What are the Paradise Papers?
They are more than 13 million electronic documents that were leaked from two law firms to a group of journalists. These papers contain details of investments made by individuals and companies from many countries around the world in off-shore locations (i.e. outside their home countries). Some people believe that these investments were made by these people/companies to avoid paying tax to their respective governments. We all need to pay our taxes, because that’s how the government gets resources to build roads and bridges, clean our cities, and have schools and hospitals.
So how do you avoid paying taxes in off-shore locations? There are many locations, a lot of them beautiful islands (!) that offer a lower tax rate than that decided by other governments. So for example, some companies set themselves up there so that they have to pay a lower level of tax. They may set themselves up in an off-shore island but mainly carry out their business in other parts of the world.
However, just because someone’s name is on that list does not mean that they are guilty of avoiding taxes. There are many legal ways to invest offshore, and only investigations will reveal whether people were trying to avoid taxes.
Why is this called ‘Paradise Papers’ and how is this different to the ‘Panama Papers’ last year? The Panama Papers were named because the law firm they were leaked from was Panamanian. The Paradise Papers relate to investments across many different countries, that are sometimes called ‘tax paradises’. These countries also happen to be beautiful islands, like Bermuda! Hence the name Paradise Papers.