The Panama Papers, explained with piggy banks

by Volker Weber

Brilliant explanation on Reddit:

When you get a quarter you put it in the piggy bank. The piggy bank is on a shelf in your closet. Your mom knows this and she checks on it every once in a while, so she knows when you put more money in or spend it.

Now one day, you might decide "I don't want mom to look at my money." So you go over to Johnny's house with an extra piggy bank that you're going to keep in his room. You write your name on it and put it in his closet. Johnny's mom is always very busy, so she never has time to check on his piggy bank. So you can keep yours there and it will stay a secret.

Now all the kids in the neighborhood think this is a good idea, and everyone goes to Johnny's house with extra piggy banks. Now Johnny's closet is full of piggy banks from everyone in the neighborhood.

One day, Johnny's mom comes home and sees all the piggy banks. She gets very mad and calls everyone's parents to let them know.

Now not everyone did this for a bad reason. Eric's older brother always steals from his piggy bank, so he just wanted a better hiding spot. Timmy wanted to save up to buy his mom a birthday present without her knowing. Sammy just did it because he thought it was fun. But many kids did do it for a bad reason. Jacob was stealing people's lunch money and didn't want his parents to figure it out. Michael was stealing money from his mom's purse. Fat Bobby's parents put him on a diet, and didn't want them to figure out when he was buying candy.

Now in real life, many very important people were just caught hiding their piggy banks at Johnny's house in Panama. Today their moms all found out. Pretty soon, we'll know more about which of these important people were doing it for bad reasons and which were doing it for good reasons. But almost everyone is in trouble regardless, because it's against the rules to keep secrets no matter what.

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My understanding: If Johnny's house/mom was the law firm, she would have erased the names on the piggy banks and would have get paid brazilions for not telling anybody which piggy bank belongs to which name...

Timm Caspari, 2016-04-05 08:09

It is a very nice explanation. I prefer this one though:

"tax hells are the parents of tax h(e)avens"

Pedro Quaresma, 2016-04-05 14:07

There's a slight inaccuracy. The piggy banks aren't actually hidden in Johnny's house in Panama. Johnny was very good at building fictitious houses and making arrangements to pass the piggy bank to someone in the fictitious house who would pass it to someone in another fictitious house who would eventually hide the piggy bank in other someone else's real houses - sometimes in Panama, and sometimes in other countries. Of course, he kept records of the fictitious houses and where each piggy bank was eventually hidden, by whom and for whom. Johnny's mom found the records.

The reason I bring up this additional level of detail is that some people in the US are incorrectly asserting that the problem is due to a recent agreement between the US and Panama, which their favorite superhero tried to stop. Of course, the problem is not specifically a US-Panama problem, it pre-dates that agreement by many years, and the superhero's efforts would not have done anything to prevent it or rein it in.

Richard Schwartz, 2016-04-05 17:33

Pedro, tax hell starts everywhere with 0.01%.

Hermann Wiesner, 2016-04-05 21:17

This is not about hiding the money. It's about hiding who it belongs to. Hidden money is so boring. You can't do anything with it because it needs to remain hidden.

But once you've transferred the money into a shell corporation, you can have so much fun. It's not only about saving taxes, it's about spending the money without tracing it back to you. Buying nice things, making political donations or paying for the hookers at the party....

Unfortunately those payments are on record. And now they might be traced back. So, this isn't like the other tax leaks. It's about what people where buying when they thought nobody was watching - which might be a wee bit embarrassing.

Max Nierbauer, 2016-04-06 19:22

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I explain difficult concepts in simple ways. For free, and for money. Clue procurement and bullshit detection.


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