It was only 19 months ago that the Panama Papers were released. Now, it’s the Paradise Papers that are filling the front pages of English and European newspapers. Back when the Panama Papers were released, I wrote that if David Cameron’s name hadn’t been in those documents, the news probably wouldn’t have had the same impact. Today I think that if Queen Elizabeth’s name hadn’t come up, we likely wouldn’t be discussing it either.

The mechanisms are the same. Only the consulting firms involved and the islands where the news originated have changed. In the Paradise Papers there’s a bit of everything: from the legitimate—though ethically questionable—creation of offshore companies to lower tax liabilities to shell companies that could hide assets of a criminal origin.

Tax havens are where criminal capitalism and legal capitalism meet and merge. I’ve said this before, but it bears repeating. So is the fact that mafia organizations were the first to create and facilitate money-laundering mechanisms through tax havens.



Play Video 2:07 What are the Paradise Papers? – video

In the 1980s, Gilberto Rodriguez Orejuela, the leader of the Colombian Cali cartel, became the largest shareholder of the First Interamericas Bank of Panama. The cartel did this in order to facilitate the laundering of drug money and its reinsertion it into circulation.

And last year, it was discovered that the mansion of a top Mexican narcotics kingpin, Rafael Caro Quintero, belonged to an offshore company based in Panama, right next to the assets of major European businessmen and politicians. These assets all have diverse origins – some legal, some illegal – but they all seek the same services and enjoy the same benefits.

Panama, Bermuda, Singapore, Cyprus, Malta—along with London at the center of this network—are all territories where you can hide money. This isn’t always illegal. In fact, when documents like the ones we saw in the Paradise Papers are leaked, the result is mostly a damage to one’s image, rather than jail time.

However, reputational damage becomes less of a threat when large multinational corporations – who are household names – get away with having offshore assets.

When we learn that companies like Microsoft, Google or Apple have offshore accounts – and yet neither their image nor stock prices are affected – it leads to the legitimization of this financial practice. Like a protective bubble wrap, they shield everyone else who is in on this game. Thanks to them, paying taxes is seen as only being for those who can’t afford not to pay them.

Tax havens are where criminal capitalism and legal capitalism meet

A study by the Institute on Taxation and Economic Policy published this year shows that 366 of the 500 American companies with the highest revenue (those that are part of the Fortune 500) use subsidiaries located in tax havens to reduce their income taxes. Among these are important banks, financial institutes, pharmaceutical corporations, and multinational communication, clothing and food companies.



The result is that an electrician on the outskirts of Rome or a small business in Liverpool will have infinitely more fiscal pressure than those colossal companies earning infinitely more money.



In fact, it’s not a coincidence that – despite the Panama and Paradise Papers scandals and numerous governmental declarations (including by states historically considered tax havens like Switzerland and Austria) to fight tax evasion and money laundering – the quantity of wealth held offshore has grown continuously over the last few years.

According to a recent study by the National Bureau of Economic Research, that wealth is now equal to 10% of the global GDP, but that’s only an estimate because the very nature of tax havens prevents the uncovering of precise figures.

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What’s more, once certain jurisdictions are rebuked (either through political decisions or because they’re at the center of media storms), the assets they hosted are often merely transferred to new, more reputable and convenient “havens.”

I am convinced that the Panama and Paradise Papers represent only the tip of the iceberg and that we have no idea of the true shape or size of this problem. What has come to light in both the Panama and Paradise Papers leak proves that in tax havens, cocaine money, money from tax evasion, and legal money all live together, legitimizing one another.

Legal capitalism has learned from criminal capitalism that in the world of money, only rule-breakers survive. Drug traffickers were the pioneers of a free market model that has been slowly adopted by the legal economy.



Cocaine combined all of the pillars of contemporary capitalism: speed, globalization and economic power. Nowhere is this synthesis better in display than in offshore tax havens