revelations?
He blamed it on American propaganda and told the Russian people that if they just held out, next year they would each have a chicken leg. Of course, the chicken leg would have to last them through the winter, but they could choose to eat it or set it on fire for heat, because the new Russia is all about individual choice.
The Prime Minister of Iceland, Sigmund David - what? Oh, Sigmundur Davis - No? Okay, Sigmund David - oh, you've got to be kidding! I'm not even going to try to spell his last name! Anyway, he resigned over allegations of his offshore accounts. Sorry about the spelling problem, but, well, anyway, Iceland...is it even a real country?
21) Were any sports stars involved?
Indeed. Professional soccer player Lionel Messi's financial shenanigans were quite me - unclean. A number of FIFA officials were named in the documents, to the surprise of nobody.
22) I don't mean to come across as parochial, but were any Canadians involved?
You betcha - a couple dozen at least. One was Louise Blouin, one of the richest women in the country. But, she claims to have no knowledge of using tax havens to shelter her money - she has people to look after that sort of thing for her. But if her money was placed in a tax shelter, she wants people to know that it had nothing to do with avoiding taxes, it was to help facilitate her hobby, which is apparently buying small cities and flipping them for a nice profit.
23) Did the law firm respond to the leak?
Indeed, it did. The company made it clear that it "does not foster or promote illegal acts," but that it would not answer questions about specific clients in order to maintain its confidentially. That seems like bolting the barn door after the horse has been sold for glue, but that's their story and they're sticking to it like...a paste adhesive.
24) How did governments (that are not Panama) respond to the revelations?
In their best Claude Rains voice, they shouted that they were shocked, shocked, they said, to find out that there was unfairness in the tax system!
25) So, they're actually going to do something to make the system fairer?
Not until they political parties that benefited from the largesse of the individuals and corporations who use tax havens have collected all their winnings. I expect meaningful action to happen in 19...maybe 20 billion years.
I was being sarcastic. Scientists estimate that the universe will cease to exist in five to 15 billion years.
27) Okay. Thank you for that explanation. What about the reportedly $1.4 trillion that corporations such as Apple, GE and Microsoft have stored in overseas banks in order to avoid the taxes of their nations of origin?
Sorry - that's detailed in an Oxfam report, not the Panama Papers. That will have to wait for another FAQ - I can only deal with one financial scandal at a time!