After a massive document leak called the Paradise Papers revealed how the world’s richest park their money in offshore tax havens, the response from those exposed was unanimous: There’s no evidence of wrong-doing, all operations are fully compliant with international tax law.
Indeed, the offshore tax avoidance structures are legal. They’re also incredibly complex – so complex that anyone who is not a tax professional can hardly understand them. Paddy Houlihan, for instance, an actor from a popular BBC sitcom who was among those outed, said that he was constantly signing documents he never understood.
Tax havens are jurisdictions with relatively low or no taxes and regulations that allow for financial secrecy. To unravel the complex transactions that they enable, Quartz has diagrammed some of the most common tax avoidance strategies broken into the different types of taxes individuals and corporations are seeking to avoid.
These diagrams are by no means a comprehensive guide to dodging taxes. The methods exposed by the Paradise Papers are also not the most straightforward. States in the US like Delaware, South Dakota, and Nevada have lax disclosure requirements that are a boon to corporate secrecy. What the flowcharts show, however, are the most common tax avoidance schemes that exploit loopholes in the international tax system that contribute to the growing inequality between the wealthiest, and the rest of the world.
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