One Number Explains the Devastating Impact of the Panama Papers on Regular People

April 4th 2016

Alex Mierjeski

The impact and importance of the Panama Papers, a massive trove of insider information being described as the largest leak in history, can be hard to grasp at first.

But one number buried in the more than 11.5 million documents detailing nefarious dealings of offshore shell companies sheds light on the gravity of the leak.

$400 million

That's how much an oil company was able to avoid paying in taxes with the help of Panamanian law-firm Mossack Fonseca, the back door dealers at the center of the Panama Papers leak.

Simply put, Heritage Oil and Gas Ltd Company (HOGL) didn't want to pay the $400 million in taxes associated with the sale of an oil field it owned in Uganda, according to a video by the International Consortium of Investigative Journalists, which played a key role in analyzing the Panama Papers.

So, rather than take on the tax burden, HOGL, with the help of Mossack Fonseca, set up a fake company in the Indian Ocean nation of Mauritius, where its sale could not be taxed.

That's a lot of money, but why should I care?

The Panama Papers leaks are full of information about corporations who set up fake, off-shore companies in order to hide sneaky dealings and avoid paying taxes. While this might seem like solely the domain of the super-rich, these dealings often deprive the poorest of the poor from benefiting from much needed tax revenue.

Panama Papers impact

As the ICIJ video notes, $400 million is a significant amount in Uganda, where one in three people live on less than $1.25 per day.

Basically, that statistic contextualizes just how impactful the actions of shell companies can be; $400 million is more than the government's annual health budget, according to the video.

That means that while the company who sought the help of Mossack Fonseca to dodge taxes, the intended recipients — places like hospitals — were forced to operate on shoestring budgets. The video notes that patients slept on floors and were asked to provide basic medical supplies such as sterile cotton balls or protective gloves.

Panama Papers impact

Uganda is one of the ten worst countries for maternal, newborn, and child mortality rate, according to the World Health Organization.

How did Mossack Fonseca help businesses avoid taxes?

Mossack Fonseca would accept payments from someone interested in setting up a shell company in tax havens like the British Virgin Islands. Shell companies, which look like legitimate businesses on paper, are essentially warehouses for large sums of cash set up in countries where the owner's own country can't levy taxes on its earnings.

Here's a chart tracking tax havens used by Mossack Fonseca over the years.

Watch the ICIJ's full video here: