On April 3, 2016, based on 11.5 million documents leaked from a law firm based in Panama, more than 100 media outlets around the world jointly investigated and exposed the opaque reality of tax havens. These documents and the subsequent investigations became known as the “Panama Papers.” The documents were initially leaked to the German newspaper Süddeutsche Zeitung by a whistleblower whose identity remains unknown.

The Panama Papers brought to light the grave injustice of a system in which the wealthy can use tax havens to avoid paying taxes that should rightly be contributed to the societies where they live and work. The documents detail how individuals, companies, and other entities use shell corporations and offshore structures to conceal assets and transactions and avoid paying taxes. The investigations led to multiple arrests, large-scale recovery of unpaid taxes, and the downfall of powerful politicians. They also sparked debate over the broad problems caused by the near-total lack of regulation of tax havens and secrecy jurisdictions.

Ten years have passed since the Panama Papers investigations were made public. What did these investigations accomplish? And how have the issues they highlighted evolved since then?

Frederik Obermaier, one of the reporters who received the Panama Papers from the whistleblower, speaks at a Panama Papers-related event (Photo: Nordiske Mediedager / Wikimedia Commons [CC BY-SA 2.0])

About the Panama Papers

In 2015, the Panama Papers were leaked from a single law firm, Mossack Fonseca. The firm was based in Panama but had clients all over the world, linking them to shell companies and secret accounts in 21 offshore jurisdictions. The documents covered several decades and contained information on more than 214,000 companies.

The documents were initially leaked to Süddeutsche Zeitung, but due to the sheer volume of information and the global spread of clients and financial transactions, the newspaper shared them with the International Consortium of Investigative Journalists (ICIJ). ICIJ reached out to journalistic teams worldwide and acted as a kind of coordinator. It created systems that allowed reporters to access the documents securely and share information and findings. Participating journalists focused on their own countries or nearby regions, searched the database for individuals and companies, and carried out investigations.

The investigations continued in secret for more than a year. All media organizations agreed to begin publishing on the same day, and that agreement was kept. On April 3, 2016, stories about hidden assets and secret deals involving prominent individuals and companies around the world began appearing simultaneously.

This was not the first time that a large-scale leak of documents on offshore shell companies and tax havens prompted a collaborative investigation via ICIJ. The Luxembourg Leaks in 2014 and the Swiss Leaks in 2015 were precedents. However, the sheer volume of documents this time was truly unprecedented.

Locations of holders of HSBC accounts revealed by the Swiss Leaks. Much of the money comes from other tax havens. (Photo: Martin Grandjean / Wikimedia Commons [CC BY-SA 4.0])

The role of tax havens

Here we examine the problems associated with tax havens.

As the name suggests, tax havens are jurisdictions where individuals and companies can minimize their tax burdens. Tax rates are of course a crucial factor: personal and corporate tax rates may be set extremely low or even at zero. But that is not all. The legal framework governing income, transactions, and corporate formation is another key feature of tax havens. Laws are designed to allow anyone, including non-residents, to move money easily and cheaply and to set up corporations with minimal oversight and hassle. In many tax havens, most of the individuals and companies using financial services have no real physical presence in the jurisdiction.

A major feature of this regulatory framework is secrecy. Secrecy plays an important role in helping to hide money offshore. By making it difficult for authorities in other countries to trace funds moved to or through them, tax havens enable individuals and companies to avoid taxation. For example, shell companies and trusts can easily be set up and used in ways that conceal their true beneficial owners.

Using tax havens is not always illegal. Law firms, accounting firms, and other offshore service providers help clients identify and exploit legal loopholes in tax haven laws to avoid taxes. However, this does not necessarily mean their actions are lawful. Such loopholes often exist in a legal grey area and can be challenged and prosecuted by authorities. At the same time, secrecy can also facilitate clearly illegal tax evasion.

For example, companies often use shell corporations in tax havens to shift profits, making it appear that profits arose in the tax haven rather than in the country where the real, taxable economic activity took place. In some cases they rely on loopholes that are superficially legal, but many companies are believed to shift profits by fraudulently misrepresenting the value of traded goods or services. This technique is known as trade misinvoicing.

A container ship (Photo: PickPik [Terms of service])

One example is when a company “sells” products at an artificially low price to a shell company it owns in a tax haven, then inflates the price and sells them on to the real buyer. Because the profits appear to accrue in the tax haven, where they are not taxed, the company can minimize the taxable income in the country where the original transaction actually took place.

The secrecy protected in tax havens also attracts those involved in criminal activities such as sanctions evasion, illegal trade in drugs and weapons, and human trafficking. By using tax havens, they can conceal transactions and profits from such activities and launder the proceeds.

In many tax havens, secrecy is strictly protected by law. In Switzerland, for instance, there have been cases in which whistleblowers who exposed illegal financial activity were criminally prosecuted for violating secrecy laws, while the illegal financial conduct itself went largely unpunished.

Even with these characteristics, tax havens are not always easy to identify, and there is no universally agreed definition. Tax rates and levels of secrecy vary by jurisdiction. Moreover, a tax haven may not be an entire country but just a single state or region within one. In the United States, for example, the state of Delaware is often cited as a tax haven. The United Kingdom itself is not generally regarded as a tax haven, but several overseas territories under its control—remnants of the British Empire—such as the British Virgin Islands, the Cayman Islands, and Bermuda, are considered major tax havens.

The direct impact of the Panama Papers

So what did the investigative reporting on the Panama Papers achieve in relation to these issues? Some impacts were immediate. Sigmundur Gunnlaugsson, then prime minister of Iceland, was confronted on the day of publication with the fact that he had failed to declare ownership of an offshore company when he entered parliament, and two days later he announced his resignation. Pakistan’s Prime Minister Nawaz Sharif also resigned after the Panama Papers revealed family-owned properties abroad, and he was charged with corruption and sentenced to 10 years in prison. Several other heads of state were caught up in scandals, but only these two ultimately stepped down.

Former Pakistani Prime Minister Nawaz Sharif, who was forced to resign in the wake of the Panama Papers (Photo: World Economic Forum / Flickr [CC BY-NC-SA 2.0])

Other consequences took longer, as authorities in each country conducted investigations and brought cases to court. Jürgen Mossack and Ramón Fonseca, the founders of the law firm at the center of the Panama Papers, were arrested on money laundering charges in 2017, and their firm was dissolved in 2018. Over the following years, governments around the world recovered unpaid taxes and levied fines. The biggest recoveries were in the United Kingdom, Sweden, France, and Spain, each reportedly recouping about US$200 million. In total, disclosures related to the Panama Papers are estimated to have led to the recovery of about US$1.3 billion over ten years.

The Panama Papers investigations may also have encouraged insiders with access to similar data at other firms to leak documents to the media. In the wake of the Panama Papers, several more leak-based investigations were conducted, again with ICIJ at the center. In particular, the Paradise Papers (2017) and the Pandora Papers (2021) were major leaks, each containing a volume of documents comparable to the Panama Papers. In the case of the Pandora Papers, the documents came not from a single law firm but from 14 different offshore service providers and law firms.

Systemic problems that persist

The Panama Papers exposed the fact that the use of tax havens by wealthy individuals and corporations to hide assets and avoid paying their fair share of taxes is not rare, but rather a widespread practice.

There was nothing particularly unique about Mossack Fonseca or its clients. Many law firms around the world perform similar functions. Law firms are just one part of a broad infrastructure—including accounting firms, banks, and other offshore service providers—that facilitates profit shifting, asset concealment, and tax avoidance and evasion. It just happened that the documents a whistleblower could access belonged to this particular firm. For this reason, it is important to assess the impact of the Panama Papers in terms of how they affected the wider systemic problems surrounding tax havens.

In its review of the ten years since the Panama Papers, ICIJ notes that “many countries have cracked down on enablers of financial secrecy and pushed for transparency reforms to close loopholes in the system.” In many countries, laws on company registration and ownership and on money laundering have been tightened. Internationally, the Organisation for Economic Co-operation and Development (OECD) has introduced measures to improve the sharing of financial account information between national authorities, in particular through the system of Automatic Exchange of Information (AEOI).

The Mossack Fonseca website (at the time) (Photo: Фотобанк Moscow-Live / Flickr [CC BY-NC-SA 2.0])

Nevertheless, the scale of untaxed wealth hidden in tax havens remains enormous. According to an analysis released by the international NGO Oxfam to mark the tenth anniversary of the Panama Papers, as of 2023 the world’s richest 0.1% are estimated to hold US$2.84 trillion in untaxed wealth in tax havens. This exceeds the total wealth held by the poorest half of the world’s population—4.1 billion people.

In a 2024 report, the international NGO Tax Justice Network estimated that global revenue losses from cross‑border tax avoidance and evasion amount to as much as US$492 billion. The report also notes that low‑income countries are disproportionately affected: they lose 3.7% of their tax revenues to such practices, compared with 2.4% in high‑income countries.

Toward a UN tax convention

Even before the Panama Papers, there had been efforts to establish a comprehensive and effective framework for international tax cooperation to address problems like those described above. These efforts have been led mainly by low‑income countries, which have felt acutely that cross‑border tax avoidance and evasion by multinational corporations—most of which are based in high‑income countries—are disproportionately undermining their tax revenues. At the Third International Conference on Financing for Development, held in Ethiopia in 2015, there was an attempt to establish an international body on tax, but the initiative collapsed due to opposition from several high‑income countries.

Even so, countries calling for global tax reform persisted. In December 2022, the UN General Assembly adopted a resolution on “Promoting inclusive and effective international tax cooperation,” in which member states committed to further discussions on tax cooperation, including “the possibility of developing an international tax cooperation framework or instrument” through an intergovernmental process at the UN.

Once this process began to take shape, however, several high‑income countries again stepped up their opposition. In August 2024, at a UN General Assembly committee, only eight countries—Australia, Canada, Israel, Japan, New Zealand, South Korea, the United Kingdom, and the United States—voted against the terms for pre‑negotiations on tax cooperation. The Tax Justice Network estimated that 43% of global tax losses are enabled by these eight countries and dubbed them the “hurtful eight.” Argentina later joined them, and in December that year, only nine of 193 countries voted against a General Assembly resolution to launch a process to establish a tax convention.

The UN General Assembly (Photo: U.S. Government Works / Rawpixel [Public domain]

With the exception of Argentina, all of these countries are members of the OECD. Until now, the OECD has effectively monopolized global agenda‑setting on tax policy, and the countries opposing tax cooperation reforms appear intent on keeping global tax issues under their own control. The tax policies advanced by the OECD can be said to have served the interests of multinational corporations based in its member countries, but the vast tax revenue losses still occurring worldwide under the current system indicate that these policies have been a failure.

Concrete reform proposals include strengthening beneficial ownership registration systems for companies and assets, and improving the automatic exchange of information between countries about those companies, assets, and owners. One of the most important proposals, however, is the introduction of unitary taxation to curb profit shifting by multinationals. This is “a method of taxing multinational companies based not on where they officially book their profits (that is, tax havens), but on where they actually conduct business—that is, where they employ workers, run factories, and sell goods and services.”

Conclusion

Ten years ago, the Panama Papers were a turning point that brought vital attention to the widespread problems of tax avoidance and evasion. Ironically, those who can use offshore structures and tax havens to free‑ride on public services are the very wealthiest in society, while the tax burden falls mainly on low‑ and middle‑income individuals and businesses.

This situation is not only unfair, it is deeply destructive. It deprives governments around the world of the tax revenues they need to maintain public infrastructure and essential social services such as health and education. The impact of such tax avoidance and evasion is especially severe in low‑income countries, where the loss of tax revenues often translates directly into loss of life.

Intergovernmental negotiations on tax cooperation at the UN are expected to continue until 2027. Despite opposition from several high‑income countries, efforts at global tax reform through the UN offer a historic opportunity to introduce, standardize, and implement such reforms. GNV will continue to follow developments in this process.

Writer: Virgil Hawkins

Follow @GNV_tweets