What exactly are the Panama Papers and why are they so controversial?

Famed Bollywood actress, Aishwarya Rai Bachchan, was asked to appear before India’s Enforcement Directorate (ED) on Monday, December 20. This was in relation to her alleged involvement with the infamous Panama Papers leak case. At the ED’s Jamnagar House office in Delhi, the actress had to record her statement against her accusation of stashing wealth outside of India under the Foreign Exchange Management Act of 1999. The term Panama Papers seems to frequently prop up in the news. However, what are these papers and what makes them so controversial? Read on to know more.  

What are the Panama Papers? 
The Panama Papers refer to as many as 11.5 million leaked documents that reveal instances of fraud and tax evasion by corporate institutions as well as individuals. This is not specific to a certain country. It includes such fraudulent cases from all around the world. They were leaked in the Central American country of Panama, and are hence dubbed with that name. They were initially the property of a Panama-based law firm called Mossack Fonseca. Consisting of close to 2.6 terabytes of data, these papers were first published on April 3, 2016. Some of these documents even date back to the 1970s. A German journalist under the pseudonym “John Doe” emerged as the biggest whistle-blower in regard to these papers. He released them in the popular German newspaper, Süddeutsche Zeitung. However, he remains anonymous to this date. 

What is included in the Panama Papers? 
The Panama Papers hold within them personal and classified information about numerous elites, corporates and public officials. They also include detailed financial information and attorney-client contracts for more than two lakh offshore entities. The revelation of the involvement of certain individuals, (Aishwarya Rai Bachchan being the most recently accused), came as a shock to many. Some names involved in the leak case were nearly a dozen former or current world leaders, politicians, nearly hundreds of celebrities, over a hundred public officials and businessmen, etc.  

Why did wealthy individuals and corporates take this path? 
The answer is simple and straightforward: To avoid paying taxes in their home countries. This is done by setting up an offshore entity, which is essentially a dummy investment known as a “shell corporation” in countries with zero to very little taxes applicable for the same. It is possible to invest enormous sums of money in these dummy corporations without losing a large sum of it, and hence this is seen as an ideal investment. Although not an illegal concept in general, the accused parties have portrayed illegal behaviour like tax evasion, avoidance of international sanctions, fraud, etc. This is exactly the reason why the Panama Papers are controversial.