Paradise Papers: What is the leak and who is behind the firm Appleby?

Updated

The Paradise Papers are the largest leak in history with more than 13.4 million files revealing the workings of the tax haven industry.

Over half of those documents, 6.8 million, emanate from the offshore law firm, Appleby, but the leak also includes roughly half-a-million documents from the Singapore-based Asiaciti Trust and a further 6 million documents from corporate registries located in 19 tax havens.

The cache of documents reveals an industry designed to sell secrecy. It also offers rare insights into the complex offshore structures used by multinationals to minimise their tax bills.

The leaks were obtained by the German newspaper Suddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and over 90 media partners including Four Corners.

The files include emails, bank statements, court documents and client records covering a period of 66 years — from 1950 to 2016.

Who is in the data?

Royalty, rock stars and 120 politicians from around the world are exposed in the documents.

They are joined by oligarchs from Russia, the Middle East, Asia and Africa.

The financial affairs of Queen Elizabeth II, US Secretary of Commerce Wilbur Ross, Canadian Prime Minister Justin Trudeau's key fundraiser and Russian tech investor Yuri Milner are revealed.

Closer to home, new details of Australian rock icon Michael Hutchence's long contested estate are uncovered in the data.

On the corporate front there are rare insights into the hidden offshore tax structures used by multinationals including Facebook and mining giant Glencore.

What is Appleby?

Founded in Bermuda — an island well known for its zero corporate tax rate and perhaps lesser known for its quirky corporate attire, the Bermuda shorts — Appleby sets up companies, trusts and other offshore entities for thousands of clients including high wealth individuals, international banks and accounting firms as well as multinational corporations.

Appleby considers itself an industry leader proving to the world that the offshore industry can operate cleanly and ethically. Its pitch appears to be as a law firm for the rich and respectable.

The firm was founded in the 1890s by Major Reginald Appleby, a lawyer who detested paying tax. In 1979 the firm began its expansion into a global institution with over 700 employees, operating in notorious tax havens including the Cayman Islands, British Virgin Islands and the Isle of Man.

In a public statement anticipating the leak, Appleby maintained it is committed to high standards and said while the firm does not tolerate illegal behaviour, "we are not infallible."

Appleby's corporate services division became independent in 2016 and operates under the name Estera.

Where are the "secrecy jurisdictions"?

The Tax Justice Network says the terms secrecy jurisdiction and tax haven are interchangeable. Broadly, they are places where the laws and systems offer legal and financial secrecy to others.

The network notes that these jurisdictions provide "facilities that enable people or entities escape [from the] laws, rules and regulations of other jurisdictions..."

Recent international agreements have made it easier for tax authorities to get information from tax havens, but it's still a battle.

Going offshore: Is this legal?

Sorry, this video has expired Video: Inside the tax havens of the rich and powerful (ABC News)

Yes. Multinationals may use tax havens to smooth the flow of capital between company operations split across multiple countries.

The problem is those tax havens can also be used for aggressive tax planning which enables individuals or large corporations to avoid paying tax or evade tax altogether.

The big attraction of tax havens is that they offer low or even zero corporate tax rates.

Avoiding tax is not illegal but it may be against the spirit of the law. However, evading tax is illegal. Beyond that, defining the differences is tricky. The Australian Tax Office has published a guide to tax crimes - warning perpetrators face criminal convictions, fines, and even prison sentences.

So why does this matter?

The ATO estimated it was owed roughly $2.5 billion in missing tax revenue from large corporations and multinationals from the 2014-15 financial year. That's money that could be used to fund public services like hospitals, schools and transport.

The use of tax havens allows large corporations and multinationals to avoid tax in a way that is out of reach for the average worker.

Critics say tax havens enable a two-tiered system where multinationals and high-wealth individuals can enjoy all the benefits of doing business within a stable law-based country like Australia but contribute little in return.

James Henry, from the Tax Justice Network, said the system was comparable to the dark days of a feudal society.

"You get a tiny group of people who are basically citizens of nowhere for tax purposes and yet are able to call in the benefits of society for defence, national security, all of the benefits of having a rule of law and courts that they take advantage of all the time to make their money and to pass it on."

How is this different to the Panama Papers?

The leak of the Panama Papers last year focussed on the inner workings of Panamanian law firm Mossack Fonseca.

In terms of the volume of documents, the Paradise Papers leak is the larger of the two. The Panama Papers leak contained just over 11 million files compared with the 13.4 million documents in the Paradise Papers.

While the Panama data exposed world leaders, Mexican drug lords and relatives of Syria's president Bashar al-Assad, the Appleby leak relates to a mostly blue-chip client list including politicians, celebrities and multinationals.

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Topics: tax, fraud-and-corporate-crime, multinationals, bermuda, australia

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