Panama: The Hidden Trillions

In a seminar room in Oxford, one of the reporters who worked on the Panama Papers is describing the main conclusion he drew from his months of delving into millions of leaked documents about tax evasion. “Basically, we’re the dupes in this story,” he says. “Previously, we thought that the offshore world was a shadowy, but minor, part of our economic system. What we learned from the Panama Papers is that it is the economic system.”

Luke Harding, a former Moscow correspondent for The Guardian, was in Oxford to talk about his work as one of four hundred–odd journalists around the world who had access to the 2.6 terabytes of information about tax havens—the so-called Panama Papers—that were revealed to the world in simultaneous publication in eighty countries this spring. “The economic system is, basically, that the rich and the powerful exited long ago from the messy business of paying tax,” Harding told an audience of academics and research students. “They don’t pay tax anymore, and they haven’t paid tax for quite a long time. We pay tax, but they don’t pay tax. The burden of taxation has moved inexorably away from multinational companies and rich people to ordinary people.”

The extraordinary material in the documents drew the curtain back on a world of secretive tax planning, just as WikiLeaks had revealed the backroom chatter of diplomats and Edward Snowden had shown how intelligence agencies could routinely scoop up vast server farms of data on entire populations. The Panama Papers—a name chosen for its echoes of Daniel Ellsberg’s 1971 leak of the Pentagon Papers—unveiled how a great many rich individuals used one Panamanian law firm, Mossack Fonseca (“Mossfon” for short), to shield their money from prying eyes, whether it was tax authorities, law enforcement agencies, or vengeful former spouses.

Tax havens are supposed to be secret. Mossfon itself, for instance, only knew the true identity of the beneficial owner—a person who enjoys the benefits of ownership even though title to the company is in another name—of 204 Seychelles companies out of 14,000 it operated at any one time. The Panama leak blew open that omertà in a quite spectacular fashion. The anonymous source somehow had access to the Mossfon financial records and leaked virtually every one over the firm’s forty years of existence—handing to reporters some 11.5 million documents. By comparison the Pentagon Papers—the top-secret Vietnam War dossier leaked to The New York Times by Ellsberg—was around seven thousand pages. Harding estimates that it would take one person twenty-seven years to read through the entire Panama Papers.

Why did the source leak the papers? In a two-thousand-word manifesto published after the publication of the main material, he or she claimed to be motivated by exposing income inequality—and the way in which the “wealth management” industry had financed crime, war, drug dealing, and fraud on a grand scale.

“I decided to expose Mossack Fonseca because I thought its founders, employees and clients should have to answer for their roles in these…


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