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Pandora Papers Explained | Money Trail of Super Rich People | Dhruv Rathee - YouTube
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Hello, friends!
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Some days ago, in the world of Finance,
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we got to witness a shocking revelation.
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The Pandora Papers.
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These papers contain the names of many influential people.
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Billionaires, top government officials, public figures, celebrities, and even
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sportspersons like Sachin Tendulkar.
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But what exactly has been revealed in these Pandora Papers?
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Come, let's try to understand it
in today's video.
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"The most expansive expose of financial secrecy."
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"The Pandora Papers are especially big ones."
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"Pertaining to the cross-border deals of these persons..."
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"Off-shore secret..."
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"Off-shore centred..."
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"Off-shore units..."
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"Which are not open for everyone to see..."
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"It contains the names of more than 300 Indians."
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Friends, the word Pandora comes from Pandora's Box.
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It is from Greek mythology.
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'Opening a Pandora's Box' is an idiom.
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It basically means that you do something,
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and because of what you did,
some unexpected problems are created.
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For example, if I say that
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religion can be involved in politics,
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it would basically mean the opening of a Pandora's Box.
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By doing this, there would be many major unexpected problems in the future.
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Pandora Papers are named after this idiom.
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But what are these Pandora Papers exactly?
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It is similar to the Panama Papers published in 2016,
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the Pandora Papers are a financial data leak.
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A financial data leak that shows how the super-rich people of the world,
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the top 1% rich people of the world,
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how they avoid paying their taxes,
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or simply don't pay their taxes.
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Two years ago, the International Consortium of Investigative Journalists received a tip.
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The ICIJ is an international network
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of more than 100 media organisations spread across more than 100 countries.
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It is basically a body of journalists.
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They were given the data by someone,
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and it was substantial data,
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of 14 off-shore companies.
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This data had more than 11.9 million files.
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Data of more than 3 TB.
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6.4 million documents, 100,000 images,
and 1.2 million images.
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This data showed how the various super-rich people handle their money.
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And how they hide their money across different countries.
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And basically not paying the taxes.
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At a time when the tax burden on the common people keeps on increasing.
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These people have so many ways of tax evasion.
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Obviously, because of the size of the data, it took some time to process it.
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So ICIJ invited more than 600 journalists
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from 117 countries,
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to participate in this investigation
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and to help them process the data.
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To filter the important data and to draw a conclusion from it.
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All those journalists participated in this investigation.
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For example, the BBC from the UK,
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The Guardian, a reputable newspaper from the UK.
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From India, The Indian Express had participated in it.
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And the journalists took about 2 years to process this data.
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And finally, they made this expose now.
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Many influential people and powerful world leaders were named in these Pandora Papers.
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More than 35 world leaders, including
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current and former Presidents
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Prime Ministers
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many governmental public officials,
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many ministers in the government
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judges, mayors, military generals, of various countries.
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Apart from these, more than 100 billionaires, celebrities, rock stars,
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and business leaders.
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Before going into the details of these names,
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let's understand what does Pandora Papers tell us exactly.
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How do these rich people hide their wealth and avoid paying taxes?
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What are the techniques?
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To be honest friends, there are a lot of ways to do this.
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Like creating shell companies,
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forming foundations and trusts,
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sending the money from one company to the other,
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sending it to other countries,
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money laundering,
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but I would like to focus on one specific way in today's video.
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That is the most common way, according to the Pandora Papers.
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Off-Shore Accounts.
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Literally, 'off-shore' means outside the borders of one's country.
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But in this context, off-shore generally means Tax Havens.
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Countries where it is easy to set up companies.
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Countries with no Income Tax or Corporate Tax,
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or one has to pay a nominal amount in taxes.
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Countries where the laws
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make it difficult to identify the owners of the companies.
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I talked about these Tax Havens in an earlier video as well
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it was in the video on Income Tax,
if you remember.
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So basically, there is no definite list of the countries that are Tax Havens,
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but some of the general names that often pop up are
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the Cayman Islands, the British Virgin Islands,
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Bermuda, countries like Panama, Antigua and Barbuda,
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some people even consider Switzerland and Singapore as tax havens.
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Let's understand how it works with an example.
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One possible way, which is listed in these Pandora Papers.
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What happens is that the rich people
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they try to set up off-shore companies in these tax haven countries.
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But generally, they don't want to do it in their names,
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to maintain their privacy.
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So they go to a lawyer or a tax advisor or a wealth manager.
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They give the money to the wealth manager,
who sets up a company on their behalf.
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In his name.
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To hide their names.
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And thus an off-shore company is set up.
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And this off-shore company has a separate bank account.
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And often they use this bank account to buy expensive things.
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Like buying properties or private planes or boats.
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They buy it in the name of the off-shore company.
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So that their real identity would never be revealed.
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And because this off-shore company is in a tax haven country,
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they would have to pay almost no taxes on all this money.
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And they often deposit their money in the account of the off-shore company
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so that they have to pay little to no taxes in the country they live in.
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Friends, the most interesting thing is that,
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it is not necessarily illegal to do it in every situation.
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It is not illegal to pay tax advisors and lawyers
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so that they could find loopholes in the tax system
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so that you can reduce your tax liability.
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It is not illegal to do it.
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Tax Avoidance and Tax Evasion are different.
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And it is very important to differentiate between the two.
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One thing that is definitely not illegal
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and that can be used by any person to protect their privacy online
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And now returning to our topic.
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Tax Avoidance can be done legally.
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You can use legal ways to avoid paying tax,
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by finding loopholes in the existing tax system.
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But Tax Evasion means that you are doing something illegal.
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Obviously, there is a grey area between the two.
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About what is tax evasion and what is tax avoidance.
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It is not so clear cut.
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Because the tax system of most of the countries is very complicated.
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And when you pay competent lawyers and tax advisors,
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it is their job to find loopholes in our tax system.
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This is why every person, that has been named in the Pandora Papers,
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they are not necessarily criminals.
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Not every person has done something illegal.
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This can be legally done as well.
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But yeah, you can say that
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to do this is perhaps unethical or immoral.
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But of course, an actual criminal can also use these same ways
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for money laundering, to hide his identity,
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or for basically doing any illegal activity.
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It is equally possible that the people named in the Pandora Papers
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have done something illegal or any criminal activity.
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But it would depend on person-to-person.
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It would depend on the individual case.
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What they did exactly.
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Let's take an example.
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Like the Russian President Putin named in the Pandora Papers,
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allegedly, in Monaco, a small tax haven country in Europe,
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a luxury property was purchased there worth €3.6 million.
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This property was purchased by an off-shore company in the British Virgin Islands.
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Officially speaking, this property was purchased by the company
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so it is in the company's name.
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But the Pandora Papers have revealed that the ultimate beneficiary of that company is actually
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a woman who is alleged to be Putin's secret lover.
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And it is said that this woman came from a middle-class background
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so it is not possible for her to buy this luxury property.
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The question then arises did Putin use his money
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purchased this property through the off-shore company?
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And if so, is it legal or illegal according to the Russian tax laws?
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And to go one step further, is it moral or immoral of Putin to have done this?
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Similarly, the former British Prime Minister,
Tony Blair
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and his wife are also named in these Pandora Papers.
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That they saved around £300,000 in stamp duty, a type of tax,
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because they purchased a property through an off-shore company.
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There was nothing illegal in this process.
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Because it is allowed to do so in the UK Tax Laws.
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Similarly, the famous Columbian singer Shakira is also named on the Pandora Papers' list.
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Allegedly, she has 3 off-shore companies in the British Virgin Islands in 2019.
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Apart from these, some of the famous Indians named in this list are
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Sachin Tendulkar,
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Anil Ambani, Vinod Adani,
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Jackie Shroff, Radia, Satish Sharma,
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and several Income Tax officers are also named in this list.
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And even government officials are named there.
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Overall, more than 300 Indians are named on this list.
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Other than these, many people from the inner circle of Pakistan's Prime Minister Imran Khan
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are also present on this list.
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But as I said, individual cases need to be checked
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to find out if someone actually did something illegal
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and where it is only immoral.
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Talking about morality, in my opinion, this whole revelation of the Pandora Papers
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shows a downside of our capitalist system.
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Think about it,
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if you are from a poor background,
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your family does not have much wealth,
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what would be your options to earn money and save up?
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Mostly, you'd have only one option.
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That you get a nice, salaried job.
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But if you are from a middle-class family,
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and your family has some extra money,
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then you can invest that money in the stock market, mutual funds or you can buy a property.
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So you get some more options.
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And if you are from the upper-middle-class,
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then your family probably has enough capital that you can afford
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to not get a job
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if you want to start your business,
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then you would get the capital to start the business.
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But if we go one level higher.
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If you are from the top 1% rich class.
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The people that have been mentioned in the Pandora Papers,
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Then you have enough money
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to afford to pay expensive tax advisors and lawyers,
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who can find legal ways and loopholes in our existing tax system
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and they can help you save more money by not paying taxes.
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Do you understand what I'm trying to say?
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The richer that you get,
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the more options you get of earning money, saving up and evading taxes.
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At this level, the options that the top 1% have to save money,
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they can go to tax haves and buy properties,
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can set up off-shore companies,
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these options are simply not available to an average person.
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Because an average man does not have the money
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to pay these expensive tax advisors.
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Or to buy properties in other countries.
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I talked about it in my video on Capitalism, if you remembered.
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The principle of Money Begets Money.
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This is a systemic problem.
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And it wouldn't be easy to solve it.
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If you try to solve this problem,
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you would face 2 main obstacles.
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First, there would always be some countries without any Income Tax.
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That would have very low tax rates
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because those countries need to find their sources of income too.
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These small island countries,
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like Bermuda, British Virgin Islands, Panama, Antigua,
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the government of these countries do not have many sources of income.
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And because every government of an independent country can make their own rules,
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they keep their taxes very low,
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and sometimes even completely eliminate them,
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so that the rich go to their countries
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buy properties, set up businesses,
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so that it would benefit these countries.
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And the government of these countries could get a source of income.
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That's why these countries do this.
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And it is extremely difficult to stop them from doing it.
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The second obstacle comes up when
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the tax system is sought to be changed,
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and the government tries to close these loopholes.
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What happens because of it is
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the tax system of the country becomes even more complicated.
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So complicated, that for an average person,
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without hiring a tax advisor,
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without the help of a Chartered Accountant,
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filing their own taxes is not possible.
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It becomes even more difficult for a common man to do business
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because the tax system becomes so complicated.
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And of course, the super-rich people
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can afford more expensive tax advisors and lawyers,
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who could find loopholes in the existing system as well as the new system.
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So these are some of the obstacles that one has to face
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when one tries to find solutions for the issues like the Pandora Papers.
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Fundamentally, this issue is that the rich have so much money
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that they find ways to save their money and not pay taxes.
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And a common man is forced to pay more tax,
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when he has no other option.
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To avoid this, realistically,
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the solutions that the governments are discussing
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are to come up with International Regulations by major countries,
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like the USA, European Union, China, and other large economies,
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if they come together to formulate some international regulations,
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then it may be fruitful.
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Another solution that is being talked about
is a Global Minimum Tax.
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If all the countries agree to a minimum tax rate in every country,
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then tax evasion would not be possible.
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It is yet to be seen how successful these can be.
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And Global Minimum Tax is a topic that deserves its own video.
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I hope you found this video informative as always.
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The link to NordVPN is in the description below.
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Let's meet in the next video.
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Thank you very much!
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