Pandora Papers: Why do Rich People hide money offshore?
Popular discontent and widespread outrage have greeted the revelation contained in the Pandora papers, which details schemes by rich people to hide money in jurisdictions where no taxes are charged.
Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at leading global services firm PwC, during the 2021 edition of the company’s Capacity Enhancement Workshop for Journalists on Wednesday, said there were four key reasons some rich people prefer keeping their assets away from public scrutiny.
One reason for keeping assets offshore according to Oyedele is for tax planning purposes and to avoid double taxation. Rich people want to maximize returns on their investments and go to tax havens that offer tax incentives to foreign investors. The favorable tax rates in an offshore country are designed to promote a healthy investment environment that attracts outside wealth coupled with laws that protect confidentiality.
Another reason is for succession planning which is a way to hand over their wealth to their heirs without paying too much taxes to the government. In some countries, an inheritance tax is levied on the value of the inheritance received by the beneficiary, and it is the beneficiary who pays it.
Some rich people in unstable economies prefer to hide their assets in offshore jurisdiction to protect them against government policies. Others prefer to maintain their privacy and do not want undue attention to their wealth so they pay lawyers and accountants to hide them offshore.
These reasons while not illegal may raise moral concerns, Oyedele said.
A red flag is when assets are hidden abroad to avoid double taxation or to circumvent paying taxes at all. This is tax evasion and it is a crime.
When assets are hidden offshore for the purpose of evading taxes or give cover to illicit money flows, enabling bribery, money laundering, terrorism financing and human trafficking and other human rights abuses, then it becomes criminal.
The International Consortium of Investigative Journalists obtained the trove of more than 11.9 million confidential files and led a team of more than 600 journalists from 150 news outlets that spent two years sifting through them, tracking down hard-to-find sources and digging into court records and other public documents from dozens of countries
According to the Gerard Ryle, director of ICIJ, the leak was named after Pandora box in Greek Mythology because it opened the box on a lot of things; the secrets of rich people.
The Pandora Papers leaked information collated from 14 offshore service providers who render professional services to wealthy individuals and corporations irrespective of their location, seeking to set-up companies, trusts, foundations and other profiles in tax havens which means countries with flexible, little or no-tax rules.
In addition to this, Pandora papers revealed evidence proving banks and law firms work hand-in-hand with the professional offshore service providers to build complex corporate structures that prevent third parties from knowing their customers even if they are persons involved in questionable dealings.
Premium Times, the only Nigerian newspaper involved in the project, reported that notable Nigerians were not exempted from the leak. Prominent names of Nigerians reported include: Abubakar Atiku Bagudu (the Governor of Kebbi State), Peter Obi (Former Governor of Anambra and Vice-Presidential Candidate under PDP), Ibrahim Bagudu (the brother of Abubakar Bagudu), a former Chief Justice of Nigeria (CJN), lawmakers, business moguls, etc.