Global – Biggest Leak Ever? Panama Papers (part-2, end)

Good morning and how’s your day?


Now, we continue with part 2 – end of article, and focus on our action.

Lets back to history on when tax heaven happen. The first idea come from Times magazine, in year 1894, when most English rich people want to maximize their assets by minimize tax. The fist country was Switzerland, on year 1924 – 1930. The second was Bahama, in year 1930 – 1940. The third was Cayman Island and Panama, on year 1960 – 1970.


Based on OECD, there are 3 main criteria for similar countries are: low/free tax area, low of transparency, and low of effective exchange of information. Another benefits are: diversification on type of and free tax of investment activities, deferred tax, high level of asset protection, etc. On the other side, big risks also arise from, such as money laundering, shell company, wrong fund, etc. These all 3 criteria must be meet to make a country as a tax heavens.

Panama Papers

Can you guess, how much North America and Europe rich people on Panama Papers? Surprisingly, only a few reveal on that list? Why it can be happen. The simple idea is like this – if a countries famous with high level of financial security for their customers, indicate that these countries becoming a top of mind for investment, both individual and a company based. Based on bbc (source: ), stated that these top 10 countries are:

  1. Switzerland, famous with highest financial banking security, even from international pressure. Luckily, it can be open under international tax evasion investigations.
  2. Hong Kong, 30% of Mossack Fonseca’s business came from Hong Kong and China. It also facilitate fund movement with less acknowledge of beneficiary.
  3. USA, lax financial regulation and many suspected of “ghost companies”.
  4. Singapore
  5. The Cayman Islands
  6. Luxembourg
  7. Lebanon
  8. Germany
  9. Bahrain
  10. United Arab Emirates

Can you guess where is it? Yes, its under # 13 (source: ). Its under Japan in #12.

For Indonesia, my country, investment from heaven country within year 2010 – 2015 are USD 8.8 billion, its small compare with foreign investment USD 146.6 billion. The top 7 are come from Barbados, Belize, British Virgin Island, Cayman Islands, Luxembourg, Mauritius, and Seychelles.In other side, investment fly out to heavens country more than USD 880 billion (as per year 2015).


Impact for Country

In this case, we focus on Special Purposes Vehicles, and impact to country tax income. Lets take an example.

  1. Person A wants to create a new company Company A, in Panama, using SPV (special purposes vehicles) scheme.
  2. Company A is a Parent Company and wants to enter Indonesia business using name Company B, listed as a foreign investment by Investment Coordinating Board of the Republic of Indonesia.
  3. Company B start a business and propose a debt to Parent Company A.
  4. Impact #1 – The Indonesia External Debt increase since the loan calculate as a public sectors debt.
  5. Impact #2 – tax income from debt. When declare as a debt, there are a potential debt interest that could eliminate profit and finally total tax income.
  6. Impact #3 – tax income from dividend. When they looks like pay a debt interest, its become a dividend from Company B to Parent Company B. The debt interest could eliminate profit and tax income, in other side there’s no tax dividend pay to country.





The world is not same again, shaken to free of secrets. Do you remember data breach of more than 300 million customers data on some companies, like Sony, Anthem, E-bay, etc? Don’t just see the loss of password, but remember that someone else can buy and use the data for see the general activities and habit to predict a future action. Options are on us. #1. Back to traditional system, like  Flintstones. #2. Accept reality and enforcement on better regulation, especially on anti money laundering and tax.

Action Plan

After this, what should we do as a country? Or suggest to our country. There are many ways to bring it back the money to original country.

  1. Tax regulation of tax amnesty, by repatriation law, to pull the money back to original country.
  2. Tax regulation of tax amnesty to collect data from all tax heaven country. E.g. can be from implementation of Automatic Exchange of Information (AEoI).
  3. Many companies list in Panama Papers are anonymous shell companies, whose has a motivation for hide behind hired “nominees”, become “getaway cars” for tax dodgers, launderers and crooked officials. Tax Mandatory Disclosure Rule or General Anti Avoidance Rule (GAAR), to see motivation background of create SPV in heavens country. E.g. Indonesia has a Specific Anti Avoidance Rule (SAAR), but not strong enough if compare with GAAR. The penalties for not comply should be stiff. Britain and a few smaller countries have led the way in this.
  4. Enhance financial transparency, anti money laundering especially for global bank.

Lesson Learn for Personal Life


Hmn, maybe it’s too high. Okay, lets back to personal life and make it simple. As an ordinary person, some learning point can be made based on this cases.


  1. Mapping your life and business process. No matter personal or business, we must mapping to identify and point out the biggest risk. After that, make a mitigation and follow up in regular basis, especially for high risk.
  2. If the high risk is data security, make a protection from small activities. As a Risk and Compliance consultant, always said to my customers to protect the data, even in small activities. E.g. Lock laptop when go for a while; using encrypt email; secure usb; back-up data in cloud and external hard disk; change password periodically.
  3. If the risk is money laundering, make a proper due diligence process. In previous experiences, this process is still developing in outside banking industry. To minimize, keep documentation of your due diligence process for regulator purposes.
  4. Tax management planning is not illegal. We can differ or minimize tax income using various plan. E.g. donation, change into small transaction.


Personal Life

  1. Keep your data privately and never share any password to anyone.
  2. Don’t trust new people who wants to transfer a big amount to your account, especially from countries listed on FATF. It’s a part of money laundering activities.
  3. Motivation to maximize assets. Rather than keeping your fresh money on saving account, change into investment. There are so many investment scheme but ensure legal aspects on transaction and company who invest our money. E.g. In Indonesia for yearly basis, 1-3% (saving account); 10-20% (if keeping for minimum 10 years – pension fund, unit link, stock market (capital gain & dividend), & gold), 10-25% (property (capital gain & rent), etc. Of course, we must remember to keep urgency fund, as proper as we can.
  4. Tax planning by legal way – divide big assets into small assets. 1 big houses valued USD 1.00o.000 have a big tax compare with 10 houses @ USD 100.000. Also, it easier to sell and rent small house compare big house.


Have a wonderful day!

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