The Panama Papers:
Secrets of the Super Rich - 4 April 2016
SARAH FERGUSON,
PRESENTER: Hello and welcome to Four Corners.
Tonight:
the story of how some of Australia's richest companies got into bed with one of
the world's shadiest law firms, which operates through offshore tax havens
under a veil of secrecy.
In
the early hours of this morning companies and individuals across the globe
found their most sensitive financial dealings exposed in a massive leak of
documents from a firm in Panama City called Mossack Fonseca. Amongst those
outed for having assets secretly stashed in tax havens are present and former
world leaders, dictators and their cronies, arms dealers and drug traffickers.
The
Australian connections include BHP Billiton, Wilson Security, a major
electricity company - and 800 individuals, now targets of the Australian Tax
Office.
The
database of 11.5 million documents was handed over to German newspaper
Süddeutsche Zeitung last year. Since then, Four Corners has worked with the
International Consortium of Investigative Journalists in Washington, analysing
the files.
The
story from this massive leak will fuel the already heated debate in Australia
about tax avoidance.
Marian
Wilkinson's investigation took her to the notorious tax havens of Panama and
the British Virgin Islands. It begins in the United States.
MARIAN
WILKINSON, REPORTER: In Washington, DC a secret project investigating the
wealth of the world's rich and powerful is in full swing.
We
are working with a team of international reporters to unravel a vast network of
companies that hides the financial affairs of corporations, politicians,
oligarchs and criminals.
GERARD
RYLE, INTERNATIONAL CENTRE CONSORTIUM OF INVESTIGATIVE JOURNALISTS: What we're
looking at here is really a parallel universe, where people can go to play and
avoid the rules in their own countries. They can go to offshore tax havens and
basically do things they wouldn't be allowed to do at home.
MARIAN
WILKINSON: With the International Consortium of Investigative Journalists, we
got access to a massive database of documents from tax havens around the world:
a stunning leak of financial secrets from a Panamanian law firm called Mossack
Fonseca.
GERARD
RYLE: We're looking at easily the biggest leak in history in terms of the size.
We're looking at more than 11 million documents. And if you were to compare it
with sort of famous leaks like the WikiLeaks State Department records: this is
thousands of times larger than that leak.
MARIAN
WILKINSON: The documents reveal in graphic detail how Mossack Fonseca set up
more than 200,000 companies, foundations and trusts - largely in tax havens.
GERARD
RYLE: In this parallel universe where people want secrecy, they go to Mossack
Fonseca first. Mossack Fonseca set up the, their companies. And then those
companies are used to basically open up bank accounts. And therefore the real
owner of the bank account becomes anonymised by the fact that it's an offshore
company that technically owns, owns the money.
JACK
BLUM, FORMER US SENATE INVESTIGATOR: Mossack Fonseca: they're the engineers who
put together the wheels and the machinery to make it work. And they make sure
that it continues to work. So they're very important.
MARIAN
WILKINSON: And who is instructing them?
JACK
BLUM: Uh, it's going to be the corporations; it's going to be the
representatives of heads of state who've stolen money; it's going to be, ah,
all of the criminals who want to hide money.
And
as long as the firm is not held to a standard of serious due diligence of who
its customers are and what they're up to, ah, they keep this system rolling
right along.
MARIAN
WILKINSON: Mossack Fonseca services a myriad of clients. In the database are
respected global corporations and world leaders who have assets in offshore
havens.
GERARD
RYLE: The current prime minister of Iceland is in there, with a company with
his wife. We've got the current president of the Ukraine. We've got the current
king of Saudi Arabia.
And
we've also got, ah, interesting sort of asides like, um David Cameron: the
British prime minister's father's in there - and in a rather embarrassing way,
because he clearly was making a lot of money out of the offshore world, while
his son is now campaigning against tax havens.
(Gerard
Ryle shows Marian Wilkinson a specific profile on computer)
GERARD
RYLE: It would seem, eh, almost impossible that they didn't know who this guy
was. They would had to have known who he was.
MARIAN
WILKINSON: There are also notorious cronies and criminals who used Mossack
Fonseca to secretly organise their business around the world. We discovered
their passports and company records buried in the files.
Among
them: Rami Makhlouf, billionaire cousin of Syrian president Bashar al-Assad and
a key financial backer of the regime.
Marllory
Chacon Rossell, a queen of the Latin American cocaine trade before she was
jailed in the US.
Sergei
Roldugin, godfather to the daughter of Russian president Vladimir Putin. A
cello player: but the leaked files show his offshore company receiving millions
of dollars in suspicious loans.
Hugo
Jinkis and his son, Mariano, two of the biggest sports marketers in Latin
America. Both are charged in the FIFA scandal for allegedly conspiring to
solicit $150 million in bribes.
JACK
BLUM: It is the corporate use of this system that protects the criminals who
use the same system.
Ah,
the corporations say, "Look, what we're doing is perfectly legitimate. Ah,
after all, the OECD- the treaty allows us to manoeuvre around; to have these
subsidiaries; to move the profits to wherever we want."
The
same system is the system that criminals use to hide the money and to make sure
that they're not caught and they have no responsibility for what they've done.
MARIAN
WILKINSON: We soon discovered hundreds of Australian passports, names and
addresses in Mossack Fonseca's files.
They
include corporate giant BHP Billiton and some of our leading foreign investors.
But we also uncovered convicted fraudsters and tax evaders.
The
Mossack Fonseca leak escalates the heated debate in Australia over tax
avoidance.
SAM
DASTYARI, LABOR SENATOR: Let's not pussyfoot around it. What is the business
model of these tax havens? Be it the Cayman Islands, the British Virgins
Islands, be it Panama, the business model is built around: "We will allow
you to engage in practices for a small fee that would otherwise be illegal in
your host country." That's the business model.
JAMES
HENRY, TAX JUSTICE NETWORK: We estimate, ah, that there's at least $21 trillion
to $32 trillion of individual private, ah, financial wealth offshore, ah,
parked through havens. Ah, that's just individual wealth; that's not, ah,
corporate money.
There's
additional, ah, you know, trillions of dollars of corporate money that flows
offshore and is parked in, ah, low-tax havens, ah, for tax purposes.
MARIAN
WILKINSON: We've come to Panama City in Central America to investigate Mossack
Fonseca at its headquarters.
Given
Panama's colourful history, it's not surprising that a law firm here has become
a global leader in the tax haven business.
(Footage
of Marian Wilkinson walking down street, Panama City)
This
city is one of the oldest tax havens in the world. At the height of the cocaine
trade, Panama was a money laundry for the Latin American drug lords. And it
offered the full service: wash, rinse and spin dry.
These
days, Panama says it's reformed.
Today
many Panamanian lawyers and bankers get rich moving money into tax havens.
It's
not a crime. But their business often moves billions in tax revenue out of the
reach of national governments.
JAMES
HENRY: They're increasingly using the best structures on the planet and not
just Panama facilities, but they're based in Panama 'cause there is relatively
strong financial secrecy in Panama.
And
then they would wire the money elsewhere...
MARIAN
WILKINSON: As James Henry from the Tax Justice Network explains, many wealthy
individuals and corporations want a tax haven company to get around the tax
laws at home.
JAMES
HENRY: Well, usually we refer to a tax haven as a low-tax jurisdiction compared
to other places. It's a place that, where non-residents, either companies or
individuals, ah, can take advantage of, ah, ah, the fact that they're not
really taxed on their income or their capital gains or their estates, ah, even
though they have planted, ah, companies there.
MARIAN
WILKINSON: Even in Panama, Mossack Fonseca stands out among other law firms.
It's setting tax up haven companies on an industrial scale, through its 30
offices around the world.
Co-founder
Jürgen Mossack is an expert in Swiss tax law, with a glamorous Cuban wife and
unlimited ambition.
JURGEN
MOSSACK, CO-FOUNDER, MOSSACK FONSECA (corporate video): My vision is that, er,
our company... and its various, er, divisions become an organisation that is
really, really: not only well respected, but which is an organisation similar
to, perhaps, Microsoft, where people basically... need us.
MARIAN
WILKINSON: His partner, Ramon Fonseca, is one of the best-connected lawyers in
Panama City. Until recently he was a special ministerial advisor to the
Panamanian president and a top player in the ruling political machine.
RAMÓN
RICARDO ARIAS, TRANSPARENCY INTERNATIONAL, PANAMA: Mr Fonseca is the president
of the governing party. Mr Fonseca was an advisor to the president and as such
he basically advises the president in whatever he's requested to.
MARIAN
WILKINSON: Is that an influential position?
RAMÓN
RICARDO ARIAS: Ah, definitely he, you know, he has the ear of the president.
Money
laundering is a big problem in Panama. Ah, we are making connections. We are
trying to restrict it. But it's still dragging on. Eh, there are still cases
going on.
MARIAN
WILKINSON: The local head of the anti-corruption body, Transparency
International, says despite Mossack Fonseca's political connections, its
operations are coming under scrutiny.
RAMÓN
RICARDO ARIAS: If you're going to continue in this industry, you know, you need
to know your client. You need to make sure your client is bona fide and is
doing exactly what he tells you he's doing with this and he's not using this
company for any criminal activity.
MARIAN
WILKINSON: Mossack Fonseca's files reveal its clients are under investigation
on four continents.
Its
simple aim might be to help people and companies minimise their tax, but the
leaked data exposes a pattern of covert financial manoeuvrings.
JACK
BLUM: Mossack Fonseca can help people avoid the laws and the regulations of
countries that have the capability of collecting tax and imposing liability.
And they are very good at, ah, helping people in that offshore environment.
MARIAN
WILKINSON: One way Mossack Fonseca helps its wealthy clients is by hiding their
identity in so-called shell companies.
These
companies hire front men or nominees as directors and shareholders, so the real
owner of the assets never appears on a company register.
JAMES
HENRY: It depends on the game that you're playing, but ultimately you're trying
to avoid identification of the ultimate beneficial owner involved in these
things, so you can avoid liability.
Let's
say someone, ah, borrows money and defaults on it. They want to escape their
creditors. They don't want to know- you know, want you to be able to track them
down. If they're dodging taxes they're not interested in (laughs) the IRS
finding them. Ah, so it's really a game of, ah, you know, hide the, ah, the
peanut under the shells. And, ah, that's a, a major part of it.
MARIAN
WILKINSON: As we dug deeper into Mossack Fonseca's files, we found one network
of front men and women, repeatedly used to hide the identity of clients.
This
network was not based in Panama, but on Queensland's Gold Coast.
The
man behind it is Ian Taylor.
Ian
Taylor is a shady New Zealander who moved to Australia a decade ago. His shell
companies have been embroiled in a series of scandals, including allegations of
money laundering.
GERARD
RYLE: Ian Taylor is one of these people - and there are many hundreds of them
in the data - where they literally rent their name to pretend to be directors
of companies. So if you want to have an anonymous offshore company, you'll need
someone to be your, basically your proxy.
So
Ian Taylor will be the director of thousands of companies around the world and
he won't have a clue what any of those companies are doing, which again raises
questions about, you know, probity.
MARIAN
WILKINSON: We've come to Queensland's Gold Coast in search of Ian Taylor.
We
want to ask him why he and his proxies appear on hundreds of tax haven
companies registered by Mossack Fonseca.
Taylor
and his former wife, Rachel, were both listed as directors at this address.
(Marian
Wilkinson drives up to gated property. She tries gate intercom)
MARIAN
WILKINSON: Doesn't look like there's anyone home. We'll have to try again.
(Footage
of Marian Wilkinson walking to multi-story apartment building at dusk. She
tries an intercom button at entrance)
MARIAN
WILKINSON: We tried other addresses used by Taylor, including this one he
currently lists with the Australian corporate regulator.
WOMAN
(intercom): Hello?
MARIAN
WILKINSON: Oh, hi. I'm looking for Ian Taylor. Have I got the right building?
WOMAN
(intercom): Oh, he doesn't live here. He's not here.
MARIAN
WILKINSON: Right. Ah, is Rachel there at all?
WOMAN
(intercom) (pause): No. She doesn't live here at all.
MARIAN
WILKINSON: OK. Thanks very much for your help.
(Marian
walks off)
MARIAN
WILKINSON: Taylor proved an elusive character. He keeps a low profile here
since his New Zealand business hit the news six years ago.
REPORTER
(TVNZ news, December 2009): Ian Taylor's Queensland office is half a world away
from a cargo plane in Thailand, seized last month with 35 tons of illegal arms
believed to be destined for Iran. But the complex paper trail leads back to a
New Zealand-registered company, set up by this Kiwi businessman.
MARIAN
WILKINSON: Taylor and his father's business had registered a local company with
nominee directors that was exposed organising an arms shipment from North Korea
to Iran - both countries under UN arms sanctions.
IAN
TAYLOR (TVNZ news, December 2009): After the initial shock we went into, ah, I
guess, a, ah, a mode of, of trying to figure out exactly where we stand with
everything.
GERARD
RYLE: That really blew the lid on the Taylor family enterprise. It attracted a
lot of, ah, unwanted attention to them and I believe that the authorities in
New Zealand began to look at, at their activities. Major scandals involving,
um, arms dealing, um, er, bank scandals involving the laundering of money for,
ah, Mexican drug cartels and other things.
MARIAN
WILKINSON: Our investigation uncovered disturbing emails, showing Mossack
Fonseca ignored warnings about working with the Taylors.
The
firm's executives repeatedly backed the Taylors, describing Ian's father
Geoffrey as a man of:
MOSSACK
FONSECA EMAIL (voiceover): High credibility, professional history and moral
standard. We have been cooperating with his company for many years.
(Footage
of Marian Wilkinson meeting Ian Taylor)
MARIAN
WILKINSON: Taylor finally agreed to meet me at a pub in Surfers Paradise.
He
admitted acting as a nominee director and shareholder on hundreds of tax haven
companies.
But
he also claimed his passport and identity had been stolen and used to forge
directorships in eastern Europe. He said he would explain all in an interview,
but then stopped taking our calls.
GERARD
RYLE: Ian Taylor and the family always say: well, you can't blame them for any
of this, 'cause they don't know what the companies are doing. But they are
actually directors of these companies and they do have some sort of
responsibility to know what these companies have been up to.
MARIAN
WILKINSON: Australian Federal Police have recently questioned Taylor on behalf
of Romanian authorities.
But
Taylor and his proxies can escape legal responsibilities for the companies they
front, because they operate in the offshore world.
GERARD
RYLE: What this really says is a lot about the system itself and how broke the
system is and how crazy the whole thing is that you can do this.
I
mean, you can have this parallel universe and it exists. And you've got all
these fake directors and all these fake companies and all this secrecy. I think
the Taylors are just, you know, part of... you know, of this kind of crazy
world.
MARIAN
WILKINSON: Mossack Fonseca uses the offshore system expertly for its top
corporate clients. While what it does is legal, in some cases it raises serious
ethical questions.
Our
investigation reveals Mossack Fonseca helped conceal the identities behind a
major Australian government contractor.
Wilson
Security, which guards the Australian Tax Office, the Defence Department and
Australia's offshore detention centres, uses the services of Mossack Fonseca.
(A
security guard emerges from the entrance of Wilson Security's Australian
headquarters.
SECURITY
GUARD: You filming me?
CAMERA
OPERATOR: Yep.
SECURITY
GUARD: Do you have my permission?
SARAH
HANSON-YOUNG, GREENS SENATOR: I think if a government is going to outsource
such a delicate operation, such as the detention of men, women and children,
um, in an isolated place, away from public scrutiny, where the media is locked
out, where there is a massive, er, ah, lockdown on information and
transparency: then at the very least, some proper due diligence on the
backgrounds on those people being contracted, um, should occur.
MARIAN
WILKINSON: Wilson Security portrays itself as an Australian operation. But
buried in Mossack Fonseca's files we found this courier envelope that tells a
different story.
It
led us from Wilson's accountants in Perth to Wilson's ultimate holding company,
in the British Virgin Islands.
JAMES
HENRY: These places are not kind to whistleblowers. They're not kind to
journalists. They thrive on secrecy and that's their bread and butter. So, um,
I wouldn't expect a warm, ah, red-carpet treatment when I go to BVI.
(Marian
Wilkinson takes a flight to the British Virgin Islands. She boards a boat)
MARIAN
WILKINSON: Following the Wilson trail to the BVI - the British Virgin Islands -
is fraught. This Caribbean tax haven doesn't welcome reporters. Indeed, we
could be jailed here for publishing the Mossack Fonseca documents.
We
were forced to enter the territory as tourists when the authorities refused us
work permits. Then we were stopped at the border.
(Marian
Wilkinson leaves customs building)
MARIAN
WILKINSON: Well, that took almost an hour because I was on their immigration
stop list. But we've gotten in.
We
met up first with Martin Kenney, a top asset recovery lawyer who knows this
place better than most.
MARTIN
KENNEY, FRAUD AND ASSET RECOVERY LAWYER: The British Virgin Islands is a
beautiful archipelago of islands in the eastern Caribbean Sea. We have only
32,000 people here; perhaps 2,000 beautiful sailing boats, the world's largest
sailboat charter fleet.
But
we have far more companies than people or boats: 500,000 by latest count,
representing about a quarter, 25 per cent of the world's population of offshore
companies.
MARIAN
WILKINSON: That's about 15 offshore companies for every man, woman and child
who lives here.
These
companies don't come here to invest: they come because it's a tax haven. And in
some cases, they come to hide their affairs from public scrutiny.
MARTIN
KENNEY: We have the same level of confidentiality as you would have in
Australia, or where I'm from in Canada, ah, with the exception that we don't
have a public registry of, ah, identifying the names of directors or registered
shareholders - or what's critically important to a fraud lawyer: the identity
of the UBO, the ultimate beneficial owner, the real owner behind a corporate
structure.
(Footage
of Road Town, BVI)
MARIAN
WILKINSON: This is the capital of the British Virgin Islands. Behind the main
street is the address on the envelope for Wilson Security's holding company.
It's the same address as Mossack Fonseca's headquarters here.
M.
SHUMI AKHTAR, DR., UNIVERSITY OF SYDNEY BUSINESS SCHOOL: Wilson's corporate
setup - Wilson Group corporate setup - is extremely complicated. It has got
many dimensions. It has got many layers.
And
especially when you have got that many dimensions and that many layers and it's
not within one country but globally: it's just complex beyond what one can
actually say in words.
MARIAN
WILKINSON: In Mossack Fonseca's files we found the original directors of
Wilson's holding company. They include two billionaire directors from Hong
Kong, Raymond and Thomas Kwok.
In
2012 the Kwok brothers, along with one of their top executives, were charged in
one of the biggest bribery cases in Hong Kong's history.
THOMAS
KWOK, FORMER MANAGING DIRECTOR, SUN HUNG KAI PROPERTIES (translation): I want
to confirm to everyone that I myself haven't done anything wrong and I believe
Thomas Kwok hasn't done anything wrong either.
MARIAN
WILKINSON: The charges hit as Wilson Security in Australia geared up to bid for
government contracts worth hundreds of millions of dollars.
M.
SHUMI AKHTAR: Definitely it shocked people, because the Kwok brothers were very
reputable and, ah, many Hong Kong citizens used to look up to them. They were
charged because of bribery. But no-one really knew which one of the Kwok
brothers was actually, um, behind this all.
MARIAN
WILKINSON: Within a week of the charges, the Kwok brothers resigned as
directors of Wilson's holding company in the British Virgin Islands, apparently
cutting their ties with Wilson Security.
But
two mysterious companies then appeared as the new directors: Harmony Core and
Winsome Sky. And we found behind these companies sat Raymond and Thomas Kwok.
They'd
hidden their directorships of the company controlling Wilson Security, with the
help of Mossack Fonseca.
JACK
BLUM: Financial secrecy is the essential piece of business. And the skills of
the Panamanian law firms are to figure out how to set up a trust here that owns
a corporation there, that owns another corporation somewhere else; and create a
series of layers that make it very difficult, if not impossible, for an
investigator to figure out who really owns what - and where the money is.
MARIAN
WILKINSON: Wilson Security's Australian executives would not be interviewed.
But in a statement they sought to distance the Kwoks from the company.
STATEMENT
FROM WILSON SECURITY AUSTRALIA (voiceover): Raymond Kwok... is not - nor has he
ever been - a director of Wilson Security.
Thomas
Kwok is not, nor at any stage has he ever been, a director of, nor has he ever
had any involvement in any Wilson company's operations in Australia.
MARIAN
WILKINSON: In December 2014 Thomas Kwok was jailed for five years over the Hong
Kong bribery scandal. His brother Raymond was acquitted.
By
then, Wilson Security had won Australian government contracts worth more than
$400 million, including sensitive contracts that are supposed to require tough
probity rules.
SARAH
HANSON-YOUNG: It seems ridiculous to me that a company that can, um, take
hundreds of millions of Australian taxpayer dollars, in exchange for locking up
children, doesn't require an assessment of the character of the individuals
involved. I mean, where else would, would that be acceptable?
JACK
BLUM: Well, this: this is a, a fundamental question, which is: why should the
large countries of the world accept as real entities that are set up on a group
of islands that has fewer people by far than it has offshore corporations; and
has no real legal system to monitor and police what these entities are up to?
Ah,
that is really the heart of the problem. And what governments should be doing
is saying, "We will not accept as real these entities. You have to come
here. You have to incorporate here. You have to do it under our rules and that
requires full disclosure."
MARIAN
WILKINSON: While governments insist they want to clean up the offshore world,
the number of companies in tax havens is exploding.
That
has a real impact on our economy and our tax system. We only had to come down
to the famous Panama Canal to see that.
The
company that operates this crucial port at the entrance to the Panama Canal is
controlled by Hong Kong's richest man. And he, too, is a client of Mossack
Fonseca, here in Panama. He also happens to be one of the biggest foreign
investors in Australia today.
He
is 87-year-old Li Ka-shing. His net fortune is estimated at over $40 billion -
and we discovered his identity card in Mossack Fonseca's files.
M.
SHUMI AKHTAR: Li Ka-shing: he's the number-one richest man in Hong Kong. And
he's very wealthy. He's a very powerful businessman in Asia and he's best known
for his mobile business in Hutchison Whampoa Limited, which happens to be one
of the biggest listing, um, companies in Hong Kong. Um, but he also has got a
lot of assets that he holds in infrastructure.
MARIAN
WILKINSON: In Australia, few people know the name Li Ka-shing. But if you live
in Victoria or South Australia and you turn on your lights at night, you help
Li Ka-shing stay at the top of the rich list.
His
company, Cheung Kong Infrastructure, has a big slice of Australia's electricity
market, especially in South Australia.
NICK
XENOPHON, INDEPENDENT SENATOR: This company is ubiquitous. Everyone who turns
on the lights, turns on an appliance in their home: ah, it's through this
company.
They
have a monopoly on the distribution of electricity into people's homes and into
factories, into businesses throughout the state. It has a massive presence in
my home state. That's all the more reason that there needs to be transparency
i- in this.
MARIAN
WILKINSON: Li Ka-shing's company, Cheung Kong Infrastructure or CKI Holdings,
is listed on the Hong Kong stock exchange - but it's incorporated in the tax
haven of Bermuda.
The
leaked data shows Cheung Kong Infrastructure used Mossack Fonseca's Hong Kong
office to organise a string of related subsidiaries in Panama and the British
Virgin Islands.
Internal
emails show the company insisted on the utmost secrecy for its affairs.
MOSSACK
FONSECA EMAIL (voiceover): Special instruction: please do NOT display and send
any documents from the client by email. The client request us to treat their
documents as the high confidence.
NICK
XENOPHON: The great irony here is that: here is a company that effectively
provides, ah, light for every South Australian household, ah, but is not
prepared to have the light shone on its tax affairs.
MARIAN
WILKINSON: Unravelling CKI's tax affairs, even with the leaked data, is
virtually impossible.
But
we do know the Australian Tax Office took two CKI-related companies to court in
2013. The Tax Office argued each company owed almost $400 million in back taxes
and penalties on their Australian electricity business.
MARTIN
LOCK, FORMER OFFICIAL, AUSTRALIAN TAX OFFICE: That particular company had
blatantly, it appeared, ignored its obligations under t- the Tax Act to lodge
either returns or documents; or it had filed a return that the Tax Office was
dissatisfied with, which appears to have been the first year's return.
MARIAN
WILKINSON: We asked a former senior official with the Australian Tax Office,
Martin Lock, to explain the extraordinary court ruling.
MARTIN
LOCK: Obviously, in frustration the Tax Office finally issued assessments which
the company obviously didn't even act upon, because the, ah, ATO had to take
this matter to court to get a judgement debt against the company.
MARIAN
WILKINSON: In your experience, is that pretty unusual for a large corporation
to do that?
MARTIN
LOCK: Ah, that's very unusual for a large corporation to do that. Um, that
simp- appears to show just blatant disregard for the law: a blatant
non-compliance.
MARIAN
WILKINSON: Li Ka-shing's companies quietly settled the case with the Australian
Tax Office last year, for less than one tenth of the original claim.
CKI
executives refused to be interviewed by Four Corners about their tax haven
arrangements, but issued a statement saying:
STATEMENT
FROM CHEUNG KONG INFRASTRUCTURE HOLDINGS LTD (voiceover): All our companies
fully comply with regulatory, tax and legal requirements of the countries they
operate in, and Australia is no exception.
MARIAN
WILKINSON: The Deputy Tax Commissioner defends the settlement, but laws on
confidentiality of corporate taxpayers mean he can't discuss it.
MARK
KONZA, DEPUTY COMMISSIONER OF TAXATION: I'm really unable to comment on
anything that wasn't on the public, ah, record. Settlements are very important,
ah, in the Australian tax system because they allow us to, ah, secure the right
amount of tax without having to go through a whole court process.
NICK
XENOPHON: To paraphrase Lewis Carroll: this is a case of curiouser and
curiouser. Ah, here is a company which has been subject to a ruling of almost
$800 million in back taxes; in underpayment of taxes. Then it was quietly
settled a year or two later for a fraction of that: something like 10 per cent
of the total amount being sought.
Ah,
what I think this highlights is: the need for greater transparency in these
settlements.
MARIAN
WILKINSON: In the British Virgin Islands it's obvious financial secrecy is a
big problem.
You
only have to see the rows of post office boxes that line the back streets to
realise no company actually keeps any significant records in this tax haven.
It's just a letter drop. And that makes it tough for tax investigators.
MARK
KONZA: The fact is that they don't hold any information because the companies
running through those, ah, havens: er, they might run through them but they
don't leave any information there. So then you have, ah, you have to see
through, ah, these, er, havens to, to try and find out what's really going on.
MARIAN
WILKINSON: You can see why the authorities didn't want us filming here. Behind
me is the British Virgin Islands headquarters of Mossack Fonseca. In this
modest building they manage to act as the registered agent of literally
thousands of companies; among them, some of the biggest operators in Australia.
BHP
Billiton has used Mossack Fonseca as its BVI agent for companies linked to its
diamonds, steel and aluminium businesses - and, most importantly, its finance
arms.
The
files show five BHP Billiton finance companies were registered in BVI, moving
billions of dollars in loans through the tax haven, organised from London.
(To
Mark Konza) The company is a UK tax resident, as well as...
(Voiceover)
The Deputy Tax Commissioner won't comment on BHP Billiton specifically. But he
explains why some multinationals put their inter-company loans through tax
havens.
MARK
KONZA: You loan money to your Australian company through a low-tax
jurisdiction. You charge, ah, interest: that's a deduction in Australia.
That
amount of money would have been subject to tax at, say, 30 per cent in
Australia, but it leaves the country - it may have a, er, withholding tax, say,
of 10 per cent, but when it gets to the tax haven it may have a tax- it may be
taxed there at, say, one per cent.
So
your overall, ah, tax burden becomes 11 per cent, as opposed to 30 per cent.
That's essentially, ah, why you go through a, a- what's called a tax haven;
what we call low-tax jurisdictions.
MARIAN
WILKINSON: BHP Billiton executives declined to be interviewed, but in a
statement they strenuously denied their BVI finance companies were used to
avoid tax.
STATEMENT
FROM BHP BILLITON (voiceover): BHP Billiton does not engage in aggressive tax
planning. Each of these companies was, and continues to be, resident in the UK
for tax purposes and therefore subject to UK tax on its worldwide income.
Consequently,
any profits made by these companies were taxable in the UK at the normal
company tax rate.
(Footage
of Tony Cudmore and Jane Michie appearing at Senate tax inquiry, April 2015)
TONY
CUDMORE, PRESIDENT, CORPORATE AFFAIRS, BHP BILLITON (Apr. 2015): Tony Cudmore,
president in corporate affairs, BHP Billiton.
JANE
MICHIE, HEAD OF TAX, BHP BILLITON (Apr. 2015): Jane Michie, head of tax, BHP
Billiton.
MARIAN
WILKINSON: BHP Billiton is extremely sensitive about its tax affairs following
last year's Senate tax inquiry.
SAM
DASTYARI (Apr. 2015): You don't have a marketing hub in Singapore, do you? Or
you do?
MARIAN
WILKINSON (Apr. 2015): Executives initially stonewalled senators' questions
about a Tax Office audit that claimed the company had avoided millions in tax
by using a so-called marketing hub in Singapore.
CHRISTINE
MILNE, GREENS SENATOR 2004-2015 (Apr. 2015): But it's a direct question: have
you been issued with a paper from the Tax Office in relation to this matter?
JANE
MICHIE (Apr. 2015): We, we would prefer not to answer that question, thank you.
CHRISTINE
MILNE (Apr. 2015): W-well, I think that actually the community deserves to
know. I mean...
(Footage
ends)
SAM
DASTYARI: It was unbelievable. To have Australia's largest taxpayer come before
a Senate inquiry about tax minimisation and not be able to present basic
information about their own structure: it's, it's, it's... it's, it just shows
the contempt with which when- with which that committee was being held at that
point in time.
(Footage
of Senate inquiry)
MARIAN
WILKINSON (voiceover): BHP Billiton emerged as one of the better corporate
taxpayers in the Senate inquiry, compared with foreign multinationals.
TONY
KING, MANAGING DIRECTOR, APPLE AUSTRALIA (Apr. 2015): Thirty per cent is our
effective tax rate.
MARIAN
WILKINSON (voiceover): The senators' controversial report is due as early as
this week.
NICK
XENOPHON (Apr. 2015): Are you serious? You've come to this inquiry...
MARIAN
WILKINSON (voiceover): Coinciding with the Mossack Fonseca leak, it's expected
to reignite public anger over tax avoidance by corporations and wealthy
individuals.
SAM
DASTYARI (Apr. 2015): Do you not know? Or you're not telling us?
(Footage
ends)
NICK
XENOPHON: I think that we've reached a tipping point; that people are really
mad as hell and they don't want to take it anymore; that this is an opportunity
to open this up.
And
this issue won't go away until there is a fair rate of tax being paid by these
companies.
(Footage
of Senate inquiry)
TONY
KING (Apr. 2015): I have no idea what you're talking about...
CHRISTINE
MILNE (Apr. 2015): Oh, come on.
TONY
KING (Apr. 2015): ...and...
CHRISTINE
MILNE (Apr. 2015): Oh, come on.
(Footage
ends)
SAM
DASTYARI: Frankly, to the justification that's provided by a lot of these
companies that: "Well, we're technically operating, we believe, within the
law, so that makes it OK": you know, I think we have to call that for what
that is: and that's bullshit. I mean, that is a bullshit argument.
The
reality is that they are operating in a very, very grey area of the law.
You
know, this isn't a victimless act. Every dollar that's minimised is a dollar
that's not going to a school; that's not going to a hospital; that's not going
to a service that w- that we require and need.
And
yet these companies are getting away with it - and we're letting them get away
with it.
MARIAN
WILKINSON: Public anger is putting pressure on the Australian Tax Office to
step up the fight against tax avoidance.
And
tonight Four Corners can reveal tax officials have got their hands on some of
the leaked Mossack Fonseca files for its high-profile tax evasion taskforce,
Project Wickenby.
MARK
KONZA: Our analysis so far has shown a number of, er, people who are either,
ah, in our Wickenby or our, ah, wealthy Australians investigation programs have
come up. So there is some, er...
MARIAN
WILKINSON: Have come up in the Mossack Fonseca data?
MARK
KONZA: Yes, they have. Yes. People who are involved in these sorts of secret
arrangements to evade tax: they need to consider their position very carefully,
bearing in mind that in recent years 46 people have been sent to jail as part
of the Wickenby Program.
It's
clear that there's a great groundswell of resentment of these tax evasion
activities, because we continually receive information from informants. We've
received information since, ah, the company you're referring to, ah, on other
companies. Ah, and so these- I don't think you can rely on these secret
arrangements being kept secret.
MARIAN
WILKINSON: Mossack Fonseca, once renowned for its secrecy in handling the
affairs of the rich and powerful, now finds itself on a very public stage.
We're
here outside the Panamanian headquarters of Mossack Fonseca - and here with
media from all over the world, who are demanding answers to their questions. So
far, we haven't got any.
(Footage
of journalists and camera operators outside building. Journalist Christoph
Lütgert calls office on mobile phone)
CHRISTOPH
LÜTGERT, NORDDEUTSCHER RUNDFUNK: Tell him that a group of around 20 or 25
international journalists is in front of your building.
MARIAN
WILKINSON: The firm's response to this unprecedented exposé was to send out its
PR man.
CARLOS
SOUSA, PUBLIC RELATIONS, MOSSACK FONSECA (translation): It is very clear. We
don't do money laundering. We don't accept money and we don't take money. That
is the only thing I can tell you.
MARIAN
WILKINSON: Our detailed questions were never answered. But Mossack Fonseca
denies it has ever acted illegally.
STATEMENT
FROM MOSSACK FONSECA (voiceover): We follow both the letter and spirit of the
law. Because we do, we have not once in nearly 40 years of operation been
charged with criminal wrongdoing.
MARIAN
WILKINSON: That Mossack Fonseca has never been charged speaks volumes about
what is legal and acceptable in the global world of tax havens.
Turning
a bright public spotlight on that world, many believe, is the only way to
achieve a fairer and cleaner financial system.
MARTIN
LOCK: There's really only one solution: and that's to change the laws. The
Parliament has to change the laws if it wants a particular result. It can't
rely on concepts of fairness to come into the thinking of the courts.
(Footage
of Marian Wilkinson with press grouping outside Mossack Fonseca office)
MARIAN
WILKINSON (to Carlos Sousa): Will you bring Mr Mossack and Mr Fonseca down for
a press conference?
(Security
staff close doors behind Carlos Sousa. Footage ends)
MARTIN
LOCK: Appeals to, you know, the corporate, social conscience of paying their
fair share: well, they can legitimately say, "We're paying what we are
required to pay under the law. And if that's not fair by your standards, change
your laws."
SAM
DASTYARI: People have realised that they are the people getting ripped off
here: that if you're not wealthy enough or you're not rich enough, you're not
big enough or you're not powerful enough to structure your tax affairs in such
a way, then you have to pay tax.
People
are angry. People have had enough. People are fed up and the political system
needs to catch up with that and actually make some tougher laws that will
address it.
SARAH
FERGUSON: Reverberations from this extraordinary leak continue around the world
tonight.
It'll
now take concerted international action to translate the anger it has caused
into real reform.
Next
week: the rise and fall of Clive Palmer's business empire and political career.
See you then.
END