Initial Thoughts on the Panama Documents Leak

 
     Over the weekend, the international tax world was rocked by news a massive data leak involving a Panamanian law firm.  Bloomberg reported:

Leaked files from a Panama law firm that creates shell companies show that politicians, criminals and celebrities worldwide have used banks and shadow companies to hide their finances, according to a series of reports by the International Consortium of Investigative Journalists.

There are three reasons why this release is very important.

1. The breadth of the data: according to the International Consortium of Investigative Journalists, “In terms of size, the Panama Papers is likely the biggest leak of inside information in history – more than 11.5 million documents – and it is equally likely to be one of the most explosive in the nature of its revelations.”  Obviously, the more information in the release, the larger the potential for unwanted disclosures.
2. The nature of the communications: the data leak occurred from a law firm and included email communications.  People are typically more willing to divulge personal information to an attorney.  This means it’s more likely that authorities will find information regarding the subjective intent behind various transactions.
3. The jurisdiction: Panama has a strong tradition of secrecy.  They have few mutual assistance treaties and a small number of tax treaties, meaning there are few official mechanisms to share information.  And thanks to the Panama Canal, they have the political will to push back against pressure from large countries to divulge confidential information.

We’re still in the early innings of this story, so be prepared from more revelations.

You can read more here.