The political economy of big data leaks: Uncovering the skeleton of tax evasion

Abstract

After the leak of 11.5 million documents from the Panamanian corporation Mossack Fonseca, an intricate network of offshore business entities has been revealed. The emerging picture is that of legal entities, either individuals or companies, involved in offshore activities and transactions with several tax havens simultaneously which establish, indirectly, an effective network of countries acting on tax evasion. The analysis of this network quantitatively uncovers a strongly connected core (a rich-club) of countries whose indirect interactions, mediated by legal entities, form the skeleton for tax evasion worldwide. Intriguingly, the rich-club mainly consists of well-known tax havens such as British Virgin Islands and Hong Kong, and major global powers such as China, Russia, United Kingdom and United States of America. Our findings build a ground for better understanding phenomena where the erosion of public trust may spark emergent social dynamics, such as social conflicts and political polarization, that are driven by the complex interconnected structure of tax evaders in a globalized economy.