Analysis of revelations made by the Paradise Papers


Little more than a year after Panama Papers leak, another shocking revelation came from International Consortium of Investigative Journalists (ICIJ), which is shading lights on big corporate houses and ultra-rich people of world who are involved in offshore investment of 19 tax havens jurisdictions. A trove of 13.4 million files was sent to German newspaper, Suddeutsche Zeitung anonymously. This German newspaper sent these financial data to ICIJ for further investigation. ICIJ along with his 100 global media partners including Indian Express of India carried out investigation of these files. These financial data are leaked from Appleby, a Barmuda based firm and from Asiaciti trust of Singapore. The Paradise papers reveled the names of big personalities including Queen Elizabeth II, Wilber Ross, US secretary of commerce, son – in – law of Russian president Vlamidir Putin. Paradise papers also include the names of 714 people from India including Amitabh Bachchan, Cabinet secretary Jayant Sinha and defaulter business tycoon Vijay Mallya.

The Paradise papers is not only raising questions on money laundering and round tripping but it also points out  the failure of tax regulatory body and laws associated with taxation. Before moving further let’s have a close look on how this revelation points out on the loopholes of our taxation system.

  1. Although it is not illegal to set up offshore based company, but big corporate houses and companies set up the subsidiary companies in these tax jurisdictions by taking the help of offshore based legal firm to evade taxes. These offshore based companies do not have any physical existence. They only exist on papers.
  2. India has signed Double Taxation Avoidance Agreement (DTAA) with several countries including Malta and Trinidad & Tobago. DTAA agreement helps companies to pay taxes only in those countries where effective management of companies are concerned. But firms like Appleby and Asiaciti helps the companies to set up paper based firm in tax havens. They help them to appoint directors, in opening bank accounts and facilitate other necessary requirement. In this way actual companies show the government that the effective management of their subsidiary is based in offshore nations. By doing this they evade taxes. They also used these subsidiaries to minimize their profit margin by transferring their profit in these offshore based firms.
  3. In India our taxation laws are too complex and this complexity helps people to find out loopholes in tax laws, which ultimately help them to evade taxes by keeping themselves in legal boundaries.

In above points we saw that how complex tax laws helps people to evade taxes and role of offshore based firm in money laundering and in round tripping. Now let’s have a look on solutions for restricting tax evasion.

  1. There is a need of International Tax Reform. After Panama Papers leakage in 2016, US President Barak Obama had called for International Tax Reform. This reform will help countries to keep track on transactions which are carried out by their citizens in foreign nations.
  2. This is the time to fill the gap and sort out the loopholes of existing tax laws. Recently implemented General Anti – Avoidance Rule (GAAR) will help tax regulatory body to fix the loopholes of taxation flaws.
  3. A simple tax laws will help government to implement these laws and will provide a good opportunity to increase the tax base of country.
  4. Simple tax laws will help India to increase FDI within sub – continent.
  5. Lastly apart from making tax laws simple, government should also look on the true source of FDI investment. Recently a report stated that nearly 20.2 % of India’s total FDI is received from Mauritius which is highest FDI received so far from a country. Hence it is the duty of government to look in this matter because it will ultimately help them to make better policies and rules to promote trade and commerce in our country.


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