Big news from the International Investigative Journalists Organization (ICIJ) once again dominated the press. This is the same organization that broke the news that the Panama Papers and the Heaven Documents were organized. They call the big news that has recently exploded "The Pandora Papers."
What should I think of the stories described in the Pandora files, or similar leaks?
When looking at any of the stories in Pandora's papers or any previous articles published by the International Investigative Journalists Organization, it's important to determine which level of "big news" belongs to the chart below (compiled by well-known tax justice advocate Maya Forstater), and then you adjust your anger level.
Although I question Mr. Maya Forstater's identification that part or most of the yellow zone should actually be classified as a green zone, in the Pandora document, the revelations about Congolese President Denis Sassou-Nguesso clearly belong to the red zone. In contrast, Elton John's list is clearly in the green zone.
Will there be any other "files" in the future?
The first thing to know is that no matter how you judge the ethics behind this matter, organizations such as the International Investigative Journalists Organization will continue to expose personal financial information. This is the reality of the world in which we currently live. Given U.S. legislation — such as the Foreign Account Tax Compliance Act and its derivative common reporting standards — financial institutions and other offshore and onshore entities are now collecting documents in electronic form. This electronic information can be downloaded or transmitted at short notice. The days when tom Cruise's lawyer in "The Sugar-Coated Trap" took days to copy and steal paper documents is long gone.
It's just as simple for insiders to send messages to investigative journalists internationally. These insiders may be legitimate whistleblowers who go to expose red zone activities. Others may be disgruntled employees who are happy to expose "rich and famous" or the embarrassing but perfectly legitimate financial activities of their former employers. As the International Investigative Journalists Group demonstrates, many journalists are keen to publish information about the Yellow or Green Zones because they despise not only tax evasion but also tax avoidance. This can also attract attention and attract clicks.
How can wealthy clients who are not active in the Red Zone protect their privacy?
Accepting this disturbing reality is the first step in opening the defense. If someone makes arrangements for their tax status to be made so that they are not tax residents in any jurisdiction, or that they are not taxed, then the initiative is back in their hands again. In short, the most powerful response to allegations of tax avoidance or evasion is that the person has no tax obligation or that the person is not exposed to his financial situation in any jurisdiction.
In this way, journalists such as the International Investigative Journalists Organization will swear to abide by the principle of personal financial information and avoid lawsuits. The reason Elton John was blown up, not Mick Jagger, was blown up was none other than that Mick Jagger was not a UK tax resident. Mick Jagger also said he would file a lawsuit if he felt his rights had been violated.
The ability to leave the current tax jurisdiction depends on the specific circumstances of the individual. For Americans, that means being prepared for an out-of-home strategy that is readily available. For non-Americans, this means having an effective, viable plan to become a non-resident.
In any case, designing a "fire avoidance plan" involves listening to the advice of a tax advisor and gaining or losing a residence or citizenship. The key to success is to prepare a "fire avoidance plan" for alternative citizenship or residence permits to ensure that you don't just go out of the tiger's mouth and fall into the wolf's den.
The lesson of the Pandora document is that wealthy families should add the protection of financial privacy to their list of immigration grounds that include taxation of the wealthy, domestic unrest, and political differences, and then prepare Plan B.
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