What is the scandal about and should you watch the movie?
The biggest leak in history. Fix your washing machine. I wonder how many may have taken the time to watch the recently released film The Laundromat by Steven Soderbergh? It was based on the biggest data leak ever known. The Laundromat tries to tell the story of the two lawyers in charge of the Mossack Fonseca law firm that helped create thousands of offshore accounts and shell companies for the wealthiest people around the world.
Unfortunately, I watched it. Twice. That’s 180 minutes of my life I won’t be getting back, but had to watch it twice to be factually correct. It seems a lot of people agree with me as it only rated 42% on Rotten Tomatoes, a review-aggregation website for film and television, that is extremely low as ratings go.
This was a golden opportunity to explain the Panama Papers and understand more about the offshore world. The intent at the beginning of the film was correct and Soderbergh looked to humanize the story. A great start but it didn’t last long.
The story unfolds, obviously, not showing any offshore operations in a favorable light with Meryl Streep tracking down an insurance Company to Nevis that was falsely run and unable to meet any obligations. But the stigma attached is pointed at offshore jurisdictions and attempts to suggest that all offshore companies are just bad. Although the owners of the boat that capsized admits that he tried to save money and took an insurance policy that didn’t actually cover them anyway. Illegal activity is pure and simply just that—illegal. The actions of unscrupulous individuals cannot be blamed on the offshore entities or structures, especially when just as much tax evasion goes on in the onshore world. It is individuals not structures that are the issue.
The film goes off in multiple tangents suggesting that all offshore company/structure owners cheat on their wives and have affairs with their daughter’s college friends and then moves on to murder in China somehow, which is totally confusing.
The final scene has Streep suddenly jumping out of a chair looking like a bedraggled Statue of Liberty and this is where the only real decent part of the film occurs—the closing credits.
In that closing, a slide comes up that discusses how the US is the biggest global tax haven and billions are never paid by large companies in corporation taxes; probably the best part of the film. And certainly not happening in some tiny island in the middle of the Pacific!
One shot during the film asks, “When will the meek inherit the earth?” It implies also that the use of offshore facilities is only for the rich and famous. This could not be further from the truth.
Offshore jurisdictions are available to absolutely everyone, including your normal average person who will take the time to look. There is a huge difference between tax avoidance and tax evasion. One will put you in a jail cell and the other will hopefully get you closer to a banana daiquiri on a beach somewhere, retired. Possibly even in an offshore jurisdiction? Who knows?
Tax avoidance is perfectly legal as opposed to tax evasion. The former should be adopted by all, to mitigate tax burdens that are simply not necessary. As individuals, it can be used in regular monthly savings structures, such as inheritance planning and trusts. If you have spent an entire lifetime of paying into the tax system, why should you pay even more if you don’t have to or your dependents should? Wouldn’t you rather a lifetime of work and earnings were passed down to your loved ones rather than the taxman? And if you are the person that wants money to be used elsewhere then get a will written and offer charitable donations from your estate.
It is a question I get asked so often. The average person, sadly, simply doesn’t know that these possibilities exist. This belief probably exists because the average person thinks that only corporations and rich individuals can use these strategies. Probably because the average person is under the false impression that it is expensive to utilize an offshore facility. It really isn’t!
It doesn’t help that it is usually high profile persons that are “exposed” by the media. Lewis Hamilton being a prime example of the Panama Papers leak. But at no point has he ever actually broken one law or been charged with such. But funnily, it does sell a lot of newspapers doesn’t it. So, who is corrupt? Perhaps the newspaper for insinuating that something has occurred illegal using sensationalist headlines and profiting from it? Or Hamilton? I’ll give you a hint. It isn’t Hamilton.
Rupert Murdoch, along with other media moguls, have been criticized for the way they reported and went after wealthy business figures and some political leaders while largely shying away from the corporate side of the story that has enabled trillions of dollars, euros, pounds and rubles to be hidden offshore.
So what do we take from all of this?
Well, the film was an attempt to show the misuse of a system, which, in all fairness, holds merit. But, this could be said of any industry and jurisdiction. Corruption exists everywhere.
I personally feel that offshore entities get a bad rap overall. Stick to the letter of the law and take into consideration the home laws of your country of citizenship. The laws of your resident country and the laws of the offshore jurisdiction and you will be able to secure a better financial future. But, it all starts with an initial question. Do feel free to ask me anything regarding both onshore and offshore jurisdictions for personal finance if you want the correct answer…