{"id":4732,"date":"2017-11-06T00:00:00","date_gmt":"2017-11-06T00:00:00","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/stories\/paradise-papers-sa-names-aplenty-in-massive-new-tax-haven-leak\/"},"modified":"2024-09-22T15:15:25","modified_gmt":"2024-09-22T15:15:25","slug":"paradise-papers-sa-names-aplenty-in-massive-new-tax-haven-leak","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/paradise-papers-sa-names-aplenty-in-massive-new-tax-haven-leak\/","title":{"rendered":"Paradise Papers: SA names aplenty in massive new tax haven leak"},"content":{"rendered":"

A number of high profile South Africans and local institutions are flagged in the biggest tax leak since the Panama Papers, which is set to cause ripples amongst many who have stashed their wealth in offshore tax havens.<\/p>\n

Most of the 13.4-million documents which have emerged relate to Appleby, an elite law firm with offices in offshore jurisdictions across the globe, and its corporate services provider Estera, which operated together under the Appleby name until last year.<\/p>\n

This leak, dubbed the Paradise Papers, highlights damning cases of tax abuse and questionable business practices involving multinational companies, high level politicians, celebrities, wealthy executives and even royals.<\/p>\n

It includes never-before-seen details of corporate registries in 19 countries infamous for ensuring high levels of secrecy \u2013 key nodes in the global shadow economy.<\/p>\n

Among Appleby\u2019s long list of international clients are multinationals and high net-worth individuals with links to South Africa, including the world’s largest commodities company, Glencore.<\/p>\n

The Paradise Papers leak also includes references to Illovo Sugar and Shanduka (the company which deputy president Cyril Ramaphosa founded and in which he held a stake until 2014) as well as Glencore’s SA-born CEO Ivan Glasenberg.<\/p>\n

While merely being an Appleby\u2019s client, or simply being mentioned in the leaks, does not imply wrongdoing, the leak of information is likely to embarrass companies.<\/p>\n

A number of top SA banks also make regular appearances in the data. Several SA banks maintain offices in secrecy jurisdictions, from where account details were compromised \u2013 including Investec and Standard Bank.<\/p>\n

In a brochure for potential clients, Appleby brags about its role in \u201cadvising Standard Bank of South Africa Limited on a US$70-million facility for the purpose of refinancing Zambia Sugar Plc, a subsidiary of Illovo Sugar Limited\u201d.<\/p>\n

That loan to JSE-listed Illovo Sugar, then 51% owned by British Foods Plc, was itself the subject of a tax avoidance scandal after a report by international NGO ActionAid exposed how Illovo used artificial structuring to dodge Zambian taxes. This meant Illovo paid an effective tax rate of 0.5% when Zambia had a corporate tax rate of 35%.<\/p>\n

ActionAid estimated that Illovo deprived the Zambian government of up to $3-million in taxes \u2013 14-times larger than UK aid provided to the country to combat hunger.<\/p>\n

That Illovo Sugar case offers a sense of some of the kinds of transactions Appleby was engaged in \u2013 involving secret trusts and webs of offshore shell companies to avoid taxes.<\/p>\n

David Lewis, director of Corruption Watch and the former chair of the Competition Tribunal, says it\u2019s not illegal for South African firms to put money into places considered tax havens.<\/p>\n

\u201cHowever, the problem is, some companies abuse this privilege by using it for transfer pricing, evading taxes and hiding transactions behind secrecy provisions,\u201d he says.<\/p>\n

While there is nothing intrinsically illegal in having a company registered in Mauritius or other tax havens, and though tax avoidance isn\u2019t necessarily illegal per se, the built-in secrecy this offers has historically attracted money-launderers, kleptocrats and politicians eager to hide bribes.<\/p>\n

Of particular interest in this regard is the case of one of Appleby\u2019s top corporate clients – Glencore, the JSE-listed commodity trading giant.<\/p>\n

Glencore was such an important client that it once had its own room within Appleby\u2019s offices in Bermuda. Board minutes show how Glencore representatives leaned on Daniel Gertler, an Israeli businessman with high-level friends in the Democratic Republic of the Congo (DRC), to help seal a deal for a valuable copper mine.<\/p>\n

Glencore lent millions to a company, widely believed to belong to Gertler, described in a US Department of Justice inquiry as a conduit for bribes.<\/p>\n

Responding in recent days to questions, Glencore said its background checks on Gertler were \u201cextensive and thorough”.<\/p>\n

Gertler\u2019s lawyers said the US Justice Department investigation \u201cdoes not constitute evidence of anything\u201d adding that he \u201crejects absolutely any allegations of wrongdoing\u201d.<\/p>\n

The offshore industry makes \u201cthe poor poorer\u201d and is \u201cdeepening wealth inequality,\u201d said Brooke Harrington, a certified wealth manager and Copenhagen Business School professor who is the author of \u201cCapital without Borders: Wealth Managers and the One Percent.\u201d<\/p>\n

\u201cThere is this small group of people who are not equally subject to the laws as the rest of us, and that\u2019s on purpose,\u201d Harrington said. These people \u201clive the dream\u201d of enjoying \u201cthe benefits of society without being subject to any of its constraints\u201d.<\/p>\n

Two years ago, Thabo Mbeki, who chaired the African Union (AU) panel on illicit flows, said that over the last five decades it is believed that Africa lost more than $1-trillion in \u201cillicit financial outflows\u201d.<\/p>\n

Even today, Mbeki said the continent loses about $50-billion every year through these illicit flows, based on data from the International Monetary Fund (IMF) and other sources.<\/p>\n

“The various tax havens and financial secrecy jurisdictions in Africa and elsewhere in the world are at the centre of the problem,\u201d he said.<\/p>\n

The Paradise Papers revelations, which follow in the wake of last year\u2019s Panama Papers<\/a> expose, also by the International Consortium of Investigative Journalists (ICIJ), will ratchet up pressure on authorities to crack down on tax havens.<\/p>\n

The Paradise Papers were obtained by German newspaper S\u00fcddeutsche Zeitung<\/em> and shared with the ICIJ and a network of more than 380 journalists in 67 countries, including amaBhungane and the Financial Mail<\/em> in South Africa.<\/p>\n