This is apparent from a series of publications by leading international media: the Pandora Papers. The Pandora Papers is a massive 2.94 terabyte leak of documents from 14 agencies that help businesses and individuals set up businesses and tax structures in tax havens.
For the already controversial Czech President Andrej Babiš, the revelations come at an inopportune time, on the eve of the country’s elections. Babiš, a very wealthy businessman who says he is committed to the fight against corruption, had some very remarkable transactions.
Sneaky lord of the castle
Through no fewer than three different letterbox companies, he bought two villas and a castle on the south coast of France. The documents, which the Guardian saw, among others, show that Babiš provided a loan to a company in the British Virgin Islands, which loan was passed on to a company in Washington DC, and then lent again to a letterbox company in Monaco. That company eventually bought the property.
It seems that Babiš mainly used the cumbersome construction to keep his ownership of the property a secret.
Letterbox companies and tax havens
Tax havens, such as the British Virgin Islands, Seychelles, Panama and Bermuda, are countries or areas where companies and individuals pay little or no tax on profits or other income. In addition, they often have a web of rules and laws that make it very easy for the owners of letterbox companies to disguise their identities.
This makes these countries a true paradise for people who want to hide possessions, for example out of sight of their own tax authorities.
Such a letterbox company is a company that only exists on paper. All activities take place elsewhere, but income is posted to the bogus company, where no tax is due.
Blair avoided tons of tax
The revelations are also embarrassing for former British Prime Minister Tony Blair. The social democrat already spoke out in the 1990s against the way in which the rich can use all kinds of tricks to avoid tax, but turns out to benefit from it himself.
In 2017, he and his wife bought a Victorian property in London, worth 7.5 million euros. If they had bought it in the traditional way, they would have had to pay about 360,000 euros in tax on it, but things turned out differently.
The property was in fact owned by a company in the Virgin Islands, which in turn was partly owned by a Bahraini minister. By buying the letterbox company with the property ‘in it’ instead of buying the property directly, the tons of tax did not have to be paid.
According to the Blairs, the only way to get the property was to buy the letterbox company and not to avoid tax. Still, it worked out nicely.
Ukrainian president with letterbox
Ukrainian President Volodymyr Zelensky also appears to be in the ‘papers’. Zelensky became president of his country in 2019 by defeating, among other things, the incumbent president Petro Poroshenko, who is known to be corrupt.
Zelensky says he opposes corruption and the power of the oligarchs in the country, but also seems to know at least some of their tricks well. Before taking office, he owned a quarter of the shares in a letterbox company in the British Virgin Islands.
In turn, that firm had shares in film production and distribution companies. He gave his share, just before taking office, to a loyal adviser.
New scandal for DSK
Former IMF boss and French political luminary Dominique Strauss-Kahn also pops up in the Pandora Papers. Today, the fallen politician works as a consultant, especially on the African continent.
He would have channeled the millions in income that he received through a network of offshore companies in Morocco and Dubai, with which he managed to avoid paying taxes.
That is painful for a former IMF boss. This institution lends money to countries in financial need, usually in exchange for far-reaching reforms that should lead to higher tax revenues. However, for ‘DSK’ the reputational damage is relative.
He was forced to resign from his position at the IMF in 2011, after he was arrested in the US on suspicion of forcing oral sex on a New York chambermaid. In the end, he was not convicted, but did come to a secret settlement with the woman.