New information unveiled in the Pandora Papers drama – why do these papers matter?

Pandora paper leak incident

In this article, we will be talking about an incident involving a lot of big names from several countries. Yes, we are talking about the Pandora paper leak incident. We often hear news involving frauds and it has become quite common now, which is wrong. This is one such incident. What is the Pandora Paper Leak incident and everything else related to it, we will discuss all this in today’s article. 

What are the Pandora papers?

Near about 11.9 million files were leaked recently from 14 big corporate service firms. These leaks set about nearly 29,000 off the shelf companies and private trusts in not just hideous tax jurisdictions but also many big countries Singapore, New Zealand and the United States for clients across the world.

What are these papers? Well, these papers are the proof of the ultimate ownership of various assets settled in the private offshore trusts along with the investments including cash, gold, shareholding and real estate properties held by the entities in the offshore. Talking about the names of Indians in this paper leak incident, there are at least 380 persons of Indian nationality in the Pandora Papers, as of now. Further investigation, in this case, is still going on. However, the reports of Indian Express have as of now verified and corroborated the documents of near about 60 prominent individuals and companies.

The number is high and is therefore very concerning for the whole country. To know better about this situation, we shall know what these Pandora Papers indicate.
These Pandora Papers act as a shred of evidence. These papers reveal how the rich, the famous, and the notorious, much of them who were already under the radar of investigation in the country’s investigation agencies, have been setting up the multi-layered trust structures for the planning of estate planning. These structures are usually those in jurisdictions that have been often regulated with loose tax structures but are equipped with airtight secrecy laws.

However, it is nothing like the trusts are built for the wrong purposes only. There are many trusts which have been established with genuine purpose. However, most of the trusts which have been identified in the Pandora Papers are established for the ill objectives. A scrutiny of the Pandora papers reveals that the objective behind this establishment of trusts is twofold. The first purpose of this establishment is to hide their true identities and to distance themselves from the offshore authorities so that it becomes near to impossible for the tax authorities to reach them.

Therefore, it becomes a safe hiding for them. The second purpose of these establishments is to safeguard the investments- cash, shareholdings, real estate, art, aircraft, yachts and much more. These are done to protect these investments from the creditors and law enforcers of the country. These are bought illegally and are not on the official records of the government, therefore they use these establishments to hide them. Both of these purposes for what the establishments are used are wrong and are punishable.

We have previously heard a lot about the Panama Papers and Paradise Papers in the news and in papers. However, the current Pandora Papers are different from these two. How? We have the answer for you. The Panama Papers as well as the Paradise papers which we have heard earlier, dealt largely with the offshore entities that were set up by the big corporates and individuals respectively.

However, on the other hand, the investigation of the Pandora Papers reveal how businesses worldwide have created a new normal after the countries were forced to make their laws stricter on these offshore entities. These laws were enforced after rising concerns for cases regarding money laundering, tax evasion and terrorism funding. These threats have been rising constantly in recent years with the rising rates of corruption across the whole globe.

The investigation in this leak reveals that the Pandora Papers pierce the corporate veil and reveal how the trusts are prolifically used as a mere vehicle for conjunction with the offshore companies which are merely set up for the basic purpose of holding and hiding investments and other assets which are owned by business families and ultra-rich individuals. Where are these trusts located, if you are wondering? Well, these trusts are usually set up in locations that are known tax havens such as Samoa, Belize, Panama, and also the British Virgin Islands.

They are also located in places that offer various tax advantages such as in countries like New Zealand and Singapore. Also, the South Dakota of the US, the biggest economy is also a prominent location for this. The growing trusts which are built with the mere purpose of hiding and holding false investments and assets are very concerning for the whole world.

Let us now discuss what trust is to make things more clear.

Trust in simple words can be described as a fiducial arrangement where a third party, which is referred to as a trustee holds the assets which belong to the individual or organisations that are benefit from it. Generally, it is generally used for the purpose of estate planning as well as succession planning. How does it benefit the big businessmen? It helps the large business families as well as the ultra-rich people to consolidate the assets that they own, which include financial investments, shareholdings and real estate properties.

What are the components of a trust? A trust majorly comprises of three key components or parties-

The first is a settlor, one who sets up, creates or authors a trust, a trustee who holds the assets for the benefits of a set of people, as named by the settlor. The third is the beneficiary/beneficiaries who own those assets and gets benefit from these trusts.
A trust, talking about definite terms, is not a separate legal entity, but the legality of its nature comes from the trustee. There is sometimes one other entity, known as the protector. This entity has the sole power to supervise the actions of the trustee, and also to remove the trustee and appoint a new one if something happens.

Can we set up a trust in India?

The answer to your question is yes. It is not illegal and is backed up by the law, the Indian Trusts Act of 1882. However, even after not seeing the trust as a separate legal entity, the Indian laws do see trusts as the obligation of the trustee to manage and use the assets of the trust for the benefit of beneficiaries. However, the current use of these trusts is going the wrong path and therefore blames the whole concept of it.

There is no doubt that these trusts are used for good purposes, which they are meant for. However, currently, a lot of people use these trusts as secret vehicles to park their ill-gotten money, hide their incomes to evade taxes, protect their unlawfully owned wealth from law enforcers, and at some times to use it for criminal activities.

Many Indian big names have come out in the investigation of these events after the Pandora Paper leak incident and are therefore very concerning for the whole country. This directly points to the rising corruption and unlawful activities done by the big businessmen and which should be stopped.