Secretive real estate purchases driving offshore economies

Pandora Papers outline ripple effect of growing transactions

From left: Guillermo Lasso, Julio Iglesias, and Abdullah II bin Al-Hussein (Getty, iStock, ICIJ)
From left: Guillermo Lasso, Julio Iglesias, and Abdullah II bin Al-Hussein (Getty, iStock, ICIJ)

Major investors spending millions on real estate via offshore companies or trusts are increasingly dodging authorities, and in turn, setting off sizable ripple effects in global markets.

An investigation by the International Consortium of Investigative Journalists outlines growing evidence that massive offshore real estate purchases could negatively impact those lower in the property market, who may be priced out of their homes. The uber-wealthy are taking advantage of tax breaks created by appreciating values, which could also trickle down to burden others with higher taxes.

ICIJ coordinated the investigation of the Pandora Papers, based on 11.9 million previously confidential documents from 14 offshore service providers. The records link current and former heads of state, celebrities and wealthy individuals to offshore trusts secretly holding millions in assets and sometimes funneling them into investments like real estate.

In addition to previously unknown property purchases, the project found some are taking advantage of explicit pitches to avoid taxes through offshore investments.

The ICIJ reports SFM, an offshore company formation specialist based in Geneva, specifically notes to potential customers the benefits of reduced or eliminated taxes through offshore investments in international property.

Sign Up for the undefined Newsletter

The full effect of offshore real estate purchases is impossible to comprehend, but significant. The ICIJ reports a recent study determined $5 trillion to $10 trillion of real estate may be owned through offshore companies or trusts.

Read more

One division of the Treasury Department said last month it will require more information about who owns homes through shell companies. However, U.S. authorities don’t appear to be eyeing formal legislation to prevent the purchase of real estate through offshore companies.

Among those exposed in the Pandora Papers were Ecuadorian President Guillermo Lasso, singer-songwriter Julio Iglesias and King of Jordan Abdullah II bin Al-Hussein.

[ICIJ] — Holden Walter-Warner