Structural studies of the global networks exposed in the Panama papers

https://doi.org/10.1007/s41109-020-00313-y

by nobody9999 • 6 years ago

193 91 6 years ago

roenxi• 6 years ago

Accounting has a rich history going back approximately 7,000 years [0]. This decade will get an entry in that history as "and in the early 21th century, it became a matter of public record how rich people actually managed their money".

It might be easy to underestimate how tectonic papers like this are.

[0] https://en.wikipedia.org/wiki/History_of_accounting

BadassFractal• 6 years ago

I haven't been following the fallout of the Panama Papers leak, but has anything concrete (and positive for us vanilla tax payers) actually come out of it? Or did the ultra wealthy simply move their tax evasion schemes to a different set of countries?

ncmncm2• 6 years ago

Just different agencies at the same countries.

vmception5• 6 years ago

Laws havent been reported to have changed, a few people had legal consequences, a few people had reputational consequences, most didnt because what they did may be misunderstood but not illegal

r721• 6 years ago

https://old.reddit.com/r/PanamaPapers/comments/4e7f1n/person... (last updated 2 years ago, so without more recent developments)

vikingcaffiene• 6 years ago

Everything I've heard about the panama papers suggests that it's a massive scandal that exposes how the rich and powerful are systematically fucking over society. The sad truth is that even though it's been exposed, the scheme is too complex for most people to grasp. Hell they even made a movie about it and no one paid much attention.

nobody99996• 6 years ago

The sad truth is that even though it's been exposed, the scheme is too complex for most people to grasp.

As the paper's abstract says: "In recent history, the Panama Papers have comprised one of the largest and most influential leaks detailing information on offshore entities, company officers and financial (and legal) intermediaries, and has led to a global exposé of corruption and tax evasion. A systematic analysis of this information can provide valuable insights into the structure and properties of these entities and the relations between them. Network science can be applied as a scientific framework for understanding the structure of such relational, heterogeneous datasets at scale. In this article, we use an existing, relational version of the Panama Papers to selectively construct various networks, and then study the properties of the underlying system using well-defined analytical methods from network science, including degree properties, country assortativity analyses, connectivity and single-point network metrics like transitivity and density."

This is an attempt to make some sense out of this using the tools of Network Science[0].

[0] https://en.wikipedia.org/wiki/Network_science

vmception5• 6 years ago

The movie was simplistic bullshit where every situation was nefarious broken people instead of the everyman that uses and would use these entity structures

csb63• 6 years ago

Sure, non-wealthy people own stocks. But right now, the richest 10% of American households own 84% of the value of all stocks owned by Americans [1]. It is clear that the wealthy benefit massively from these structures and have much more use and access to them than the "everyman", who in the U.S. probably lives paycheck-to-paycheck. The fantasy that the "everyman" is this cowboy investor and broker is ridiculous and only makes sense if you define "everyman" as an upper middle class American who has a high-paying job and owns significant investments. Compared to the wealthy, most Americans see no benefit from these global networks of moving money around because they aren't rich enough to make the effort and investment worth doing, much less have the connections necessary to even access them.

[1] https://money.com/stock-ownership-10-percent-richest/

ShamelessC• 6 years ago

What was the movie called? Don't think I saw that.

kjksf• 6 years ago

The Laundromat Available on Netflix https://www.netflix.com/title/80994011

monkeycantype• 6 years ago

The actual power of the wealthy is vastly overestimated. What matters is the extent to which that power is exercised. Most of us exert very little effort to nudge society in a direction we want it improve, leaving the few that do vulnerable and exposed. (and we put too little effort into handle the conflict that arises when we do.)

I disagree that people couldn't understand the panama papers, we don't because we don't try. People like J.C. Sharman spell it out for us what's going on.

http://www.internationalaffairs.org.au/australianoutlook/rea...

we just don't read it. I've got his book. I haven't read it. But in the time that I've had it I've watched multiple garbage sci fi series.

wombatmobile• 6 years ago

In recent history, the Panama Papers have comprised one of the largest and most influential leaks detailing information on offshore entities, company officers and financial (and legal) intermediaries, and has led to a global exposé of corruption and tax evasion. A systematic analysis of this information can provide valuable insights into the structure and properties of these entities and the relations between them.

OK, I get that. What are the insights?

In the Summary it says:

We iterate that, while we certainly did not expect small-world phenomena to emerge in all networks, the fact that it did not emerge in even a single network, and also that the distribution of connected components (as a function of size measured in terms of number of nodes) seems to follow a clear and consistent trend throughout, suggest a similar fundamental difference compared to small-world networks.

Um, what does that tell us about corruption and tax evasion? Can somebody please explain in layman's terms?

davisr• 6 years ago

It means the corruption is spread far and wide, without a central group of 'authority'.

hashtagmarkup2• 6 years ago

It means the author has to worry about car bombs from more than a single entity.

civilized• 6 years ago

It means the authors were trained to plot degree distributions of any network they come across, and hey, here's another network, let's plot some degree distributions

idclip2• 6 years ago

It means corruption is a basic human behavior. Its a self generating phenomena, and is „natural“.

So there is no „illuminati“ to go after to solve this. Studies try and see how problems can be solved - if there was a single organizing entity like a mafia boss, it would be simpler to tackle the issue but there isn't, so its Marder than first expected.

As to tax evasion, id posit the question „so why are these people evading? Is it the law itself? Can they be otherwise somehow incentivized to invest in their Communities rather than evade? And how big is the contribution here? Is it worth pursuing?“

guerrilla• 6 years ago

It means corruption is a basic human behavior.

That is most certainly not what the study means. If you were going to extrapolate, you might be able to get away with corruption is basic rich people behavior, but even that is going way further than what the study is actually saying.

milchek• 6 years ago

Can they be otherwise somehow incentivized to invest in their Communities rather than evade? And how big is the contribution here? Is it worth pursuing

I like this question. It makes me wonder what society would look like if we had micro community councils that operated this way, where residents “donated” parts of their wealth and those donations gave them some sort of stake, naming right, or voting power in community projects.

I wonder if we’d get the same sort of donations we get by wealthy families to get hospital wards named after them etc.

I suppose it requires a shift in what we value as humans, perhaps we could work toward a society where the amount you’ve given away gives you the most social credit or prestige, rather than how much you’ve amassed. Is it too naive and childish to think this sort of society is possible and could be an improvement over the current one?

fit2rule3• 6 years ago

They're evading because taxation is based on income.

If it were based on expenditure, there'd be no avoiding.

eternalban• 6 years ago

Off shore safe havens exists because some sovereign authority has designated their domain as a "tax haven" and the usually very strict sovereigns of "big powers" are not sending their military to the said "off shore safe havens" to shut them down.

Opaque segments of the global financial networks enable Black Ops. No need to drag in Weishaupt and his worshipful brethren here, correct? So let's just discuss the "secret services" of the "big powers". Are they using the "tax havens"? I think the answer must be "Surely you jest, old boy!"

frabbit2• 6 years ago

More like "illuminati" emerge "naturally" from the "Free Market".

xavriley• 6 years ago

In network science, it’s fairly common to take a graph of something and be able to apply techniques like neighbourhood analysis or clustering which then reveal something about the data. This comes up in all kinds of real world examples from social networks to music preferences etc. What the authors are saying (I think) is that they tried the same tricks on the Panama data and got nothing useful out of it. The standard graph techniques don’t explain anything useful about what’s going on. I would guess (from previous experience working on similar things at opencorporates.com a few years ago) that this is because these networks aren’t constructed according to the real world - instead they’re a response to specific tax rules. For example if you use a specific tax avoidance scheme like the Irish dog leg then the company structure will be defined by the laws of the countries involved. Another reason would be that intermediaries like company formation agents are likely to show connections where they don’t exist in reality. If I use the same company formation agent as say, Donald Trump, it doesn’t follow that we’re related financially. Finally the Panama papers were just about hiding assets in many cases, so you’ll have these chains of ownership going through as many countries as they could be bothered to work with. This is just to give law enforcement etc. a hard time. Again I wouldn’t expect graph analysis to make sense of that on its own. If anyone is interested, banks in the US are required to document their corporate structures so there’s good data available on their structures. It suffers from the same issues though - it’s hard to tell from looking at a graph of companies where the bad stuff is happening.

nobody99996• 6 years ago

What the authors are saying (I think) is that they tried the same tricks on the Panama data and got nothing useful out of it. The standard graph techniques don’t explain anything useful about what’s going on.

The impression I got was not that they found nothing useful, but that they didn't find broadly interconnected networks within the data.

If that's the case, it's likely that the transactions in the data aren't tightly linked.

Which is useful, in that it tells us that those involved in such activities are not a cabal of evil elites, rather they're disparate groups with little in common except their desire to avoid taxes/hide assets.

That conclusion certainly implies that addressing these activities will be more difficult as they are decentralized and widespread, but it's certainly not useless IMHO.

canjobear• 6 years ago

It means they ran a bunch of off the shelf graph theory algorithms and the results were confusing.

plutonorm• 6 years ago

There are no lizard people. No New world order and no Illuminati. Disappointing because that makes it all much harder to solve and makes it that much harder to view humanity in a favourable light.

WealthVsSurvive• 6 years ago

Humans are easy to view in a favorable light. Humanity, less so. Humans take individual actions that help themselves. Humanity forms networks of perverse incentives that harm others. If we build a network of perverse incentives, and catastrophe befalls us, an interesting thing happens: no one wants to lose in the time of loss. This is when you get revolutions, invasions, fascism threatening where the imaginary border lines are drawn. It's all merely loss aversion. Change is necessitated by material reality, in which the average person, fearing for their loss of wealth or for their loss of potential future life, are driven to extreme or violent actions. There needs to be one world currency, and it needs to be subject to entropy without human intervention (and something similar with material buildup and 'property'); we will kill ourselves otherwise as that which nourished us in the past is today's poison. Nothing is forever, why is wealth? Loss over time due to entropy as law needs to be more accounted for in our world economy as a whole. There is a level of individual wealth and capital advantage one may gain that literally destabilizes international peace (I'm looking at you global oil): why do we allow it? It's like nations have become lame date-show suitors to international oligarchs, offering missiles as flowers, and it's pathetic, and it's weak.

seibelj3• 6 years ago

There will always be offshore entities with strong rule of law (Cayman) because multinational companies need a neutral ground to settle disputes with competent judges without the whims of each company’s home base screwing it up.

That’s the most generous and ethical explanation for the continued support and existence of offshore judication. The unpopular reason is that offshore countries offer lower taxes and favorable regulation. As someone who believes in the smallest possible state and enjoys the benefits of offshore countries (as do Facebook, Google, and Apple which use a combination of the Netherlands, Ireland, Bermuda, and Cayman in complex corporate structures) I am sympathetic to this argument. Although my friends say I am a corporate stooge!

jariel5• 6 years ago

"multinational companies need a neutral ground to settle disputes with competent judges without the whims of each company’s home base screwing it up."

This is definitely not it. The largest entities with the most IP at stake don't duke it out in the Cayman islands.

Moreover, Cayman - and any other offshore - does not have nearly the sophistication to handle complicated disputes.

'Sound rule of law' is one thing, but when laws are not very clear or complex, without a lot of historical rulings, without a sophisticated judicial + participants ... then it's not going to be part of the value add.

If you're really concerned about 'rule of law' then you want to be in EU/US/UK, possibly Canada, Australia, Switzerland and you don't even want it to touch other jurisdictions.

seibelj3• 6 years ago

I don’t think you understand how offshore works. You seem like someone who saw a bunch of YouTube videos. For example all re-insurance companies that back the US insurance markets are Bermuda companies, and this is explicitly OK in the tax code.

ncmncm2• 6 years ago

They have it right.

The less power the state asserts, the more is left for the biggest corporations to use, throwing their weight around, dominating everybody smaller.

jariel5• 6 years ago

The Panama papers really only make sense in the context of multinationals operating from regimes with some degree of transparency, i.e. the West, Japan, Singapore etc..

'Most' of the problems are in regimes where everything is nicely hidden i.e. Dubai, Moscow, anywhere in China.

Why would anyone do banking in Dubai, where there are absolute Monarchs who can do whatever, whenever, with their money, finances information, when they can go to US/UK/EU and have full legal protections? Because 'no transparency'. And that's it. Billions of USD intended for Afghanistan investment end up in bank accounts there etc..

What we really need are the 'Dubai Papers'.

powerapple3• 6 years ago

I would expect people in Dubai, Moscow and China put their money in the WEST. How much money go to London every year? How much money go to Sydney? And Vancouver? Money will go to the so-called cities with transparency.

jariel5• 6 years ago

People in Russia and China put their money in the West for it to be safe from their own corrupt regime, otherwise, they don't want transparency.

And Dubai, definitely, is the place to keep dirty money.

If it can be cleaned, and someone has legit cover for their money, they can keep it in the West.

FandangoRanger2• 6 years ago

Hey where can independent researchers obtain the Panama Papers? I don’t think people can be expected to simply “trust us guys.”

nobody99996• 6 years ago

Hey where can independent researchers obtain the Panama Papers? I don’t think people can be expected to simply “trust us guys.”

Footnote 5 of the paper in the submission provides a link to the data used. For your convenience, that link is: https://offshoreleaks.icij.org/pages/database

I look forward to reading your paper when it's complete.

FandangoRanger2• 6 years ago

No I mean, the entire dataset. It's being jealously guarded by the "free" press.

K0balt• 6 years ago

It should be mentioned that there are lots of non tax avoidance reasons to go offshore. The biggest ones are asset protection and incontestable estate succession.

IMHO, if your net worth is over about 250k (or lower if you have a high risk profile) your assets should probably be held in an offshore LLC, trust, or foundation. This makes them effectively untouchable by lawsuit, divorce proceedings, seizure, etc.

If you are concerned that your will provisions will be contested or that a lawsuit between siblings is likely when you die, offshore estate management also makes those things impossible.

Since in only costs 1-3 thousand US to set up effective offshore asset management, and maintaining it is 200-1200 a year, it's a small price to pay for peace of mind.

nickpp2• 6 years ago

This. Most people pissed off about various (legal) offshore structures do not even understand their utility. A little financial education goes a long way.

JacobAldridge• 6 years ago

Noting that transferring assets into Trust will often trigger a capital sales event (and tax), while potentially increasing asset holding costs (your home held by a Cook Islands trust may be subject to non-resident land taxes, for example, than many self-occupiers are exempt from) or life friction (I had a UK client who refused to work with me unless my main company was based in the UK, for example). Of course, these things are hugely jurisdictional - I would set the bar much higher than $250K net worth, but agree with your point.

Havoc• 6 years ago

This feels very much like a case of when you have a hammer everything looks like a nail

Structural studies of the global networks exposed in the Panama papers

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