The Panama Papers have taken the world by storm the last two weeks, and quite literally so as well. The leak forced the resignation of Iceland’s prime minister, and is putting pressure on the British Prime Minister David Cameron. As expected, Vladimir Putin has denounced the leak as an American-led conspiracy against him. Banks that have wittingly or unwittingly facilitated tax avoidance through layers upon layers of shell companies are also starting to feel the heat as regulators start looking into the transactions. Indeed, the Panama Papers has captured the imagination of the public, thanks to the International Consortium of Investigative Journalists.
The leak has finally forced governments to plug the gaping loopholes in tax systems across the world. Representatives from 28 nations are scheduled to meet tomorrow to discuss increased tax regulations. Riding on the public outrage over the Panama Papers revelations, the US government announced rules that would limit tax inversions, immediately killing a planned merger between Pfizer and Allergan that would have, yes, reduced Pfizer’s tax bill by declaring Ireland as its headquarters.
What struck me the most from the Panama Papers though, was that the leak, which followed the Unaoil bribery leaks, signifies in a big way an end to confidentiality and forever helps shape the way privacy is defined. Client-attorney confidentiality clauses can now easily be breached by a third-party security breach. Those in power can no longer hide behind the veneer of the secrecy of shell companies, they can now easily be outed by a persistent hacker on a mission. The influx of incriminating data may also overwhelm regulators, who are now facing increasing public pressure to hold errants accountable. And how should governments deal with the hacker or hackers who gave them priceless ammunition to go after tax cheats but broke laws in the process?
When all is said and done, many heads will have rolled. Unfortunately, some heads may include those who delivered the information on a silver platter.