Panama City, April 6
- Mossack Fonseca says company was hacked by servers abroad
Western leaders pledged to crack down on tax dodges by the rich and powerful today amid a mushrooming scandal provoked by revelations of a web of Panama-based offshore financial dealings.
A day after Iceland’s prime minister stepped down after being named in a massive leak of 11.5 million confidential documents — the so-called Panama Papers — international attention turned to tax cheats, with Panama’s role in particular focus.
France led global pressure on the Latin American nation, saying it would put Panama back on its own list of tax havens, four years after it had been removed.
Finance Minister Michel Sapin called on 34-nation Organisation for Economic Cooperation and Development (OECD) to do the same. “Unfortunately, Panama has a bit of a tendency to make U-turns, to play the good guy and then the bad guy. This cannot go on,” Sapin told parliament today.
Panama hit back, however, after days of being hammered in the world media.
“In Panama, there is a law that sets out retaliation measures against countries that include Panama in ‘grey lists’,” Alvaro Aleman, the minister for the presidency, warned France in a news conference.
The retaliatory measures can include blocking foreign investment or withholding public tenders.
Panama had earlier lashed out at OECD Head Angel Gurria, saying his description of the country as the last major tax haven impenetrable to law enforcement was ‘unfair and discriminatory’.
Panamanian law firm Mossack Fonseca is at the centre of the scandal after its papers were obtained from an anonymous source by German daily Sueddeutsche Zeitung
and shared with more than 100 media groups by the International Consortium of Investigative Journalists (ICIJ).
After a year-long investigation, ICIJ and other international media on Sunday published the first wave of revelations, detailing offshore financial activities of 140 political figures. Many of those identified insist they have done no wrong. Offshore financial dealings are not illegal in themselves, though they may be used to hide assets from tax authorities, launder proceeds of criminal activities or conceal misappropriated or politically inconvenient wealth.
The Group of 20 advanced economies has backed a series of tax crackdowns since 2009. That has led to a weakening of international banking secrecy, with 19 countries committing to automatically exchange clients’ financial information by 2018.
One of the founders of the firm, Ramon Fonseca, told AFP
it had lodged a criminal complaint with Panamanian prosecutors over the breach which he blamed on a computer hack from abroad. “Nobody is talking of the hack, and that is the only crime that has been committed,” he said.
US President Barack Obama said wealthy individuals and corporations were ‘gaming the system’ by making use of tax code loopholes to which average taxpayers had no access. He also labelled ‘insidious’ the growing practice of US companies merging with foreign firms just to cut their tax liabilities.
“A lot of it is legal, but that’s exactly the problem.”
Iceland’s Prime Minister Sigmundur David Gunnlaugsson was the biggest casualty so far, quitting his post on Tuesday after it emerged he and his wife invested millions of dollars in an offshore company that had stakes in three Icelandic banks that collapsed in 2008, tipping the country into a deep recession. He denies any wrongdoing, but bowed out on after thousands took to the streets.
Other more powerful figures are implicated in the Panama Papers, which come from around 214,000 offshore entities and cover almost 40 years.
They purportedly reveal a web of financial transactions by associates of Russian President Vladimir Putin’s associates and relatives of Chinese President Xi Jinping.
The Kremlin suggested a US plot after the leaks put a close friend of Putin’s at the top of an offshore empire worth more than $2 billion.
Beijing refused to respond to ‘groundless accusations’ that eight current or former members of the ruling party’s most powerful body concealed their fortunes through offshore havens, as well as relatives of Xi, who has overseen a much-publicised anti-corruption drive.
Pakistani Prime Minister Nawaz Sharif pledged to create a commission to investigate after three of his children were named in the papers.