Panama has long been a tax haven for many and recently information has been leaked confirming the people who have been using Panama to avoid paying tax elsewhere.
HMRC joins its Tax Office counterparts from around the globe, as they mine the Panama Papers for every scrap of information that is relevant to their tax resident citizens.
The International Consortium of Investigative Journalists (ICIJ) has received requests for information from many countries. Reportedly, 11 million documents have been leaked from a Panamanian law firm called Mossack Fonseca. Their area of expertise has been establishing offshore companies for their clients and they did have a reputation for maintaining strict client confidentiality.
Offshore companies
Although offshore companies themselves are not illegal, the revelations already uncovered in the documents are raising questions about just how much the system can be compromised and used to avoid paying taxes. Obviously, it is the wealthy and powerful that benefit from using tax havens and so far a minimum of 72 former or current heads of state are involved with Mossack Fonseca.
UK tax payers
UK citizens seem to be heavily involved in using the firm’s services, with 3 former Conservative MPs, 6 current House of Lords members and many political party donors already exposed. When comparing the volume of money moving through Mossack Fonseca, the UK rates in the top 5 countries – not a poll position to be proud of. Another disheartening result is that, of all the places involved, the British Virgin Islands has the most shell companies registered with Mossack Fonseca – a grand total of 113,000. This is under Crown jurisdiction and we can only hope that the Treasury will recoup a large sum of money at some point in the future. The most famous alleged client of this firm at the moment is, of course, Ian Cameron, our Prime Minister’s late father. This has prompted David Cameron to publicise his own tax affairs in an attempt to lead by example in previously stated aim to “end tax secrecy”.
What HMRC say
The Director General of Enforcement and Compliance at HMRC, Jennie Grainger, said:
“We have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation. 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.
Our message is clear: there are no safe havens for tax evaders and no-one should be in any doubt that the days of hiding money offshore are gone. The dishonest minority, who can most afford it, must pay their legal share of tax, like the honest majority already does.”
It’s not just the UK
Other tax offices around the world have leapt into action regarding the search for further information about their tax residents.
France’s President Hollande stated: “As the information emerges, investigations will be carried out, cases will be opened and trials will be held. These revelations are good news because they will increase tax revenues from those who commit fraud.”
The Australian tax authorities have said that they are looking at over 800 clients of Mossack Fonseca for tax evasion and New Zealand have requested further information from the ICIJ.
Norway’s bank DNB has said that it assisted about 40 of its customers to establish offshore accounts in the Seychelles through Mossack Fonseca. Norway’s tax office have asked for access to the Panama Papers in order to evidence these cases.
Another large Scandinavian bank, Nordea, is being investigated for the same thing by the Swedish authorities. They have also requested data from the leaked documents.
Given the amount of information revealed, “swift” action may be rather optimistic. Perhaps sharing this windfall of data may inspire international tax authorities to work together to close to target the wealthiest if they’re not paying their fair share of tax.
