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Tax inquiries launched over 'Panama Papers'

Jane McIntoshApril 4, 2016

Naming politicians, sports stars and others using offshore tax havens in the 'Panama Papers' leak of documents has offered an unprecedented look into how the elite conceal money. Tax authorities have started to react.

The office building of Mossack Fonseca in Panama
Image: picture alliance/AP Photo/A. Franco

The 11.5 million documents from the files of Panama law firm Mossack Fonseca, the world's fourth-biggest offshore law firm, revealed the details of hundreds of thousands of clients using tax havens.

The records, which were obtained from an anonymous source by German newspaper "Süddeutsche Zeitung," cover a period of almost 40 years, from 1977 until last December. They are alleged to show that some companies domiciled in tax havens were used for suspected money laundering, arms and drug deals, and tax avoidance.

Georg Mascolo led the research for the "Süddeutsche Zeitung" and two German broadcasters on the basis of the data from the law firm's files. They shared the information with the International Consortium of Investigative Journalists (ICIJ), the international arm of the Center for Public Integrity, and a hundred other international news organizations. More than 370 journalists from 76 countries have spent a year going through the material.

ICIJ Director Gerard Ryle said: "I think the leak will prove to be probably the biggest blow the offshore world has ever taken because of the extent of the documents."

Mascolo said Sunday evening on German television that he expected the insight into the business of tax havens to be quite "explosive," adding that more revelations are to come. The news "is very remarkable because we have not had such insight into the business of these tax havens on this scale," Mascolo said.

Taxing action

The director-general of enforcement and compliance at the UK tax authority HMRC, Jennie Grainger, said on Sunday they had approached the ICIJ for access to the material: "We will closely examine this data and will act on it swiftly and appropriately," she said. "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 Australian Tax Office said on Monday that it would investigate more than 800 Australian clients of Mossack Fonseca for possible tax evasion: "Currently we have identified over 800 individual taxpayers, and we have now linked over 120 of them to an associate offshore service provider located in Hong Kong," the Australian tax office said in a statement. It did not name the Hong Kong company.

Denouncing the leak

The law firm Mossack Fonseca has claimed the revelation of the data is a crime: "This is a crime, a felony," Ramon Fonseca, one of the firm's founders, said on Sunday. "This is an attack on Panama because certain countries don't like it that we are so competitive in attracting companies," he said.

Jürgen Mossack, the other lawyer who co-founded the firm more than three decades ago, was born in Germany in 1948 and moved to Panama with his family, where he obtained his law degree. Mossack's father had served in Hitler's Waffen-SS during the Second World War, according to the ICIJ, citing US Army records. It said "old intelligence files" showed the father had offered to spy for the CIA.

The company has denied any wrongdoing, saying that it has acted beyond reproach for 40 years and that it has carried out robust due-diligence procedures. The firm also operates in Switzerland, Cyprus and the British Virgin Islands.

Naming names

The report listed 12 current and former national leaders - from Argentina, Georgia, Iceland, Iraq, Jordan, Qatar, Saudi Arabia, Sudan, United Arab Emirate and Ukraine - among 143 politicians, their families and close associates known to use tax havens. Russian President Vladimir Putin's friend since childhood, the cellist Sergei Roldugin, was named as the linchpin in a scheme to hide money from Russian state banks offshore.

Among the national leaders with offshore wealth listed in the papers were Nawaz Sharif, Pakistan's prime minister; Ayad Allawi, former interim prime minister and former vice president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt's former president, and the prime minister of Iceland, Sigmundur David Gunnlaugsson.

More than 500 banks registered nearly 15,600 shell companies with Mossack Fonseca, according to the ICIJ's analysis.

While the use of offshore companies is not illegal, action to avoid payment of taxes can be. It can also have political consequences. The families of eight current and former members of China's supreme ruling body, the Politburo, have been found to have placed wealth offshore.

A member of Fifa's powerful ethics committee acted as a lawyer for individuals and companies recently charged with bribery and corruption, according to the documents. Footballer Lionel Messi is mentioned in the document.

Media attention

Newspapers around the world have focused attention on nationals named in the documents. The Indian Express titled its front page "Revealed: Indians in global list of secret firms in tax havens."

WikiLeaks is continuing to present information from the data:

jm/gsw (AFP, dpa)

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