(Image: Private Media)

Another release of offshore tax papers, another wave of outrage from political leaders vowing to clamp down on tax evasion and money laundering, and another resigned shrug at a global financial elite that continues to play by its own rules. 

The Pandora Papers, a leak of 12 million documents obtained by the International Consortium of Investigative (ICIJ) Journalists, puts a spotlight on to the secretive world of shell companies, secret trusts, shadowy property dealings and tax evasion on an industrial scale. And it’s the latest reminder that Australia could be doing a lot more to crack down on tax loopholes and purge the flow of dirty money.  

Dark secrets, muted response 

By now most of the world has woken up to the lengths to which the rich and famous go to hide their wealth in offshore tax havens.

The Pandora Papers are the ICIJ’s third big data dump exposing the financial dealings of the 1%. When its first leak, the Panama Papers, was released in 2016, Australian Tax Office (ATO) commissioner Chris Jordan flew to Paris for an emergency meeting to work out a global response. At the time it was one of the most ambitious international investigations in history to hunt down tax evaders, and Australian authorities took a leading role. 

That initial report laid bare how extensive this global network of accountants and lawyers was and how entrenched it had become for the rich and powerful to hide their money and evade tax. 

Then came the Paradise Papers in 2017.

And now the Pandora Papers reveal that 35 current or former heads of state are among the customers of offshore tax havens, with more than 100 billionaires and rich individuals. Findings include the king of Jordan spending $130 million on secret properties (he denies misusing public money) and shady property dealings between the Queen’s Crown estate and the Azerbaijani ruling family.

In Australia it’s exposed how mega-rich foreign families from countries like China and Sri Lanka have secretly made high value property transactions from behind the mask of a series of shell companies.

All up, it’s estimated countries lose $427 billion each year in revenue because of tax avoidance.

The leaks have generated a global push to lift transparency. But Australia has so far resisted closing a key loophole that allows the world’s richest people to send money offshore and manipulate their wealth. 

Forgotten reform

In 2016, then-prime minister Malcolm Turnbull’s name was found in the Panama Papers database because — along with that of former NSW premier Neville Wran — he was previously a director of a company incorporated by Panamanian law firm Mossack Fonseca, one of the world’s leading shell company suppliers. While there was no suggestion of wrongdoing on his part, the news broke, awkwardly, in the middle of an election campaign where Turnbull was selling corporate tax cuts.

Earlier, the release of the Panama Papers had prompted Turnbull’s government to promise a public register of shell companies and beneficial ownership. Two years later, then-assistant treasurer Stuart Robert said the government was still committed. By 2019, Treasury admitted in response to a Senate estimates question on notice the government had never committed to it.

The response has been pretty muted to the Pandora Papers. It was telling that Labor put forward Deborah O’Neill, the NSW senator best known for snatching the number one Senate spot from Kristina Keneally, to lead calls for money-laundering reform. Responding to media questions, shadow treasurer Jim Chalmers hinted that Labor “would have more to say between now and the next election” about multinational tax evasion. 

Greens’ treasury spokesman Nick McKim will introduce legislation requiring the government to establish a beneficial ownership register.

In a vague statement, Treasurer Josh Frydenberg said the government was investing money to modernise and consolidate business registers, which would “enable the development of a beneficial ownership register”.

Australia lags behind

The ATO has vowed to leave “no stone unturned” to investigate any links to Australians that emerge from the Pandora Papers. But it is hamstrung by the government’s reluctance to introduce a register of beneficial ownership.

Miranda Stewart, professor of international tax law at the University of Melbourne, says Australia has fallen behind the EU, UK and US in closing this critical loophole.

“The piece that is missing here is beneficial ownership,” she said. “We committed to it some years ago. The EU has introduced one. Australia is lagging on that.”

This means Australia still does not require private companies, other than those with anti-money laundering obligations, to maintain any information about who really owns them. If a register was introduced it would enhance the ATO’s ability to crack down on tax evasion. But it may be the politicians who want to avoid scrutiny, Stewart says.

“One reason governments have been slow to cooperate on beneficial ownership is because politicians benefit — just as businesses do — from these kinds of arrangements,” she said.