The Paradise Papers and Political Fallout
Another day, another leak.
The Panama Papers scandal was big, but this could be even bigger, and may potentially cause more political fallout.
Just over 2 weeks ago, a mysterious post on messaging board Reddit tipped off readers that a major leak of sensitive material concerning ‘the extremely wealthy and members at the highest levels of government in developed countries around the world, including the United States’, was due to be released.
Lo and behold, the Paradise Papers were made public over the weekend. It is a database which contains over 13 million documents, revealing over 25,000 companies owned by the worlds rich and powerful, and details how these influential people have avoided taxes using trusts and other investment vehicles.
The headline making the rounds in the British press concerned the Queen primarily. It was revealed amidst the leaks that the monarch has over £10 million of her personal wealth invested in a Cayman Islands tax haven. Naturally, the conservative government under Theresa May came under fire from opposition parties including Labour who accuse them of being lax on tax avoiders.
Speaking at a CBI conference today, Labour leader Jeremy Corbyn said that anyone (even the Queen) who avoids tax should issue an apology. His speech was met with a mixed reaction. As a confederation of businesses, the CBI (as well as other organisations) have seemingly become more concerned about the direction of the Labour party, now more left-wing than ever before under Corbyn’s leadership. The party plans to introduce higher taxation on businesses more generally and nationalisation of certain industries, which is not likely to go down well with the business community.
The CBI’s director general Carolyn Fairbairn said Labours vision of significant state intervention including nationalisation would ‘undermine ambitions’ to lift productivity and living standards in communities across the UK.
Regardless, the Paradise Paper leaks are likely to hand more political firepower to Corbyn, who will probably direct it towards Theresa May in Prime Minister’s questions this Wednesday. As a staunch socialist (as well as his shadow Chancellor John McDonnell), this kind of news is gold-dust and plays nicely into the narrative he pushes whereby there is one rule for the rich and another for the less well off in Britain. The leaks will enable Corbyn to claim that the Conservative party are protecting their elite friends at the top of the foodchain, while public services continue to underperform in the face of large-scale spending cuts. Theresa May has refused to commit to a public register of the ownership of offshore companies and trusts in the wake of the revelations, but said new measures were already creating more transparency. These words will not be enough for the Labour party, or indeed large swathes of the general public who want more transparency on such issues.
Though the news is likely to increase pressure on governments to crack down on tax loopholes, the key insight gleaned from the data may have broader implications for America. Crucially, the Paradise Papers revealed that a Putin family member made substantial payments to the shipping group of the current US commerce secretary, Wilbur Ross.
The revelation looks likely to do even more damage to the Trump administration, which is already under close scrutiny from legal teams, who are trying to prove beyond doubt that Russia interfered in the US election and colluded with the Trump team to get him elected.
No statement has been released from the White House officially as of yet while Trump continues his tour of Asia, but Wilbur Ross spoke directly to the BBC in a video interview earlier.
Addressing how the media pounced on the news, Mr Ross seemed to dismiss the more sensationalist headlines from some publications like The New York Times. Ross said, “The media has made a lot more out of it than it deserves.” He added, “First of all the company in question, Sibur, is a very major hydrocarbon company. Its commerical relationship with Navigator holdings is simply that Navigator charters some vessels to them. There is no interlocking of board, no interlocking of shareholders. I had nothing to do with the negotiation of the deal, and in fact it was negotiated before I went on the board of Navigator.”
Mr Ross also explained that since no sanctions are in place against the company from the US government, that “There’s nothing whatsoever improper about Navigator having a relationship with Sibur.”
“If our government decided to sanction them, that would be a different story. Our government has not thus far made the determination to sanction them, so theres nothing wrong with it, the fact that it happens to be called a Russian company does not mean that there is any evil in it.”
The President has pushed back on accusations of collusion many times before, ratcheting up his tweeting of the subject shortly before, during and after the latest revelations from the Robert Mueller investigation which implicated Paul Manafort and another Trump aide. He recently pointed to major issues in the Democrat camp as being worthy of more air-time from mainstream news networks, compared to the Russia narrative.
Amidst a climate of division in the US, where many people either love or hate Trump, a new poll from ABC News showed that 49% of respondents suspect President Trump did indeed commit a crime during the presidential campaign. The poll didn’t specify exactly what the crime was, but its safe to assume they are asking whether people think he colluded with the Russians.
However, in a Politico poll of 1,990 people, having the Republicans pass a tax reform bill was weighted as more important for Congress to address, rather than the Russia investigation. This suggests that Trump’s legislative agenda (and getting it through) is still a big concern for many Americans, regardless of the Russia story, which is not the top priority for the public.
Little can be said yet about what comes next, but the fact that Wilbur Ross approached the media so quickly to vindicate his name and divulged his investment in detail, suggests that there is likely less to hide than the left-wing press is hoping for. We will have to wait and see what other developments spring forth from the Russia investigation, but as of yet all the time and energy being invested into it by the Democrats has not brought Trump significantly closer to impeachment as they would hope for.
The Paradise Papers, just like the Panama Papers before them, have laid bare corruption and the scale of tax avoidance by the worlds top earners, but whether the political will exists to clamp down hard on such actions is yet to be seen. Politicians face a balancing act of trying to keep businesses and high earning individuals happy and encouraging them to grow, thrive and create jobs by not coming down too hard on them, with the anger of a public that feels cheated by such news.
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