You’ve probably heard a lot of talk recently about the Panama Papers, a massive data leak containing details of business dealings with some of the most powerful people in the world, along with some dicey characters that are sure to be receiving a stern word or two very soon.
How big are we talking? To put it frankly, it’s fucking huge. 11.3 million documents that add up to 2.6 terabytes of data has been dubbed as the biggest data leak in history. To put it in perspective, Wikileaks clocked in at 1.7 gigabytes. You can fit that on most USB thumb drives these days.
How was it leaked?
Around a year ago, a German newspaper was contacted by an anonymous source with data from a seemingly benign law firm based in Panama called Mossack Fonseca. This particular law firm specialises in creating shell companies that are based in countries with strict privacy laws, away from the prying eyes of those that would want to know about it.
The German newspaper – Süddeutsche Zeitung – teamed up with the International Consortium of Investigative Journalists, along with over one hundred partners, including the BBC and The Guardian, to sift through and report on the data.
So what’s in these emails and documents that’s so important?
Basically, they detail how some of the worlds wealthiest and most powerful people hide their business dealings via offshore tax havens and shell companies. In other words, it reveals how really rich people that don’t want to pay tax, or are doing some rather unsavoury deals, are moving their money around.
This data implicates people like Russian president Vladimir Putin, Iceland’s prime minister Sigmundur David Gunnlaugsson and over 800 Australian’s that are now under investigation by the ATO.
Understandably, world leaders are pissed off, but the wider implications of the leak are yet to be known, but it won’t be long.
Rather than attempting to break it down better than Redditor DanGliesack, who posted his explanation in the subreddit /r/ExplainLikeImFive, I’ll allow it to shine below and chime in every now and then to clear up any confusion.
“When you get a quarter you put it in the piggy bank. The piggy bank is on a shelf in your closet. Your mom knows this and she checks on it every once in a while, so she knows when you put more money in or spend it.”
The piggy bank is the bank account located in your native country and your mum is the government making sure you or your company is doing the right thing.
“Now one day, you might decide “I don’t want mom to look at my money.” So you go over to Johnny’s house with an extra piggy bank that you’re going to keep in his room. You write your name on it and put it in his closet. Johnny’s mom is always very busy, so she never has time to check on his piggy bank. So you can keep yours there and it will stay a secret.”
The extra piggy bank is the offshore account and Johnny’s house is the shell company used to hide it. Because it’s in another country, the local government can’t track its contents.
“Now all the kids in the neighborhood think this is a good idea, and everyone goes to Johnny’s house with extra piggy banks. Now Johnny’s closet is full of piggy banks from everyone in the neighborhood.
One day, Johnny’s mom comes home and sees all the piggy banks. She gets very mad and calls everyone’s parents to let them know.
Now not everyone did this for a bad reason. Eric’s older brother always steals from his piggy bank, so he just wanted a better hiding spot. Timmy wanted to save up to buy his mom a birthday present without her knowing. Sammy just did it because he thought it was fun. But many kids did do it for a bad reason. Jacob was stealing people’s lunch money and didn’t want his parents to figure it out. Michael was stealing money from his mom’s purse. Fat Bobby’s parents put him on a diet, and didn’t want them to figure out when he was buying candy.”
Now in real life, many very important people were just caught hiding their piggy banks at Johnny’s house in Panama. Today their moms all found out. Pretty soon, we’ll know more about which of these important people were doing it for bad reasons and which were doing it for good reasons. But almost everyone is in trouble regardless, because it’s against the rules to keep secrets no matter what.”
So a lot of naughty people are probably shitting their pants right now, because it’s only a matter of time before all the data is broken down and we know who’s been up to no good.
Why should I care?
Other than criminals hiding their nefarious profits, a great deal of these people will likely be using this method to avoid paying taxes. Taxes that you pay every day. Taxes that could be funding new schools, hospitals, playgrounds, infrastructure etc. These people are weaselling their way out of millions, probably billions of dollars’ worth of taxes, leaving us to carry the burden.
The level of greed we could see with the coming analysis of this data is sure to be nothing short of astounding.