Panama Papers: The impact felt around the world

April 6, 2016 5:55 am

Barcelona’s Lionel Messi has been caught up in the scandal. Photo / AP

ICELAND
The Prime Minister Sigmundur David Gunnlaugsson is to resign, becoming the first casualty of leaked documents from a Panamanian law firm that have shone a spotlight on the finances of an array of politicians and public figures worldwide. The Papers showed his 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. Gunnlaugsson quit ahead of a planned vote of no-confidence, hours after asking the president to dissolve Parliament, a move that would almost certainly have led to a new election. After a meeting with the Prime Minister, President Olafur Ragnar Grimsson said he had asked for talks with the main parties before making a decision.
PANAMA
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 wealth and avoid taxes while many people suffer austerity and hardship.
Mossack Fonseca denies any wrongdoing and Panama President Juan Carlos Varela’s chief of staff said that the Government could retaliate after France announced it would put the Central American country back on its blacklist of unco-operative tax jurisdictions. Alvaro Aleman said no Panamanian company had been found to have committed a crime. He added: “We are not going to allow Panama to be used as a scapegoat by third parties. Each country (implicated) is responsible.”

A 2010 file photo of Britain's Prime Minister David Cameron, left, as he greets his father Ian Cameron, in Swindon England. Photo / APA 2010 file photo of Britain’s Prime Minister David Cameron, left, as he greets his father Ian Cameron, in Swindon England. Photo / AP

BRITAIN
British Prime Minister David Cameron also came under fire from opponents who accused him of allowing a rich elite to dodge their taxes. The leader of the Labour Party, Jeremy Corbyn, demanded the Government tackle tax havens, saying it was time Cameron stopped allowing “the super-rich elite” to dodge taxes. Cameron was put on the spot by the leaks, which named his late father Ian and members of the ruling Conservative Party among the list of clients who used Mossack Fonseca’s services. Cameron said he
did not own any shares or have offshore funds. “I have a salary as prime minister, and I have some savings, which I get some interest from, and I have a house,” he said. “I have no shares, no offshore trusts, no offshore funds, nothing like that.” Downing Street said Cameron’s wife, Samantha, “owns a small number of shares connected to her father’s land, which she declares on her tax return.”
PAKISTAN
Prime Minister Nawaz Sharif announced that he would to set up an independent judicial commission to probe whether his family was involved in illegal overseas investments after reports based on Panama documents indicated his sons owned several offshore companies. In a televised address to the nation, Sharif said a retired judge from the Supreme Court of Pakistan will head the commission. “This commission after investigations will decide what is the fact and to what extent the allegations are valid,” he said. He asked those levelling corruption charges against his family to cooperate with the commission and prove any allegations instead of repeating “baseless allegations” which his family had been facing for years. Sharif’s comments came a day after his son Hussain Nawaz admitted he owned offshore companies and property abroad. He maintained that he never used his government office for financial gain.
GERMANY
Chancellor Angela Merkel and top economic officials are calling for greater transparency. Merkel spoke after a previously-scheduled meeting with the heads of the World Bank, the Organisation for Economic Cooperation and Development, the International Monetary Fund, the International Labour Organisation and the World Trade Organisation. She said the new corruption allegations show “the theme of transparency is of the greatest importance”. OECD Secretary-General Angel Gurria said it was an “exceptional situation which we should profit from” by pressuring Panama to join international financial disclosure agreements. World Bank President Jim Yong Kim called it “an opportunity to continue and aggressively move forward to find how these illicit financial flows are moving.” Germany’s Justice Minister Heiko Maas is proposing setting up a national “transparency register” that would list the real beneficiaries of letter-box companies – but only those set up in the country itself. Maas conceded that German legislation could only apply to companies set up in Germany.
RUSSIA
President Vladimir Putin’s spokesman says the Russian leader has no connection whatsoever to offshore accounts allegedly owned by his close friend, a Russian musician. Dmitry Peskov says the leaked documents from a Panama-based firm have been wilfully interpreted by an international consortium of investigative journalists to make what he called an unfounded claim that cellist Sergei Roldugin’s offshore assets were linked to the Russian president. Peskov emphasised that “there is not a word about President Putin in those papers,” and dismissed the alleged link between Russian owners of offshore assets and Putin as a “product of imagination”. He said the scandal around the so-called Panama Papers has proven that Putin was right when he urged Russian businesses to pull out their assets from offshore accounts.
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. 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.
AUSTRALIA
The Australian Taxation Office has confirmed it is investigating 800 taxpayers linked to the firm. A digital forensics expert who helped journalists parse the massive trove of offshore finance documents says it took weeks to process the leaked information. Carl Barron, a consultant with Australian data investigation firm Nuix, says his company has been collaborating with the International Consortium of Investigative Journalists since September on the Panama Papers investigation. “We worked with them as a partner but we didn’t actually see the documents.” Barron said it took roughly two weeks for the company’s software to make the 2.6 terabyte stash of information searchable and several additional weeks to process hard-to-parse documents such as photos and faxes. Deduplication – the process of removing redundant data such as copies of the same email chain – slimmed the final cache by 30 per cent. He said that “if they had done it by hand it would have been impossible”.
UNITED STATES
President Barack Obama said the Panama Papers showed tax avoidance was a major problem and urged the US Congress to take action to stop companies from taking advantage of loopholes allowing them to avoid paying taxes. “We’ve had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem,” he told reporters. Obama says the massive leak is evidence that world leaders should do more to crack down on individuals and corporations that try to dodge taxes. He says the leaders have made some progress in shutting down international tax avoidance schemes, but not enough. Obama says the problem is that too often the tax dodging in enabled by “poorly designed” laws that are easy to exploit. He says: “A lot of it’s legal, but that’s exactly the problem.” The Justice Department has said it is reviewing the documents for evidence of corruption or violations of US law.
SPAIN
Spain’s acting Deputy Prime Minister says her country’s investigation into offshore companies created for luminaries like soccer great Lionel Messi and movie director Pedro Almodovar will focus on whether the companies held money and if it was declared in Spain. Soraya Saenz de Santamaria told the Telecinco broadcaster that Panama’s Government appears inclined to cooperate with Spanish authorities probing the companies in various tax havens. Spain since 2012 has required taxpayers to declare their holdings abroad. She says Spain will “trace the money and relationships with third parties”. Messi has denied wrongdoing and Almodovar’s brother says the company for them was dissolved a few years after it opened in the 1990s. Other Spaniards named in the massive document leak from the law firm include a sister of former King Juan Carlos and a son of a former longtime Catalonia regional leader.
FRANCE
French Finance Minister Michel Sapin says his country will put Panama back on its list of tax havens. France had withdrawn Panama from its list of “uncooperative countries” in 2012 following the signature of a convention on the fight against tax evasion between the two countries. Sapin, speaking to legislators at France’s Lower House of Parliament, says Panama tried “to make us believe it was able to respect the key international principles.” France’s list of tax havens currently includes six states: Brunei, Guatemala, Marshall islands, Nauru, Niue and Botswana. It allows tax administration to apply specific stringent measures on financial transactions with these countries.
HUNGARY
The chairman of Hungary’s opposition Socialist Party says a former MP and party treasurer has admitted that reports about an offshore company owned by his wife are “completely true”. Jozsef Tobias says that Laszlo Boldvai, who was a parliamentary deputy from 1994 to 2014, told him that he is willing to face any inquiry and has suspended his party membership. Boldvai was also party treasurer for the Socialists in 1994-1998. According to information published by Hungary’s Direkt36.hu investigative journalism centre, Boldvai’s wife, a high school teacher, has owned a company registered in Samoa since 2012. Years ago, Boldvai’s personal finances were the subject of articles in several newspapers as he and his family seemed to be living beyond their means. Still, in 2009, a parliamentary commission chaired by another Socialist Party deputy decided not to investigate the allegations.
ROMANIA
Romania’s national tax authority has set up a working group to examine the data published by investigative journalists on offshore accounts and firms held by Romanians. The National Agency of Fiscal Management said anti-fraud inspectors, tax inspectors and inspectors specialised in checking people’s assets and financial information would be part of the interdepartmental group.
SLOVENIA
Slovenia’s Finance Ministry has called for greater international sharing of data to tackle the kind of tax fraud allegedly revealed by the data. The ministry said Slovenia was active in tackling tax havens by investigating hundreds of suspected cases of tax evasion. It says an additional €24 million was collected between 2011 and 2015 as a result of probes into suspected transactions. Delo newspaper says that according to leaked documents it analyzed, at least 78 Slovenian companies and 74 Slovenian individuals are reportedly associated with offshore companies set up through Mossack Fonseca. The newspaper says that Slovenia’s most prominent boxer Dejan Zavec is among those named in the leaked documents. He has said he has done nothing wrong.

People walk past the Arango Orillac Building which lists the Mossack Fonseca law firm in Panama City. Photo / APPeople walk past the Arango Orillac Building which lists the Mossack Fonseca law firm in Panama City. Photo / AP

SERBIA
A known football player, a fashion designer whose dresses are worn by first lady Michelle Obama and 16 other mostly business figures are on a list of prominent Serbs who used the services of Mossack Fonseca. The Belgrade-based KRIK network investigating crime and corruption, which issued the list on after going through documents leaked from the Panama-based law firm, says Darko Kovacevic had officially earned about US$2000 a month while playing for Spanish club Real Sociedad during the 2006-2007 season. The leaked documents, however, show the club had paid Kovacevic US$1.4 million that season to his offshore account. That means that both the club and Kovacevic had avoided paying full taxes in Spain, KRIK says. Fashion designer Roksanda Ilincic had a firm in British Virgin Islands, KRIK says, adding that the ownership of a shell company is not a crime, but that it can be used for money laundering or evading taxes.
ARGENTINA
An Argentine businessman who was extradited to the US for his involvement in the Fifa corruption scandal is linked to offshore companies. Alejandro Burzaco transferred US$370 million to secret companies in tax havens. The money was used to pay the South American football confederation for broadcasting rights to the region’s top club tournament over a 14-year period. Burzaco was previously the chief executive of sports marketing company Torneos y Competencias. He was one of 14 people indicted by US authorities last year on bribery, vote-rigging and other corruption charges.
ANDORRA
The Finance Minister for the tiny country of Andorra wedged between France and Spain has told reporters that he once was in charge of an offshore company and is making the announcement in the interest of openness. Jordi Cinca Mateos said that he was the company’s agent from 1999-2000, long before he entered government. The offshore company dissolved in 2002 had been set up to deal with possible business interests in Central and South America for an Andorran company that Cinca Mateos used to work for.
CHILE
One of the world’s largest anti-corruption watchdogs is expressing regret that the head of its office in Chile is linked to several offshore companies, according to the Panama Papers. Transparency International said that Gonzalo Delaveau’s resignation shouldn’t take away from the group’s important work in Chile. Jose Ugaz, chair of the Berlin-based group, said he was deeply troubled by revelations that Delaveau, a lawyer, was linked to five companies domiciled in the Bahamas. Delaveau is not accused of any wrongdoing but Ugaz said his continued affiliation with Transparency International is incompatible with the group’s aims to register the beneficial owners of all shell companies to make it harder for the corrupt to hide illicit wealth.
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