In the last few days, people all over the world has been talking about The Panama Papers.
If you have no idea about what it is, how it happened and why it's such a big deal,
then let's find out.
To fully understand this, you might need to know about tax havens and offshore corporations.
Imagine Mr. Sneaky is a successful businessman, he runs a big company making $100 in revenue
each year.
However, he can only spend $70 because he has to pay the government $30 of corporate
income tax.
Mr. Sneaky doesn't like that, so he invests $90 to some offshore corporations in Panama.
The invested money is listed as business expenses, which is tax-deductible, so Mr. Sneaky only
has to pay $3 of tax because his revenue is now only $10 .He will get most of his investment
back after paying a small fee for these companies, thanks to the incredible low tax rate of Panama,
as known as a tax haven.
Criminals, celebrities and corrupted politicians are also interested in using offshore corporations'
services for money laundering and tax evasion because of anonymity, which is what normal
financial institutions can't provide.
The Panama Papers is a massive data leak of Mossack Fonseca, a law firm in Panama, specialized
in incorporating companies in offshore jurisdiction and wealth management.
Mossack Fonseca runs a worldwide operation with 600 employees working in 42 countries.
It is considered the world's fourth biggest offshore law firm.
Mossack Fonseca operates in tax havens including Switzerland, Cyprus, British Virgin Islands,
Isle of Man, Bahamas and so on.
The leak consists of 11.5 million internal documents created by Mossack Fonseca between
1970s and early 2016, including 2.6 terabytes of e-mails, pdf files, photos and excerpt
from Mossack Fonseca's database.
This data leak is one of the biggest ever; it's even bigger than 2010 US diplomatic cables
leak and 2013 Edward Snowden scandal.
A year ago, an anonymous source contacted Süddeutsche Zeitung, a German newspaper about
the leak.
The newspaper subsequently shared the files with the International Consortium of Investigate
Journalists.
The files were distributed and analyzed by 107 media organizations in over 80 countries
by around 400 journalists.
The first report were released on April 3rd, 2016, exposed financial activities and offshore
holdings of many people, including political figures and other prominent officials.
The full report is expected to be released in May.
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