What is the Pandora Papers exposé which names 380 Indians with hidden wealth? – Explained

Know what is the Pandora Papers exposé which names 380 Indians with hidden wealth?

Pandora Papers, Source: ANI
Pandora Papers, Source: ANI

The Pandora Papers are the 11.9 million leaked files from 14 global corporate services firms that have set up approximately 29,000 secret offshore companies and private trusts to hide their wealth. These leaked Pandora Papers reveal hidden wealth tax, money laundering, and tax avoidance by some of the world’s rich and powerful. The Pandora Papers include about 380 persons of Indian nationality. The Pandora Papers is an ongoing investigation. However, if the concept of trusts is legal in India, then what is the investigation about Pandora Papers.

What is the Pandora Papers exposé?

The Pandora Papers includes files from global corporate services firms who have set up secret offshore companies and private trusts in jurisdictions that are loosely regulated by tax laws but have highly tight secrecy laws and countries including the US, New Zealand, Singapore, Belize, Samoa, the British Virgin Islands, Panama. The Pandora Papers include assets in secrete offshore companies such as real estate properties, shareholding, and cash.

What do Pandora Papers show?

The Pandora Papers reveal how the rich and powerful individuals and entities on the radar of the Pandora investigation have set multi-layered trusts for the purposes of real estate. The purposes of the layered structured trusts are divided into two objectives:

(i) hide from tax authorities by hiding the real identities behind the offshore companies,

(ii) safeguard investments such as real estate, aircraft, cash, art, shareholdings, yachts, etc from law enforcers and creditors.

What is a Trust in case of Pandora Papers?

A Trust is referred to the third party who is also referred to as the trustee. A Trust holds assets and investments of the individuals or firms. These trusts aid large businesses or wealthy families to hold their assets and investments such as real estate, shareholding, cash, etc.

Three key parties are involved in a Trust. One is Settlor who creates, sets up, or authors a trust, the second is Trustee who holds the assets and investments for the people named by the Settlor, and the third is Beneficiaries who will benefit from the assets and investments.

Though a Trust is not a separate legal entity, the legal aspect of it comes from the Trustee. In some instances, a Protector is appointed by the Settlor. A protector supervises the Trustee and if required can even appoint a new Trustee in place of the existing one.

Is setting up Trust in India or outside India illegal?

No. The concept of trusts is legal as per the Indian Trusts Act, 1882. Though the trusts are not recognized as a legal person or entity under the Indian Laws however they are seen as an obligation of the Trustee to oversee and use the assets in the Trust for the benefit of beneficiaries. Trusts set up in other tax jurisdictions known offshore trusts are also recognized by India.

Then why Pandora Papers investigation is ongoing if Trusts are legal?

Though, many set up Trusts for genuine reasons relating to real estate planning or for beneficiaries who can continue to avail income or inherit assets after the person who set up the Trust passes away.

However, there are also those who set up Trusts to hide from tax authorities, protect their investments from law enforcers, or use them for criminal purposes and offshore trusts offer highly tight secrecy.

What is the difference between Pandora Papers, Paradise Papers, and Panama Papers?

The Paradise Papers and Panama Papers showed corporates and individuals respectively setting up offshore entities. The Pandora Papers reveal how corporates, business families, and the rich have been using Trusts as tax havens in offshore companies to hold their assets and investments.

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