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Geopolitics

Panama Papers, A Haven For "Regular Guys" Too

While most attention has been devoted to the VIPs and politicians cited in the leaked documents of the Panama shell-company firm, most of the people turning to tax havens look much more like you and me.

Paris street scene
Paris street scene
Mathilde Damgé

PARIS — There are heads of state, billionaires, big names in sports and show biz scattered among the more than 11 million client files of Mossack Fonseca, the firm specialized in the creation of offshore companies that is the source of massive Panama Papers leak.

But the documents also reveal that the vast majority of the names on the lists are nobody you've ever heard of: They belong to "ordinary" people who've turned to tax havens. While the Panama Papers files that Le Monde was able to consult don't always specify the sums that were transferred, thanks to offshore shell firms in places with lenient tax authorities, numerous email exchanges, official business documents and photocopies of passports flesh out a detailed portrait of the regular clientele of the Mossack Fonseca firm that is at the center of the largest leak in newspaper history. Names have been changed.

    Of the thousand or so French citizens who appear in the "Panama Papers," 95% are ordinary, low-profile individuals whose backgrounds and motivations for involvement in tax havens and offshore finance are far more diverse than one might imagine.

    A poker-player, butcher and opera singer

    They aren't all rich, they aren't necessarily familiar with the inner workings of the banking industry and they aren't all out to commit fraud.

    Overall, the Panama Papers lists paint a picture that closely matches previous French investigations into tax evasion: There are more people involved from in or around Paris, the south of France and along the country's borders with Switzerland. Their professions — CEOs, business leaders, lawyers, doctors — largely coincide with those seen in earlier reports on clients from HSBC or UBS banks.

    But among these French citizens who have created offshore businesses, there are also some with professions less commonly associated with tax scandals: a horse breeder, a poker player, a butcher, an opera singer… even a cantaloupe grower. There are also civil servants. One health and safety inspector with a Panama-based operation feebly told Le Monde that he had wanted to "respect his parents' wishes." He has since tried to remedy his situation with the tax authorities.

    There are also some who have barely entered adulthood, who can be seen posing with friends on social media and whose high school baccalaureate exam results date from the previous year. These are children whose parents wanted to give them part of their inheritance.

    Fear of inheritance taxes and expatriation

    The majority of those with offshore businesses are trying to dodge inheritance taxes, whether for themselves or for their children. Sometimes it's perfectly legal: Pierre M., a retiree living in Mauritius, designated his son, who lives in France, as beneficiary of the foundation he created. "If he lives in Mauritius, he won't pay any inheritance tax. If he's in France and he doesn't want to pay any taxes, he can always refuse to become the foundation's beneficiary," Pierre notes.

    [rebelmouse-image 27090101 alt="""" original_size="1024x683" expand=1]

    Le Morne, Mauritius — Photo: carrotmadman6

    But these family estates are sometimes more a curse than a blessing, especially when decisions involve several people. Camille D., a civil servant, admits that she initially went along with her sisters' plan to turn to an offshore scheme, but wound up preferring her own peace of mind and did things legally, souring relations with her family.

    A $50,000 admission price

    Some CEOs rely on offshore businesses to expand internationally. That was the case for Matthieu B., who wanted to launch his firm in Asia and felt it was vital to have a foothold there. So he created a company in the British Virgin Islands via Mossack Fonseca's Singapore branch.

    "At the time, I was planning on moving there myself. Having a company on site allows you to speed up the installation phase, and that's not illegal. I'd even say it's necessary to successfully bring your business to Asia," he says.

    The "Panama Papers," these Mossack Fonseca files, don't say anything about the assets of the firm's clients. However, based on our reporting, the totals reach "hundreds of millions of euros." The price of admission to open this type of offshore business is around $50,000 in capital. For comparison, the median total of assets hidden in Switzerland by UBS fraudsters was 340,000 euros.

    From the "shell company" to millions

    These totals span highly diverse estates. Some of those involved claim they don't have a cent in their offshore firms. ("An empty shell," says one. "I didn't even remember the company existed.") Others acknowledge having placed significant sums there, which would have been heavily taxed in France under the country's "Solidarity Tax on Wealth," or ISF.

    Jean-Charles G., for example, inherited some money from an uncle in the United States. As a taxpayer in France, he explains that "the inheritance followed the American legal process because of an arbitration decision between the U.S. and France, in which France renounced its claim." Perfectly legal, then.

    That wasn't the case for Benoît S., a CEO who wanted to dodge some of the taxes on his businesses so he could invest more in international expansion. He made his fortune in… hair removal. (His company posted a turnover of several million in 2015.) And he created several offshore firms in his children's and wife's names, including one based in Hong Kong, to plant a foothold in the Asian market.

    The business statements that Le Monde viewed nevertheless mention that Benoît S.'s "firm will continue its commercial activities in medical equipment in Europe." Another document specifies that he wants to "acquire a new company in Hong Kong, with nominee shareholders and nominee directors." Both, basically, dummy companies.

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