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Why does someone want to take the Panama route? You can incorporate a company in just 72-hours. 
Your identity and those of other shareholders and directors is kept a secret. Bearer shares are allowed. Share transfer is both easy and confidential. Shareholders, directors and officers can be citizens or residents of any country. Meetings can be held anywhere and accounts need not be held in Panama. Finally, Panama’s circulating currency is the dollar and Panama has no currency restrictions. So money is fungible.


The Panama that Indians who grew up in the 1980s knew was the popular cigarette brand. In the exchange of used packets, Panama enjoyed a premium while Charminar sold at a discount!

‘Panama’ is in news once again.  This time it is Panama, the country and not the brand, which is the centre of attraction. The new fiscal year opened to startling news from the Latin American Island.  

The news had the same old script of a whistleblower and an ever-willing media. An illegally hacked database landed on the lap of journalists who then performed data-analytics that singed world leaders and global celebrities alike.  This included several Indians.

The Polish Prime Minister was named and he promptly resigned his job. The British premier’s father too was on the list but David Cameron for now stays in his job.  A number of Indians, including actor Amitabh Bachchan and lawyer Harish Salve make the roll-call but a mere presence there does not mean they have illegal money.

 

Mossack Fonseca leaks 11.5mn documents

At the heart of the leak was Panama’s top law firm, Mossack Fonseca.  The firm has forty offices worldwide and provides services like incorporating entities in tax havens. It had incorporated 14,658 active companies in Panama till August 2013. 
No mean achievement indeed.

The story ripped the veil off transactions rou-

ted through the Panama islands. The ‘Panama Papers,’ as they are now called, are confidential documents leaked from Mossack Fonseca. These provide information about offshore entities and identities of their shareholders and directors, till now held as a global secret.  

Ramon Fonseca, co-founder of the firm, confirmed that the papers are genuine.

The leaked data has 11.5mn documents shaved off Fonseca’s internal database by one of its emplo-

yees. 
Call him a thief, a whistle blower or whatever you please, he handed it to a German newspaper, which in turn shared it with the International Consortium of Investigative Journalists (ICIJ). 


The papers contain information on 2.15 lakh offshore entities cutting across 200 countries. The leaked data covers over 40 years and dates back to 1977. It lists individuals who have offshore entities in Panama that give them either direct or indirect ownership in these companies. The list includes Indians who floated such companies when forex laws of India prohibited such transactions.


Why is Panama important

But why does someone want to take the Panama route? Here are a few reasons:

Like, you can incorporate a company in just 72-hours. 
Your identity and those of other shareholders and directors is kept a secret. Bearer shares are allowed which means anyone who is holding on to the certificates, like anyone holding a 100-rupee note, is the owner! 
Share transfer is therefore both easy and confidential. Further, shareholders, directors and officers can be citizens or residents of any country.  Meetings can be held anywhere and accounts need not be held in Panama. Finally, Panama’s circulating currency is the dollar and Panama has no currency restrictions. So money is fungible. 


In Panama privacy is protected by the Constitution. Revealing banking information is a crime.  Panama has no mutual assistance treaties for sharing of banking information with other nations.  It does not recognise court rulings of other countries. 
Things can’t get better for someone who wishes to hide. Today, it is home to the second largest international banking centre, next to Switzerland. 


There are other reasons why people establish shell companies in tax havens.  Shell companies have no independent operations, assets or employees. 
Such companies are used to hide the real identity of the creators or buyers of assets. In other words, these are established not to pursue a legitimate business but to obscure the identity of owners.

So, the two big attractions of offshore entities in jurisdictions are secrecy of information relating to the ultimate beneficiary owner and zero tax on income generated.

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