What the leak has revealed – from Russian contracts to royal investment
A who’s who has emerged from disclosures about the complex network of arrangements that provide tax shields for firms and super-rich individuals
The Paradise Papers last week shed new light on the murky world of offshore finance, revealing the inner workings of arcane schemes through which the world’s wealthiest individuals and corporations can opt out of their tax responsibilities.
Heads of state, technology giants and government officials are among those to have found their interests in tax havens brought into the cold light of day. Several governments announced investigations based on the reporting. So what have we learned?
An important point to bear in mind: though morally questionable and increasingly controversial, going offshore merely to avoid (rather than evade) tax is not against the law. But as Barack Obama said of the Panama Papers one year ago: “A lot of it’s legal, but that’s exactly the problem.”
Donald Trump’s commerce secretary was revealed to be in business with the son-in-law of the Russian president, Vladimir Putin. He holds shares in Navigator, a shipping company specialising in the transport of liquefied natural gas. Navigator holds a valuable contract with Sibur, a Russian gas company co-owned by Kirill Shamalov, who is married to Putin’s daughter.
The discovery has the potential to be highly embarrassing, and potentially damaging, to Trump’s administration as it struggles to fend off investigations into Russian influence over the 2016 presidential election, and whether Trump won through collusion with that effort.
Ross denied wrongdoing, but has since said he would “probably” sell his stake in the company. A spokesperson said that he recused himself as commerce secretary from any discussion of international shipping.
Two institutions with close connections to the Russian state funded major investments in Facebook and Twitter, the papers reveal. The investment was made through Yuri Milner, a Russian technology investor.
In 2011 2 the state-controlled VTB Bank f funded a $191m investment in Twitte Twitter, while – separately – a subsidiary of the state energy firm Gazprom financ financed an offshore company that in turn funded an entity that owned more t than $1bn of Facebook shares.
Mil Milner said VTB’s funding did not buy it influence at Twitter, and he hadn’t known Gazprom backed the stake in Facebook. The discovery could inform US and UK investigation tions into Russian disinformation cam campaigns on social media.
The Queen and Prince Charles
The Queen, via the Duchy of Lancast caster, was revealed to have investment ments in an offshore portfolio with indire indirect interests in the UK rentto-buy retailer Brighthouse, as well as the Threshers off-licence chain. Bright Brighthouse was recently criticised by the UK Financial Conduct Authority for irresponsible lending to those with poor credit records, and ordered to pay £15m ($19.6m) in compensation. Threshers went into administration in 2009, four years after the duchy placed its investments. The duchy, which provides income for the monarch, said it did not know about its stake in Brighthouse until approached by journalists. While admitting it held other “overseas” investments, a spokesperson declined to make the details public.
Prince Charles features in the Paradise Papers by virtue of his private estate’s investment in a Bermuda business set up to trade carbon credits and run by one of his close friends. The duchy said Charles had no “direct involvement in investment decisions”.
The commodities giant secretly loaned $45m to the Israeli diamond magnate Dan Gertler on condition that he secure a mining concession in the Democratic Republic of the Congo for the firm.
Gertler was charged with negotiating with the DRC authorities over the Katanga copper mine, over which Glencore assumed effective control in 2009. Gertler’s company, Lora Enterprises, was loaned $45m in pledged shares to enable him to keep his existing interest in the mine. But the papers also reveal that the loan could be recalled if Gertler was unsuccessful in securing a mining agreement that Glencore needed. Gertler’s lawyers said that there was no improper behaviour with regard to the loan. Glencore said the loan “was made on commercial terms negotiated at arm’s length”, recorded appropriately and repaid in 2010.
Associates of the Canadian prime minister appear in the documents in connection with the moving of millions of dollars to offshore tax havens. The family investment business of Stephen Bronfman, Trudeau’s chief fundraiser and adviser, created a complex arrangement of legal entities in the US, Israel and the Cayman Islands.
Trudeau came to power on a platform of tackling economic inequality, and his family inheritance was scrutinised after publication of the Panama Papers last year. The two associates declined to comment, but Trudeau said last week the arrangement had been explained to his satisfaction. “We received assurances, rances, the same assurances that hat are in the public declaration ion made in this case, and we are satisfied with that,” he told old a press conference.
The Formula One world champion and Monaco tax exile, worth £130m m ($170m), is revealed d to have used a convoluted scheme to o avoid paying VAT on his private jet. His advisers concocted d a device whereby a British Virgin Islands company would own the jet, then lease it to o an Isle of Man company, any, which would then lease ease
the jet on to a UK company. The result would be Hamilton leasing the jet out to himself. It only had to land in the Isle of Man once and never returned, but continues to technically be part of a jet-leasing company on the island.
Hamilton’s lawyers said he had made all necessary nece disclosures to tax and customs authorities.
AThe fo former treasurer and deputy chairman of the Conservati servative party, who has dona nated millions to it over the years, is linked to a previously unknown Bermuda trust that made substantial payments to him, the papers show. Internal correspondence from Appleby, the firm at the heart of the Paradise Papers, revealed that the firm was uncomfortable with the trust’s m management. “There are ver very significant payments bei being made from time to tim time and we must ensure tha that these are properly con considered and recorded by the trustees,” a 2009 revi review warned. When approa proached for comment by the Guardian, Ashcroft’s spokesman refused to pass questions on to him, and when confronted by the BBC’s Panorama programme at the Conservative party conference Ashcroft tried to escape the conversation. He later tweeted a statement saying he had never controlled the Bermuda trust.
Isle of Man Jets
The Isle of Man, a UK crown dependency, helped ultra-wealthy individuals devise schemes to help them cut VAT bills on private jets to zero by claiming they were leasing their aircraft from themselves.
Private jets must be able to prove VAT was paid on their purchase in order to circulate freely within Europe. But VAT can be reclaimed on goods if they are part of a business. So Appleby helped clients to set up chains of companies that would lease the aircraft out, typically to the jet’s true owner. VAT would normally be payable were the jets for private individual use.
The consultancy firm that helped devise the scheme said its advice was “based on our knowledge of tax law and providing transparency to tax authorities”. While the island’s customs service claimed it had found no wrongdoing with the schemes, the Isle of Man government held a press conference to announce it had called in the UK Treasury to review VAT refunds worth £790m it had issued to 231 jet-leasing firms since 2011.
The technology giant began scouting for new options for its international tax structuring after criticism of its behaviour by a US Senate committee in 2014. Senators accused it of artfully creating a “byzantine” array of corporate entities, some of which were effectively tax-resident nowhere. After Ireland announced plans to close a tax loophole, Apple approached the Paradise Papers law firm Appleby (no corporate relation) to ask questions about the advantages of the different tax havens in which the offshore firm operated. Appleby was ecstatic: “This is a tremendous opportunity for us to shine on a global basis.”
The papers show two of Apple’s key subsidiaries changing their tax residency to Jersey. Apple declined to comment on specifics, but said: “The changes we made did not reduce our tax payments in any country.” y.
The documents shed new ew light on how Nike, one of the e best-known brands in the e world, reduced its global tax bill using an international al array of legal entities. One of the most perplexing, Nike ke Innovate CV, which holds the company’s intellectual property is not technically based d anywhere. Nike said it fully complied mplied with all tax regulations.
Several of the most prominent nent supporters of the campaign for the UK to leave the EU appear in the e Paradise Papers. Arron Banks, the insurance nsurance businessman now under investigation by the Electoral Commission, ission, coowns the Isle of Man-based dC on is t er Bank, which opened accounts ounts for a businessman whose online line gambling firm and business partner tner were being pursued by the US Department epartment of Justice. Conister said it meets all compliance obligations ns and a spokesman for Banks said he had no oversight role.
Separately, the papers mention an effort by the Barclay brothers, owners of the Daily Telegraph, to obscure their ownership of a company by appointing another company to act as shareholder in their place. The practice is not illegal and a spokesperson for the Barclays declined to comment.
Appleby, firm at the heart of the Paradise Papers
Appleby, the offshore law firm at the centre of the panoply of schemes exposed in the Paradise Papers, insists it has committed no wrongdoing. But a 2013 compliance review found serious problems with the firm, which remained unresolved one year later. The offshore lawyers were found wanting in 12 compliance reviews over a decade, taking place in the Isle of Man, Cayman Islands, Bermuda and the British Virgin Islands.
The 2014 Bermuda Monetary Authority review found that “oversight weaknesses were repeated in highrisk findings in both the 2013 and 2014 reports … These omissions have heightened the authority’s concern about the firm’s regulatory compliance and control environment, and its failure to demonstrate a cooperative approach to the authority’s mandated initiatives. These issues will be escalated within the authority for consideration of enforcement action.”
Around the same time the firm was part of a consortium of offshore lawyers lobbying against government reform of British tax havens. Appleby declined to comment on details of the compliance reviews, but in a general statement said it did not tolerate illegal behaviour and was committed to meet meeting high regulatory standards where it operated. “Appleby has thoroughly and vigorously investigated the allegations and we are satisfied that there is no evidence of any wrongdoing, either on the part of ourselves or our clients,” it said.
Wilbur Ross, Donald Trump’s commerce secretary, with the president
An entity with Russian links bought a stake in Mark Zuckerberg’s Facebook
Racing driver Lewis Hamilton used a convoluted scheme to avoid paying VAT on his private jet, in essence leasing it out to himself The Queen, via the Duchy of Lancaster, was revealed to have offshore investments
Associates of Canadian prime minister Justin Trudeau were linked to millions moved offshore