Offshore financial dealings: Iceland premier the first casualty of Panama leaks

Britain’s Cameron denies offshore holdings; India also orders probe

LONDON/ REYKJAVIK:

Iceland's Prime Minister Sigmundur David Gunnlaugsson is to resign, his party said on Tuesday, becoming the first casualty of leaked documents from a Panamanian law firm which have shone a spotlight on the finances of an array of politicians and public figures worldwide.

The Panama Papers showed the premier's wife owned an offshore company with big claims on Icelandic banks, infuriating many in his country who joined mass street protests calling for him to resign.

The more than 11.5 million documents, leaked from the Panamanian law firm Mossack Fonseca, have caused public outrage over how the world's rich and powerful are able to stash their cash and avoid taxes while many people suffer austerity and hardship. Mossack Fonseca denies any wrongdoing.

Among those named in them are friends of Russian President Vladimir Putin, relatives of the leaders of China, Britain and Pakistan, and the president of Ukraine.

Gunnlaugsson quit ahead of a planned vote of no-confidence, hours after asking the president to dissolve parliament, a move which would almost certainly have led to a new election.  The deputy leader of his Progressive Party, Sigurdur Ingi Johannsson, told reporters the party would suggest to its coalition partners in the Independence Party that he himself should become the new prime minister.

With the fallout from the leaks reverberating across the globe, British Prime Minister David Cameron also came under fire from opponents who accused him of allowing a rich elite to dodge their taxes. And in China, the Beijing government dismissed as ‘groundless’ reports that the families of President Xi Jinping and other current and former Chinese leaders were linked to offshore accounts.

US President Barack Obama said the Panama Papers showed tax avoidance was a major problem and urged the US Congress to take action to stop US companies from taking advantage of loopholes allowing them to avoid paying taxes.

Thousands gathered outside the Icelandic parliament in Reykjavik on Monday to protest about what the opposition said was Gunnlaugsson’s failure to disclose a conflict of interest over his wife’s offshore company, which has big claims on Iceland’s collapsed banks. The prime minister has stressed his wife’s overseas assets were taxed in Iceland.

In Britain, the leader of the opposition Labour Party demanded that the government tackle tax havens, saying it was time Cameron stopped allowing ‘the super-rich elite’ to dodge taxes. “There cannot be one set of tax rules for the wealthy elite and another for the rest of us,” Labour leader Jeremy Corbyn said.

“The unfairness and abuse must stop.”

In India, Prime Minister Narendra Modi’s government said it was constituting a special multi-agency group to look into all cases of Indians setting up offshore entities in tax havens.

Welcoming the information brought out by ‘any investigative journalism’, the finance ministry, in a statement, said the group, comprising officers from the investigative unit of the Central Board of Direct Taxes (CBDT) and its Foreign Tax and Tax Research division, the Financial Intelligence Unit (FIU) and the Reserve Bank of India (RBI), will monitor the flow of information in each case.

According to media that have seen Mossack Fonseca’s files, more than half of the 200,000 companies set up by the firm were registered in the British Virgin Islands, where details of ownership do not have to be filed with the authorities.

Cameron has cast himself as a champion in the fight against tax evasion in British-linked territories. But he was put on the spot by the leaks, which named his late father and members of the ruling Conservative Party among the list of clients who used Mossack Fonseca’s services.

Other leading figures and financial institutions responded to the leak with denials of any wrongdoing as prosecutors and regulators began a review of the investigation by the US-based International Consortium of Investigative Journalists (ICIJ) and other media organisations.

Britain, France, Australia, New Zealand, Austria, Sweden and the Netherlands are among nations that have started inquiries. French Finance Minister Michel Sapin said Paris would put Panama back on its blacklist of uncooperative tax jurisdictions.

The leaks also pointed to offshore companies linked to the families of Chinese President Xi and other powerful figures. Chinese Foreign Ministry spokesman Hong Lei, when asked if the government would investigate tax affairs of those mentioned in the documents, told reporters the ministry would not comment on ‘these groundless accusations’.

Beijing also moved to limit local access to coverage of the matter. State media denounced Western reporting on it as biased against non-Western leaders. The Hong Kong government said its tax department would take ‘necessary actions’ based on any information it received.

The famous personalities drawn into the affair also included soccer star Lionel Messi. Spanish tax authorities said they are investigating allegations of tax irregularities involving Barcelona’s Argentinian striker after the release of the documents. Messi’s family released a statement denying wrongdoing and saying it “never used the company” involved in the matter.


Published in The Express Tribune, April 6^th, 2016.