Panama Papers leak prompts tax haven investigations

Australia first to respond to leak by launching probe of more than 800 clients of law firm Mossack Fonseca
A Mossack Fonseca law firm logo is pictured in Panama City April 3, 2016. REUTERS/Carlos Jasso
© Reuters
Australia has become the first country to launch investigations following a massive leak of documents from a Panamanian law firm that provide an insight into how the wealthy use offshore tax havens.
Australia’s tax authorities said on Monday that they are investigating more than 800 clients of Panamanian law firm Mossack Fonseca, which specialises in setting up offshore companies in tax havens.
More than 11m documents from the firm were passed to Süddeutsche Zeitung, the German newspaper, and shared with the International Consortium of Investigative Journalists.
They include emails, bank records and client information dating back several decades, and have implicated politicians and senior officials from across the globe. Edward Snowden, the former US National Security Agency contractor turned whistleblower, called the co-ordinated reports the “biggest leak in the history of data journalism”.
The documents demonstrate that as much as $2bn has been shuffled through banks and offshore companies said to be linked to associates and friends of Vladimir Putin, the Russian president.
Sigmundur Davio Gunnlaugsson, Iceland’s prime minister, is also facing allegations that he used an offshore vehicle to hide millions of dollars of investments in the country’s banks.
Michael Cranston, Australia’s deputy tax commissioner, said on Monday that the Australian Tax Office had recently received data in relation to a Panamanian law firm containing the names of more than 800 Australian residents, and was “already taking action” in some cases.
Some of those individuals had already been investigated by the ATO, while a small number of others voluntarily disclosed their arrangements under an existing offshore tax disclosure initiative, he said.
The ATO said it may refer some cases to Australia’s Serious Financial Crime Taskforce — an agency formed last year to fight financial crime deemed to pose a genuine threat to national security.
The UK’s Inland Revenue department and New Zealand’s tax authorities also said they were ready to look at any allegations of money laundering or tax avoidance that arose from the document leak.
“We have asked the ICIJ to share the leaked data that they have obtained with us. We will closely examine this data and will act on it swiftly and appropriately,” HM Revenue & Customs director-general of enforcement and compliance Jennie Grainger told the Press Association.
The fallout from the massive data leak will force Panama to give up the secrecy that has made it the “last, ultimate tax haven”, according to the Paris-based OECD, which has been leading a global transparency drive.
Pascal Saint-Amans, the OECD’s top tax official, said Panama would face intense political and commercial pressure in the wake of the revelations.
He said it would suffer reputational damage as legitimate businesses would not want to stay in a jurisdiction “that welcomes crooks and money launderers”.
He also urged the intermediaries providing the opaque structures involving Panama to “see the writing on the wall”.
Panama is the only significant financial centre to hold out against the drive for the automatic exchange of tax information. It is one of just four jurisdictions — along with Bahrain, Nauru and Vanuatu — that have refused to sign up to global transparency rules. The US has adopted similar but different rules.
Mossack Fonseca worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers.
The firm denied that it provided shareholders with structures supposedly designed to hide the identity of the real owners. It told the ICIJ that it “does not foster or promote illegal acts”.
The ICIJ said that in many cases, there was no evidence that the offshore companies were being used improperly and noted that using an offshore company was a logical choice for some business transactions.
Marina Walker Guevara of the ICIJ said most of the world leaders mentioned in the files were from democratic countries, and had often been champions of greater tax transparency. “That’s the irony of it,” she told the BBC Today programme.
“Some people are using it for legitimate reasons, but that secrecy is also offered to a whole bunch of people who are taking advantage of it and not using it for the right reasons but for criminality,” she said.
Robert Barrington of Transparency International UK said: “The Panama Papers seem to confirm the evidence from elsewhere that the world’s corrupt elite are gaming the international financial system to launder and protect their stolen wealth.”
Additional reporting by John Murray Brown in London