More than 900 individuals and companies linked to the Philippines have figured in millions of files on offshore accounts leaked from finance providers, and which a broad group of journalists from 117 countries recently investigated.

An extremely small number of these accounts are tied to big businesses with legitimate sources, and whose reasons for moving and keeping their wealth overseas may be indicative of how the Philippine financial system has been slow on reforms.

The rest of the Philippine-linked accounts are mysterious at the very least.

• READ MORE: Pandora Papers: Secret wealth and dealings of world leaders exposed
• World leaders deny wrongdoing after leaks

Some individuals, who are either previously unheard of in elite circles or never found in legitimate databases, turned out to be the beneficiaries of multiple accounts. The purpose of many accounts could not be ascertained.

On a global scale, the International Consortium of Investigative Journalists (ICIJ) – leading 140 media outlets in 117 countries in this latest investigation – found that fugitives, con artists, murderers, and world leaders used offshore accounts to hide wealth and buy properties.

Rappler and the Philippine Center for Investigative Journalism (PCIJ) parsed through all the names and companies from documents collectively known as the Pandora Papers.

Of the 14 offshore service providers whose documents were accessed by ICIJ partners, five had Philippine-based clients:

• Trident Trust
• Commence Overseas Limited
• Overseas Management Company Trust Limited
• Asiaciti Trust
• Alcogal

We found very little information about the people with the most links to offshore accounts in the ICIJ documents. (Check the complete list from the ICIJ here.)

Details were scant to be able to identify the purpose of 259 offshore companies, while at least 282 names from the list could not be linked to registered or active companies.

While Rappler and the PCIJ do not necessarily imply that illegal transactions were done through these companies of unknown individuals, we raise questions on the purposes of keeping these offshore.

Why go offshore?
It is legal for Filipinos to set up offshore accounts. These companies, however, operate in various shades of gray areas that are worthy of scrutiny from regulators.

A seasoned corporate lawyer who has wealthy clients acknowledged in an interview with Rappler and PCIJ that companies in so-called tax havens attracted both high-net worth individuals and criminals. He asked not to be named.

For one, the British Virgin Islands is an established favourable taxing jurisdiction. While the Philippines has recent laws which reduced estate and income taxes, the British Virgin Islands still has significantly lower rates.

“We have this client, she’s a matriarch, she owns shares of high value. Now, her concern is that she does not want to burden her children and grandchildren with taxes related to inheritance,” the lawyer explained.

“I think the tax could reach P30 million (NZ$900,000). What if you’re rich but not liquid? Where will you get that money just to inherit the shares?

“So I advised her to establish a trust, because, when those shares go into the trust, the trust will hold the shares for the benefit of your children…and effectively cut what could have been perpetual taxes once it goes down to the grandchildren and their children. That saves a lot of money.”

For another, the territory is very lenient when it comes to disclosure of ownership of companies.

‘Layering’ wealth
BVI companies can help in “layering” one’s wealth so as not to attract “too much” attention.

The lawyer, however, admitted that these functions operate within gray areas that corrupt individuals could abuse.

“It’s not wrong per se, but, like all other things, it can be used for bad purposes. For example, you’re a politician who got kick-backs, then you have lodged your funds here in the Philippines, it’s quite possible that the bank secrecy can be lifted during a litigation.

“But if you lodge it abroad, it would mean that the court may have to ask for cooperation from that country, that company or bank – that’s a lot of steps,” the lawyer said.

We reached out to the business executives we were able to identify on the list. They said that their offshore companies were either created for business deals or for cost and tax efficiency. Some remained dormant and were not used at all.

Moreover, corporate lawyers we spoke to pointed out that the rich have every reason to move their money out, as the Philippines’ laws “unnecessarily” taxed wealth several times over.

“While there have been reforms, the tax laws need to be improved further,” a corporate lawyer said.

Most importantly, moving assets abroad also provided some security for their legally-acquired wealth.

What’s fishy, what’s not
With the mix of the good and the bad operating within the BVI system, how does one tell which account holds dirty money?

“There really is no clear way,” said another corporate lawyer, who also wanted to remain anonymous so as not to “alarm” his high-profile clients.

“I have a client whose child was almost kidnapped because of their perceived wealth. Setting up an offshore account hides their money in a legitimate way from people who have bad intentions, while also keeping it accessible whenever they need the liquidity,” the second lawyer said.

Former Bureau of Internal Revenue Commissioner Kim Henares shared this view, saying that prominent names on the list may “not be an issue,” as these individuals could easily justify their wealth.

“But if a name does not come up on Google, but has lots of offshore accounts,” the second lawyer said, “I simply ask: What are you doing there?”

Moreover, the secrecy of the offshore system makes it impossible to distinguish which are tied to legitimate sources and which come from criminal activities.

ICIJ also pointed out that even legal transactions have to also be put into question. For instance, profits of businesses from high-tax countries are transferred to companies that only exist on paper in tax havens.

Does this put the host country like the Philippines at a disadvantage? Or are there gaps needed to be plugged in such countries and territories?

Unclear purposes
After careful investigation, Rappler and PCIJ found that the purpose of the majority of the offshore companies linked to Filipinos on the Pandora Papers are unclear.

The Philippines is not a unique case. According to the Paris-based Organisation for Economic Cooperation and Development (OECD), at least $13.3 trillion is held offshore.

Who’s who on the list?
The tree map here shows that most of the individuals on the list linked to the Philippines are unknown or have scant publicly available records.

The chart was made by carefully checking each name on search engines and databases and matching them with a company. These companies are then categorised per industry.

While the majority of the companies can’t be traced to prominent Filipino personalities or firms, we were able to identify 36 offshore companies linked to conglomerates and mall operators, some of which have responded to our queries.

The names of the Sy siblings of SM Investments Corporation, for instance, showed up on the Commence list and are linked to 10 offshore companies incorporated in the British Virgin Islands. Their companies were created sometime between 2002 and 2015.

The Gaisano family, which owns malls and retail outlets mostly in the Visayas and Mindanao, are linked to 12 companies.

The Commence list also indicated the Gatchalian family of the Wellex Group owning 10 BVI companies.

Some members of the Aboitiz clan were named owners of 13 companies. (View the responses of prominent Filipinos here.)

The documents were able to identify 156 Filipinos, 21 Chinese, and 9 Britons.

But the nationalities of 160 other names on the list cannot be ascertained. Almost all of these names, however, are Filipino and Chinese-sounding.

The Philippines has a long way to go.

While leaks via the Panama Papers and the Paradise Papers of 2017 have prompted legislators to follow the rest of the world in lifting the bank secrecy law, the Philippines continues to keep the lid on.

• CONTRIBUTORS TO THE ‘PANDORA PAPERS’ PROJECT: Carmela Fonbuena, Miriam Grace A. Go, Karol Ilagan, Elyssa Lopez, Pauline Macaraeg, Ralf Rivas, Felipe Salvosa
• Other stories in the Pandora Papers Philippines series

Reported in partnership with the International Consortium of Investigative Journalists and the Philippine Center for Investigative Journalism. Republished with permission.

For decades, the feared Ampatuan clan held sway in the impoverished province of Maguindanao in Mindanao in the southern Philippines. Through a ruthless private army and a reported “propensity for beheadings”, the clan cultivated a culture of impunity. Now, however, reports David Robie, a courageous judge has challenged the horror by jailing the masterminds of the 2009 Ampatuan massacre for life.

SPECIAL REPORT: By David Robie in Manila

The families of the 58 victims – 32 of them journalists or media workers – had waited for 10 years for justice in the Philippines.

After so long, what is another couple of hours?

The Ampatuan massacre in Maguindanao on 22 November 2009 was the world’s worst single attack on journalists and the worst elections-related violence in a country notorious for electoral mayhem.

READ MORE: The Ampatuan massacre – what happened and why

With the judge almost two hours late in arriving at the fortified special courtroom in Camp Bagong Diwa, a police barracks with a jail annex in Manila’s satellite Taguig City, fears were expressed for her safety.

The 101 accused (although three were missing and cited for possible contempt of court) for the heinous crime, dressed in yellow jail tees, were housed in in a barred cage sandwiched between lawyers and some 200 heavily armed police guards and waiting.

The lawyers for both prosecution and defence were waiting.

The media crews for the CNN Philippines live broadcast anchored by celebrity Pinky Webb were waiting.

The CNN Philippines live newsfeed on the Ampatuan judgment.

Live television
The public, glued to their television sets or live streaming from CNN and the state-run People’s Television, were waiting.

In the end, the historic judgment took only 52 minutes.

Many of the victims’ families burst into spontaneous applause for the jailing of the ringleaders; others wept for joy with the convictions. While other families of some of the accused were relieved with the acquittals.

Judge Joycelyn Solis-Reyes of the Quezon Trial Court Branch 221 announced to the court that she could deliver the shortened verdict rather than the full 761-page judgement or “it could take all day”.

In fact, broadcaster Peter Musngi reckoned it would have taken “43 uninterrupted days” to read the full judgement. Both prosecution and defence lawyers agreed to the short reading with the full judgment being made available online – read it here on Rappler.

Judge Solis-Reyes sentenced the 28 principal accused – including three brothers of the powerful Ampatuan warlord clan from Mindanao – to life in prison without parole and ordered them to pay a total of more than 155 million pesos (almost NZ$5 million) in changes to the heirs of 57 victims killed in the massacre.

The judge reduced the “official” death toll from 58 to 57 because the body of photojournalist Reynaldo Momay was never found. This means that the Momay family was not granted compensation even though it was commonly known that he was with the journalists who were killed and never been seen since. There was also dental evidence linking him found at the multiple murder scene.

Appealing sentences
Some of those jailed announced last week that they are appealing against their sentences, and the prosecution is also appealing over the acquittals and the judge’s Momay finding.

While it has been a long wait for justice for the victims, it had also been a long wait for the judge herself. Judge Solis-Reyes had shelved her own plans for career advancement so that she could see the notorious case through to judgment.

She was forced to brave death threats and political pressure over the case. At least three witnesses were killed during the course of the trial.

The judge had earlier admitted in interviews that she had wanted to pursue a career in broadcast media and had studied journalism at the Lyceum of the Philippines.

Describing the atmosphere in the courtroom with 400 people packed in to hear the verdict of the century” on December 19, Tempo columnist Jullie Y. Daza wrote that the judge “deserves the nation’s gratitude for her dedication and deportment”.

“All I can say is,” she added, “you’re priceless, Your Honour.”

Judge Solis-Reyes broke down her summary into 1. Those guilty beyond reasonable doubt; 2. Accessories; 3. Those released on the basis of reasonable doubt; 4. Those facing arrest warrants.

Police officers acquitted
Forty-three people, including leaders of the Ampatuan clan, were convicted of mass murder or being accessories, and 58 other accused – many of them police officers – were acquitted in the infamous case.

Sentenced to reclusion perpetua, or up to 40 years in prison without parole – effectively life – on 57 counts of murder were prominent clan members Datu Andal “Unsay” Ampatuan Jr; his brothers, former Autonomous Region in Muslim Mindanao (ARMM) governor Datu Zaldy “Puti” Ampatuan Sr, and Anwar Ampatuan Sr, former mayor of Shariff Aguak town.

Another brother was acquitted. Two other prominent members of the clan – nephews Anwar Ampatuan Jr and Anwar Sajid Ampatuan – and 23 others were also found guilty of the multiple murders.

Fifteen other accused – almost all of them policemen – were convicted as accessories to murder and sentenced to between six and 10 years in prison.

It took 10 years, 424 trial days, to hear the testimonies of 357 witnesses against 197 who were originally charged.

During the long-running trial, six accused were acquitted and the clan patriarch, Andal Ampatuan Sr, also accused, died in prison from a sudden heart attack in 2015, aged 74.

One of his daughters, Rebecca, told the Philippine Center for Investigative Journalism (PCIJ) that her father had six wives and 40 children. The PCIJ closely followed the case for a decade with a series of special reports in The Maguindanao Chronicles.

The killings in 2009 sent shockwaves around the world because of the brazenness of the attack. The victims, including 20 women, were kidnapped and clubbed before they were executed, mutilated and buried in shallow graves.

Mass graves
The backhoe digger, using a government machine, who excavated and filled the mass graves, was among the convicted accessories.

The ambushed electoral convoy had been taking the registration papers to enable challenger Esmael “Toto” Mangudadatu to contest the governorship of Maguindanao in defiance of threats by the Ampatuans. He was not with the convoy, but his wife, Genalyn, was shot 17 times: “They shot her on her breasts, her private parts. Such unimaginable cruelty.”

He subsequently won the election in a landslide in 2010 and has since been elected to the Philippine national Congress.

The mass murders were widely condemned around the world by governments, global media freedom organisations and human rights groups. The US ambassador at the time, Kristie Kenney, described the killings as “barbaric” and then UN Secretary-General Ban Ki-moon condemned the brutal political violence in the southern Philippines.

The Malacañang presidential palace welcomed the convictions last month, saying the rule of law had prevailed in closing one of the darkest chapters of Philippine history.

“The Maguindanao massacre marks a dark chapter in recent Philippine history that represents merciless disregard for the sacredness of human life, as well as the violent suppression of press freedom,” said presidential spokesman Salvador Panelo, who ironically was once one of the lawyers for the Ampatuans.

“This savage affront to human rights should never have duplication in this country’s history.”

Editorial opinions cautious
However, most editorial opinion in the nation’s media and human rights groups greeted the “historic” judgment with caution.

“Justice at last, but …” summed up the headline on a Philippine Star editorial, warning “a victory has been achieved, but the pursuit of justice is far from over”. Said the Star:

“Amid the rejoicing are the disappointments and concerns about what might happen next. With 56 defendants cleared, including two members of the Ampatuan clan, there are valid concerns raised by the victims’ families that violence remains a serious threat in the clan’s turf.

“Most of the guns believed owned by the Ampatuans and their private army remain unaccounted for. The claim is believed to continue enjoying control over substantial funds and other assets.

“Harassment of witnesses, victims’ relatives and prosecution lawyers are possible. At least three witnesses were killed in the course of the trial.

“There are 80 suspects still to be brought to justice, and an appeals process that could take another decade to complete. There is the equally complicated task of going after the assets of the Ampatuan clan.

“There are other criminal cases – about 200 of them – still being pursued, including complaints for corruption and obstruction of justice, as well as cases related to the murders and disappearances of witnesses.”

‘Terrible crime’
The Philippine Daily Inquirer noted in an editorial that this daily newspaper – along with other media – had “faithfully reported on the terrible crime that thrust the Philippines squarely on the map for the single deadliest attack on journalists in the world.

“In bearing witness, we strived mightily to ‘piece together the bloody shards of the crime’, and to find the words to ‘approximate the horror’.

But the Inquirer added that there were significant lessons to be learned – and acted upon – in spite of the hope stirred by Judge Solis-Reyes’ guilty verdicts, such as the “endless delay” caused by defence motions that reflected the “dismaying state of the judicial system”.

“And journalists and media workers remain in peril in the fast-shrinking democratic space.”

Philippine Star columnist Ana Marie Pamintuan described the Ampatuan clan as “Monsters Inc.” and was candid in a wide-ranging article about the challenges ahead after the judgment.

One challenge is to “catch the 80 suspects who remain at large and bring them to justice”. Another is the expected “spirited fight for their acquittal” on appeal for those who were convicted.

“Let’s hope the road to final judgment won’t take another 10 years,” warned Pamintuan.

Another huge challenge is the legal fight to have the Ampatuans’ massive wealth forfeited by the state, and payment of civil damages to the victims’ families.

Property freeze orders
Freeze orders have been issues by the courts on bank accounts, real estate property and other identified assets of the Ampatuan clan.

“Prosecutors believe, however, that substantial amounts of cash have been stashed away by the clan the old fashioned way – not in banks where there is a paper trail, but perhaps in boxes, chests or baul [a Tagalog word meaning a traditional clothes trunk], buried somewhere or concealed within walls the way South American narcos do with their mountains of dirty money,” says Pamintuan.

“In one of the poorest regions in the country, the Ampatuans thrived, driving around in convoys of luxury vehicles with their private armies, living it up in fortified mansions. How do local executives in third-class municipalities and impoverished provinces, with their modest salaries, manage to accumulate that kind of wealth?”

The last challenge – and probably the toughest – is how to “eliminate the environment that creates monsters and breeds impunity”?

Etta Rosales, former chair of the Philippine Commission on Human Rights, described the Mindanao environment as like the “wild, wild west”, warning it remained “compromised injustice” until the private armies and political dynasties were rooted out.

While the Ampatuan massacre remains the worst example of this environment, there are many other regions of the Philippines where the local population are ruled by patronage and fear.

The implications for press freedom in the Philippines have not been lost on students and tertiary journalism schools.

‘Already afraid’
Writing on Rappler, Diwa Donato, a political science graduate from Saint Louis University, Baguio City, who has dedicated 13 years of her life to campus journalism as an advocate for youth empowerment, press freedom and democracy, says she will never forget the day of the massacre. She was aged 10 at the time – and she was “already afraid to continue my dream of pursuing journalism”.

“The Philippines remains one of the deadliest countries for journalists in Southeast Asia,” she says.

“The fight of professional journalism will always be the fight of campus journalism. We celebrate the Ampatuan massacre verdict, hope for justice, and continue to address the struggles of press freedom.

“For now, democracy and press freedom have won. But we do not fight to win, we fight to be free. There is more to be done.”

National Union of Journalists of the Philippines (NUJP) chair Nonoy Espina also fears for the future.

“The culture of impunity for crimes against journalists means that massacres like the one in Ampatuan can happen again,” he says. “Without justice, the bloodshed will continue.”

The NUJP played a key role in independent investigations and keeping a watch on government, also sponsoring family members of slain journalists to get to Manila for the trial.

Ruthless warlords
The Ampatuans were the warlords of Maguindanao and the Autonomous Region of Muslim Mindanao (ARMM).

“Even Andal Ampatuan Jr’s ruthlessness and sociopathic violence served a purpose,” admits Pamintuan. “Cops and soldiers who were assigned to the ARMM talk of the Islamic separatists being terrified of incurring the ire of Andal Jr because of his reported propensity to decapitate and mutilate anyone who crossed him.”

“There are other political warlords still out there – running their own fiefdoms like gangsters, naming streets and villages and government projects after their family members, freely using public money for private purposes and controlling every aspect of the local criminal justice system.”

Yes, a victory, but the fight to end impunity in the Philippines has just begun.

Professor David Robie, director of the Pacific Media Centre, has been in the Philippines on a research sabbatical.

• The Maguindanao Chronicles: Shamefully rich, clan has 35 houses, fleet of wheels
• National Union of Journalists of the Philippines on the Ampatuan massacre 10 years on – before the judgment
• Children bear the brunt 10 years since the Ampatuan massacre

Café Pacific video of the Ampatuan trial guilty verdicts.

BACKGROUNDER: By David Robie

Three United Nations special rapporteurs have added their voice to the global protests this week over the President Rodrigo Durterte government bureaucracy’s attack on the independent online news website Rappler and a free press in the Philippines.

Rappler has been the latest media target for the administration’s wrath over a tenacious public interest watchdog that has been relentless in its coverage of the republic’s so-called “war on drugs” and state disinformation.

Some media freedom advocates claim that the Philippines is facing its worst free expression and security crisis since the Marcos dictatorship, with The New York Times denouncing the “ruthlessness” and “viciousness” of Duterte’s disdain for democracy.

The death toll in the extrajudicial spate of killings range between 3993 (official) and more than 12,000 since Duterte took office on June 30, 2016, according to Human Rights Watch.

READ MORE: Licence to kill – Philippine police killings in Duterte’s ‘war on drugs’

Headlined “After killing spree, is a free press Mr Duterte’s next victim?”, the NY Times editorial said: “Even among that cast of illiberal leaders who rouse mobs with their ruthless policies and disdain for democratic protections, President Rodrigo Duterte of the Philippines stands out for his viciousness.

“He has effectively declared open season on those he and his minions accuse of being drug users and dealers … Exposing such brazen abuse of power is a hallowed mission of a free press, so it should come as no surprise that authoritarians like Mr Duterte usually go after independent media.”

The NY Times described Rappler as a “tenacious critic of the President’s vicious crackdown” and this had led to the government announcing on January 15 it was revoking the online news site’s licence.

No hard evidence
Media freedom watchdogs say the Philippine Securities and Exchange Commission (SEC) has produced no hard evidence to support its “foreign ownership” in breach of the constitution accusations against Rappler and the company that owns it, Rappler Holding Corp. Rappler is challenging this SEC ruling through the courts.

Philippine Ambassador to the US Jose Manuel “Babe” Romualdez denied any “political motivation” behind the SEC ruling on Rappler.

In a letter to the editor published by The NY Times on January 24 in response to the editorial, Romualdez described SEC chairperson Teresita Herbosa as “a person of unimpeachable character”.

Rappler and many supporting news groups staged “Black Friday” demonstrations across the Philippines on January 19 when chief executive Maria Ressa declared her organisation would “ hold the line” on press freedom, insisting journalism was “not a crime”.

“We’re doing journalism. We’re speaking truth to power. We’re not afraid and we won’t be intimidated,” she said.

Ressa has joined a group of courageous, outspoken and defiant women opposed to Duterte who are “being marginalised, silenced, or worse”, according to The Diplomat.

They include Vice-President Leni Robredo (effectively gagged and whose office will be eliminated under Duterte’s controversial “federalism” plans) and Senator Leila De Lima, a human rights advocate (jailed for the past year on trumped up charges that have yet to be tried in court).

Highly successful and innovative website
Ressa founded Rappler in 2011, originally on Facebook (now 3.6 million followers), after being CNN’s leading Asia investigative journalist for several years. It has been a highly successful and innovative online and “citizen journalism” website, with an Indonesian edition and the slogan “independent journalism with impact”.

Rappler currently faces a “cyber libel” complaint that is seen as highly dangerous for the media.

Duterte has also threatened to block renewal of ABS-CBN’s franchise – the largest and most influential television network in the Philippines and publicly criticised the Philippines Daily Inquirer for its alleged “slanted reporting”. (A Duterte crony, San Miguel beer baron Ramon Ang, then seized a majority ownership stake in the company).

University of the Philippines journalism professor Daniel Arao said the President’s criticism echoed the martial law era, when then dictator Ferdinand Marcos ordered the shutdown of media outlets that were critical of his regime.

“The Duterte administration is being creative in terms of harassing and intimidating the media, but there is also the brutality, the bullying and the crassness,” Dr Arao said.

“Right now, he might even end up worse than Marcos.”

Other media freedom advocates have also warned that the Philippines is sliding into its “darkest chapter” of Philippine history between 1972 and 1986.

‘Flagrant’ violation
Describing the government’s stance as a “flagrant” violation of press freedom, the Paris-based Reporters Without Borders watchdog announced it had asked the United Nations, UNESCO and the Association of Southeast Asian Nations (ASEAN) to take a stand.

“The decision to close Rappler is fraught with danger, hence the urgency of referring it to these international bodies,” RSF deputy director-general Antoine Bernard said. “We are very concerned about the safety of its journalists and the protection of their sources, especially as Rappler is well known for the quality of its investigative reporting.”

The watchdog’s Asia-Pacific director Daniel Bastard added: “For more than a year, Duterte’s notorious troll army has been spreading the rumour that Rappler is 100 percent foreign-owned.”

In a joint statement on Thursday, the three UN special rapporteurs said they were “gravely concerned” about the government moves to revoke Rappler’s licence.

“Rappler’s work rests on its own freedom to impart information, and more importantly its vast readership to have access to public interest reporting,” said the rapporteurs.

“As a matter of human rights law, there is no basis to block it from operating. Rappler and other independent outlets need particular protection because of the essential role they play in ensuring robust public debate.”

The rapporteurs are: David Kaye (Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression), Agnes Callamard (Special Rapporteur on extrajudicial, summary or arbitrary executions), and Michael Forst (Special Rapporteur on the situation of human rights defenders).

‘Dangerous, risk of murder’
Writing in The Diplomat, University of Portsmouth academic Dr Tom Smith warned that journalism in the Philippines “has long been a dangerous trade, one that carries a very real risk of murder with little likelihood of accountability”.

He reminded readers of the 2009 Maguindanao massacre when 58 people, including 32 journalists, were “hacked to death, allegedly by members of the Ampatuan clan”. There had been no justice so far for the victims so far in a flawed prosecution case that has crawled over the past decade.

“Yet it is vitally important that Filipinos have a robust critical press to question a government up to its neck in human rights abuses.”

This is why so many people are concerned for the future in the Philippines with the news that Duterte’s administration is trying to ban Rappler.

Dr David Robie is editor of Asia Pacific Report, published by the Pacific Media Centre.

• Duterte’s ‘drug war’ claims 12,000+ lives
• ‘This isn’t the time to be silent,’ say writers defending Rappler
• Cybercrime, criminal libel and the media: From ‘e-martial law’ to the Magna Carta in the Philippines
• Other Philippines articles

Journalists in the Philippines take their life in their hands doing their job. What was already one of the world’s riskiest places to be a reporter has become even more difficult under President Rodrigo Duterte and his “war on drugs”, reports RNZ’s Mediawatch.

In today’s Mediawatch programme featuring the executive director of the Philippine Center for Investigative Journalism, Malou Mangahas, who spoke at “Journalism Under Duress in Asia-Pacific”, a summit marking the 10th anniversary of Auckland University of Technology’s Pacific Media Centre, presenter Colin Peacock reports:

When the Philippines appears in the news here these days, it’s not normally good news.

Most stories focus on the maverick president Rodrigo Duterte – nicknamed The Punisher – who is often compared to Donald Trump. Many of those stories also refer to the bloody crackdown of his ‘war on drugs’ launched after he took power last year.

READ MORE: Journalism under duress in Asia-Pacific – an introduction

Thousands of people have been killed by vigilante-style policing since mid-2016.

In her APEC visit to Manila last month, New Zealand’s Prime Minister Jacinda Ardern said the deaths “require investigation . . at the very least” – and in a rather awkward-looking press conference, she also made a point of telling the president New Zealand’s police are unarmed.

The culture of impunity allowing police to kill suspected drug users and sellers in the Philippines is also putting journalists under severe pressure – and in some cases getting them killed too.

The extra-judicial killings are often officially explained as self-defence or the results of shoot-outs. But sometimes media reports show otherwise.

This week, Reuters news agency published a startling multi-media report called Operation Kill detailing the extra-judicial killings of three men and how the circumstances were covered up by police officers.

“The Philippines has one of the most free presses in Asia, and it also one of the rambunctious in its exercise of freedom,” said Malou Mangahas.

“The drug problem is very serious and that is accepted across the country. It is the method of the war on drugs is what has divided it.”

• Listen to the full RNZ Mediawatch report
• Read RNZ Mediawatch
• Read David Robie’s introduction to the “Journalism under duress” summit
• View the Livestreaming video

What do some bankers and fund managers, a few senior government officials, a dozen top taxpayers, and a handful of companies located in the Philippines have in common?

They are among some 200 Filipinos, Philippine residents, and corporations that own or are linked to offshore accounts in tax havens across the world, according to the “Paradise Papers” cache of 13.4 million confidential electronic documents that had been leaked and exposed this month.

READ MORE: PCIJ’s Malou Mangahas to speak at Pacific Media Centre’s 10 years On event in Auckland

While having offshore accounts is not a wrongdoing per se, in some cases, these may be used to avoid or evade tax payments in their host countries, hide unexplained wealth, or move illicit and fraudulent financial flows across borders.

The latest expose by “Paradise Papers,” which has led to stories by media outfits such as the BBC and the UK newspaper The Guardian, covers offshore investments made by the law firm Appleby and corporate service providers Estera and Asiaciti Trust in 19 tax jurisdictions in the world.

About 120,000 people and companies are enrolled in “Paradise Papers,” including Philippine citizens, residents, and business entities.

Leaked papers
The “Paradise Papers” data files were leaked to the German newspaper Süddeutsche Zeitung, which shared these with the International Consortium of Investigative Journalists (ICIJ) based in Washington, DC, and its global reporting network of over 380 journalists from 100 news organisations, including PCIJ.

PCIJ reviewed the list with special attention to apparent transparency and accountability issues. PCIJ thus sent inquiry letters to about a dozen individuals who had served as senior state officials, donated to candidates for president, own or run major corporate entities, or are tied to contracts with government.

Not all the Philippine accounts are active as of the current year. Most accounts are listed to be operational still while some turned out to have been dissolved already, according to those PCIJ reached for comment.

PARADISE PAPERS: For the full list of persons and companies, check out ICIJ’s Paradise Papers database

This is the second round of PCIJ reporting on offshore accounts with ICIJ. In 2013, PCIJ wrote about the offshore ties of then re-electionist Ilocos Norte Gov. Maria Imelda “Imee” Marcos, then senator Manuel “Manny” B. Villar Jr., and then senatorial candidate Jose Victor ‘JV’ Ejercito. They all failed to disclose their interests offshore in their Statements of Assets, Liabilities, and Net Worth.

Five of those PCIJ sought for comment, as well as replies from the law and accountancy firms that had assisted them, invariably disowned or denied any wrongdoing had been committed in regard to their offshore accounts.

But Filipino and Philippine-based offshore account holders may have nothing to worry about for now. At present, the Philippines has neither law nor rules, nor any effective regulatory framework for monitoring or even recovering taxes possibly due from monies in these accounts.

Split opinion
Also, between former and current finance officials, there is a split opinion on what the Philippine government should do to regulate such accounts and to run after their owners.

Interviewed recently by PCIJ, former Internal Revenue Commissioner Kim Jacinto-Henares said that in her view, when someone or some entity opens an offshore account, that should raise concern at once among government officials.

In contrast, Finance Secretary Carlos G. Dominguez — who admits his connection to an offshore account himself until 2001 – told PCIJ that “there is nothing illegal per se about these accounts… and we are not about to declare them illegal”.

“Actually,” Henares said, “nobody can stop you from incorporating anywhere in the world.” But, she said, “the question is if that company has an asset that matches (its) net worth.”

She pointed out, “The important thing to ask is if the tax for that had been paid, and second, did it come from questionable deals. Kasi ‘yung galing sa masama rin, hindi mo rin binabayaran ‘yung buwis (Because if it came from something illegal, you wouldn’t pay the tax due).”

Why hide monies?

Henares continued: “Ibig sabihin, hindi mo siya maipasok mainly sa pangalan mo kasi hindi mo ma-explain saan nanggaling ‘yung income, saan galing ‘yung pera. ‘Yun lang naman ‘yung tinatanong d’yan, pero itself, wala namang problema (In other words, you couldn’t place it under your name because you won’t be able to explain where the income was sourced, where the money came from. That’s really the only question there, but itself, there’s no problem).”

It’s a question, according to her, of what would drive someone or some entity to open an offshore account. “Siyempre, medyo may tanong lang na ano bang objective mo (Of course, there’s a bit of a question there on what really your objective is),” Henares said. “Parang lahat ng tao feeling nila na kapag Pilipino ka, naiisahan mo ‘yung gobyerno mo. Bakit mo ginagawa ‘yan? (So everyone starts feeling like, if you’re a Filipino, you can easily put one over your government. Why do you do that?)”

‘No law, not illegal’
Dominguez takes the contrary view. Indeed, he said that there is no clear, cogent legal framework to regulate offshore accounts, but getting one “would require legislation by Congress.”

At the moment, he said, “we’re all focused on the tax reform bill until December.”

“But really,” Dominguez said, “there is nothing illegal per se about Filipinos or Philippine residents opening accounts overseas.” Still, he said that “when information like this comes out, then we look at it case by case.”

“In truth, there is nothing illegal about it,” Dominguez said. “It is legal, and we are not about to declare it illegal.” He then cited one instance when he was told that a friend of his staff had planned to open a dollar account in Hong Kong to buy bitcoins. Recalled Dominguez: “I told her, ‘Go ahead, that’s okay’.”

These comments by the Finance Secretary came on the fourth time that PCIJ had called him in the last month, to follow up on a request letter for an official opinion on offshore accounts from his department.

PCIJ mailed its letter to Dominguez last November 8, prompting a quick call from him; at the time, though, he was still in Vietnam for the Asia-Pacific Economic Cooperation Summit (APEC).

Working group promise
He promised then that he would organise a technical working group of his staff, as well as officials of the Bureau of Internal Revenue, and — if they would agree, he said — of the Bangko Sentral and the Anti-Money Laundering Council.

The ASEAN (Association of Southeast Asian Nations) Summit intervened and kept Dominguez busy for a week. He received PCIJ’s second and third calls during the week, however.

Last November 16, he said, “My staff will write you a letter. We discussed this yesterday. There is no law prohibiting anyone from opening offshore accounts. It’s allowed by law.” Offshore accounts “may be a tax leak for us,” Dominguez said, “but it is a small leak.”

He added that offshore accounts are a lesser problem than tax incentives that some companies and sectors have been enjoying for so long. “We have a list of tax incentives given, and you’d be surprised how big those amounts are,” Dominguez said. “Some have been receiving tax benefits for over 40 years.”

Tax leakage on account of incentives given to corporations is, in Dominguez’s view, “a more important issue than someone buying, registering a plane or cargo vessel — that is a one-off thing.”

In an offshore leaks database reported in 2013, Dominguez’s name had actually come up as an offshore account holder. The company listed in his name was called Radstock Corp.

Connection admitted
When PCIJ asked Dominguez about this, he promptly acknowledged his connection with Radstock.

“I saw that before,” he said. “I was involved with them a long time ago, 2001 ‘ata.” As he recalled it, his engagement as a director of Radstock was connected with a project of the Philippine National Construction Corporation.

Like Dominguez, many other finance experts say that offshore accounts are legal. They also note that these are rather common among multinational enterprises with global operations.

Yet when account holders turn to tax havens offshore to avoid or evade paying taxes, hide illicit wealth, and conduct illegitimate or abusive financial flows in secret, they cross over to forbidden territory in law.

Evade, avoid taxes
International companies, finance experts say, operate in tax havens to be able to transfer the taxable income to jurisdictions where tax rates are lower. Companies that make profits in the Philippines, for instance, can transfer these to other jurisdictions. This means that what should have been part of the tax base of the Philippines becomes instead part of that of another country.

Tax havens also use secrecy as a prime tool to hide identities. Individuals and entities can hold shares in offshore companies without being identified, unlike in the Philippines where incorporation and registration records are public.

Too, one can sell shares offshore without having to pay capital-gains tax.

Secrecy jurisdictions provide structures that enable people or entities to skirt or undermine laws of their home country or jurisdictions elsewhere. In the Philippines, the lack of a legal and regulatory regime over offshore accounts makes it difficult for government to run after tax evaders and money launderers.

According to the Tax Justice Network, between $21 trillion and $32 trillion of private financial wealth is located, untaxed or lightly taxed, in tax havens around the world. Illicit cross-border financial flows have also been pegged at $1 trillion to $1.6 trillion per year, a huge amount compared to the $142.6 billion in global foreign aid in 2016.

Founded in 2003, Tax Justice Network or TJN is a UK-based independent international network that conducts research, analysis, and advocacy on international tax, the international aspects of financial regulation, the impact of tax evasion, tax avoidance, tax “competition,” and tax havens. Not aligned with any political party, TJN has global and regional partners in Africa, Asia, Africa, Europe, Latin America, and North America.

TJN has a Financial Secrecy Index that ranks jurisdictions according to their secrecy and the scale of their offshore financial activities. The higher the rank, the more secretive financial activities are in the country.

The scoring is based on an assessment of 15 secrecy indicators that can be grouped around four broad dimensions of secrecy: knowledge of beneficial ownership, corporate transparency, efficiency of tax and financial regulation, and international standards and cooperation.

Of the 92 countries surveyed by TJN for its 2015 Index, Bermuda was ranked No. 34 and Isle of Man at No. 32. The Philippines was 46th. Switzerland, Hong Kong, and the United States are first, second, and third, respectively.

The Financial Secrecy Index reveals that the stereotypes of tax havens are misconceived. Said TJN: “The world’s most important providers of financial secrecy harbouring looted assets are mostly not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest.”

Wanted: Evidence
As of this posting, PCIJ has yet to receive a written reply from Dominguez himself, or even from the “technical working group” that he said he plans to convene to study the matter of offshore accounts.

He tossed PCIJ’s query letter to Finance Undersecretary Antonette C. Tionko, who recently replied to PCIJ. She said in part that they had “gone through the attached list which contains names of Filipinos and a few foreign corporations which appear to have Philippine ownership (although this is not clear considering that only the name of said corporations are provided).”

“Please note,” Tionko said in her letter dated November 22, “that under Philippine tax laws, income of Filipino citizens are subject to Philippine income tax regardless of where earned. On the other hand, only income of foreign corporations from Philippine sources is subject to Philippine income tax.

“Hence, if we assume that the listed corporations are all foreign corporations, evidence must be presented… that income is earned and not reported in the Philippines to constitute a violation of the Tax Code.”

She then asked for “further information” on the Filipinos on the Paradise Papers list. According to Tionko, information “such as purported types of investments, amounts of said investments, and the like will be relevant in determining whether or not there is a violation of Philippine laws.”

Global vs local firms
To Henares, meanwhile, big companies and top taxpayers who have offshore ties are not suspect. She is more concerned, she said, about those on the list who have no global business or reason to have offshore companies.

Asked Henares: “If you have no international corporation, then what are you doing there?”

Henares said that she welcomes having more information into offshore transactions primarily because without information and appropriate regulations, governments have no way of running after tax evaders who hide their wealth offshore.

The BIR, with Henares at the helm, had set to investigate Filipinos with offshore accounts following PCIJ’s 2013 report. But Henares said she could not recall updates on the planned investigation.

When contacted by PCIJ on the matter, BIR Assistant Commissioner Marissa Cabreros said that the Bureau cannot confirm or deny any information about it because its staff are bound by law to keep silent.

In any case, Henares said that the country’s strict bank secrecy law in a way already offers “a domestic haven” for people who may want to hide their cash assets. Tax havens offshore meanwhile offer options for people who may want to hide their ownership of properties.

“Let’s say,” she said, “without knowing how much they have in the bank, we already know they’re deficient by P1 million. What more if we have that bank figure? It would be much, much more ‘di ba? Then what more if we have the information about the international (accounts)? Then it could become much, much more din.”

Information exchange
The OECD Global Forum for Tax Transparency was specifically set up to address the risks to tax compliance posed by secrecy jurisdictions. Global Forum members, among them the Philippines, had agreed to implement transparency and exchange of information for tax purposes. This includes the Exchange of Information on Request (EOIR) and the Automatic Exchange of Financial Account Information (AEOI), which requires tax administrations to exchange taxpayers’ financial information.

Henares clarified, however, that the Philippines is involved only in the EOIR, which allows the BIR to exchange information only with a country that the Philippines has a tax treaty with.

The Philippines was reviewed as “largely compliant” in the first round of the EOIR review. But it currently has treaties with 41 countries only; it has no tax treaty with many of the popular tax havens.

The OECD and the Council of Europe also developed the Convention on Mutual Administrative Assistance in Tax Matters, which is said to be the “most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance.”

The convention not only provides for exchange of information, but also includes assistance in recovery, the service of documents, and facilitation of joint audits.

The Philippines signed onto the agreement in 2014 but has yet to ratify it.

The article was published by the Philippine Center for Investigative Journalism (PCIJ) and is republished here with permission.