Panama Papers Explained So That Even A 5-Year-Old Can Understand

A huge leak of confidential documents has revealed how the rich and powerful use tax havens to hide their wealth.

In a massive investigation, hundreds of journalists went through 11 million documents from the secret files of Mossack Fonseca, a law firm headquartered in tax haven Panama, to reveal some of the world's biggest names who have set up offshore entities in tax havens around the world.

Panama Papers have been in the headlines of all newspapers and trending everywhere on social media.

Right now, everyone around the world is talking about Panama Papers--the story of which is really, really complicated. So, if you haven't understood what the big deal is about, there's an easy explanation for it.

Thanks to Redditor DanGliesack, who have explained the Panma Papers controversy in the simplest way.

The Redditor uses piggy banks as a metaphor to help explain the (complicated-sounding) thing that was happening in Panama-- foreigners setting up Panamanian shell companies to hold financial assets that obscure the identities of their real owners.

"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."

Nailed it.

If this isn't helpful enough, Vox has explained the Redditor's analogy by using a comic. You can read it here.

ALSO READ: What You Need To Know About The Panama Papers Leak

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