Part I of what are being called the “Paradise Papers”, is out. Paradise Papers, is a collection of 13.4 million corporate records, primarily from Bermuda firm Appleby, and from Singapore-based Asiaciti Trust and corporate registries maintained by governments in 19 tax haven jurisdictions, often referred to as “tax paradises”. This story is being broken in India, by The Indian Express, As a partner of International Consortium of Investigative Journalists (ICIJ), which had access to these documents.
The people named in this list are a cross section of Indians, across political and social spheres. Some of the prominent names linked to the Papers are: Vijay Mallya, Omdiya Network (which funds left-leaning media houses like Newslaundry and Scroll.in), MoS Civil Aviation Jayant Sinha (via his position in Omdiyar Network some years ago), Nira Radia, Amitabh Bacchan, Havells India and names from the Congress stable such as Ashok Gehlot; Karti Chidambaram, Sachin Pilot, Ravi Krishna, etc.
While some of the above are directly named in the Paradise Papers, some are linked to some of the companies which figure in the Paradise Papers. Given that the names are from different political spheres, one can expected politically motivated attacks from different political parties, cherry-picking the data from the leaks, and exchanging barbs of corruption on one another. But what is the real picture?
Before we go there, lets rewind to 2015, when another set of such documents were leaked via the ICIJ and The Indian Express, known as the “Swiss Leaks“. Many on social media had dubbed this, the “Black Money List”.
The Indian Express had back then, clarified this in a separate post, where it said that it is “Unlikely” that all these accounts have black money and haven’t been disclosed to the Indian tax Authorities. It further said that the list “may include legitimate account-holders who had taken permission and have declared the accounts, as well as holders of undeclared accounts who currently have to pay taxes and penalty, even face prosecution ”
For the Paradise Papers also, The Indian Express gives a similar disclaimer, in a separate post:
Yet, the likes of Preeti Sharma Menon, who had earlier provided legal support to the man who falsely claimed he had been attacked by Gaurakshaks, has gone on to declare that the names in Paradise Papers, had deposited “black money” in offshore accounts:
— Preeti Sharma Menon (@PreetiSMenon) November 5, 2017
Have all the people or entities linked to the Paradise Papers deposited “black money” in offshore accounts? Probably No. So are all the the people or entities linked to the Paradise Papers innocent? Again, Probably not. While offshore accounts in tax havens are preferred routes to evade tax (which is illegal), they can also be used to employ legal means to avoid or reduce tax. A very recent study showed that 73% of Fortune 500 companies maintained subsidiaries in offshore tax havens as a part of their tax avoidance strategies.
As The Indian Express mentions, the basic use of such leaked documents, is to make Tax authorities aware of the existence of such offshore accounts and entities. From thereon, the Tax authorities need to investigate and determine if any fraud was orchestrated at any level.
And there lies the problem. Does any media agency have the right to publish names of legitimate account holders with legitimate “white” money, under a Paradise Papers list, and thereby fuelling theories in the minds of a lay reader that such accounts are of “black money”? This question should go to all agencies around the world, not only Indian Express. Also, the question arises, is Media competent to judge whether an account is related to tax fraud or not?
To use an analogy, the publishing the Paradise Papers list is akin to publishing a list of entities, who had deposited more than Rs 50 lakhs of cash during the demonetization period. Is all cash “black money”? No. Do all large deposits of cash during demonetization period relate to black money? No. Can an entity have perfectly legal sources of cash which it deposited in banks? Yes. Publishing such a list can only be called defamatory.
Ideally, media agencies should have gone for a more indepth investigation to ascertain if any of the names in the list, are linked to any known scams.
The story on one of the names above, Havells India, is in particular very drab. The thrust of the story is on the fact that Havells India floated over 50 subsidiaries beginning February 2000, most of them in tax havens, to acquire a global footprint through acquisitions and tie-ups. There is no additional information which can hint to any wrongdoing by the company. The response of Havells India, which is also (fortunately) published in the same story, says that the entire structure was duly filed with the Reserve Bank of India as per extant regulations and that tax has been duly paid in the respective jurisdiction as may be applicable. Prima Facie, nothing appears to be explicitly illegal.
On the other hand, a story like the one on Vijay Mallya, adds much more value than what the leaked documents show. Mallya’s name comes up because he allegedly approached a London-based law firm Linklaters LLP to undertake a massive restructuring exercise to simplify the complex group structure. From this data, the reporters at The Indian Express, have found evidence of some further possible wrong-doings – alleged diversion of funds through entities in Tax Havens. The story details various transactions which come to light via the leaks, such as waiving off of $1.5-billion debt owed by subsidiary companies of the Mallya-USL group and absolving another USL group entities of some dues. The USL group spokespersons though maintain there is no wrong doing.
All the other stories, could be as innocuous as the Havells story, or as damning as the Mallya story, or may fall between the two, occupying more than fifty shades of grey between “white” and “black” money. But for public consumption, all the names linked have been put in the same bracket.
A simple contrast of the two above stories Havells vs Mallya, demonstrates how the Paradise Papers list, much like the Swiss leaks, will achieve only the following:
1. Reveal names and details of legal account holders with legal money, thereby invading their privacy. Be prepared to see the anti-Aadhar, privacy activists gleefully share the Paradise Papers lists stories.
2. Clubbing of such legal names with people who have “black” money in such accounts, thereby defaming such legal account holders.
3. Giving fodder to conspiracy theorists: When the Government, after investigation, will reveal the names against whom cases of Tax fraud have been established, there will be a section of people who will compare the Government’s list with the Indian Express list and start claiming that the people against whom the Government hasn’t acted have paid off the Government and that the Government is “XYZ agent”
It is tragic that the media today would create such unnecessary sensationalism to recover some of that fast dwindling readership. Demonising legitimate business transactions is a dangerous and slippery slope, but at the same time, it is important that stories which demand the attention of tax sleuths are covered. A nuance approach was needed, which seems to be missing.