It wasn’t good news for a Danish jewelry company or the radio app with the same name when the International Consortium of Investigative Journalists released details on the Pandora Papers.
The project’s name comes from Greek mythology and the opened gift box that let out the world’s evils.
Six hundred journalists worked on the project based on nearly 12 million pages of leaked financial information that details a vast and complex international system. It allows the world’s most affluent and influential in funneling money into financial vehicles that hide their holdings or allow avoidance of taxes.
Offshore and onshore tax havens are nothing new. The only surprise coming out of the series was the size and complexity of these networks, and the number of celebrities, national leaders, and one king.
Delaware entities were prominently mentioned in the less comprehensive Panama Papers a few years back, but not so much this time around.
Delaware has been cleaning up its act in recent years and is now shutting down notorious corporate entities tied to criminal activities ranging from money laundering to human trafficking.
This time around, the spotlight has been shining more brightly on South Dakota, which has long harbored ambitions to beat out Delaware as a home for minimal disclosure legal entities and associated trust services. Its perennially tight labor market and relatively isolated location led to the Rushmore state not winning out over Delaware in the once fierce battle for banking jobs.
Prominently mentioned was the Chicago-based law firm Baker McKenzie, which for some reason does not have an office in Delaware. The firm defended its practices that included working on behalf of clients who do not want to see a strengthening of laws and oversight. It claims to support reforms and noted that its activities are perfectly legal.
Baker McKenzie has a point. Many if not most financial vehicles listed in the papers are lawful. Still, these entities do not pass the smell test and in many nations lead to tax increases for the less affluent and powerful.
What to do?
Delaware and, for that matter, South Dakota could become the most transparent states in the union. However, it would not stop the complex financial vehicles and shell companies from going overseas. Both states would lose revenues to overseas entities without any meaningful change.
Many are skeptical that much will be done, at least in the short term.
Some signs that the status quo is under pressure surfaced last week.
One example is the Czech Republic, where its billionaire prime minister appeared to be losing his grip on power. It came after his party suffered parliamentary losses when his name was mentioned in the Pandora papers.
Another development was a tentative agreement from more than 130 nations that would require a minimum 15% taxation rate on corporate entities. However, critics claim the deal comes with loopholes that would benefit wealthier countries. – Doug Rainey, chief content officer.