The Panama Papers is the biggest leak in history, certainly in terms of size. What we know at the moment is just the tip of the iceberg; this could be the biggest in terms of magnitude too. As I write, the leaks already look like they might bring down the Icelandic government.
It appears those implicated include Argentine President Mauricio Macri, Ukrainian President Petro Poroshenko, President of the UAE Sheikh Khalifa bin Zayed bin Sultan Al Nahyan, Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson, The King of Saudi Arabia, Russian President Vladimir Putin, aides to the former Argentine Presidents Kirchner, the chidren of the Azerbaijani President, footballer Lionel Messi, Lord Ashcroft, aeroplane manufacturer Airbus, and the late father of the Prime Minister Ian Cameron.
HMRC is now investigating Britons implicated and, according to former tax inspector Richard Brooks, will be cross checking the leaked data with tax returns.
The leaks revolve around hidden financial dealings with Mossack Fonseca, an off-shore law firm. Some of the older deals, including those implicating Ian Cameron, involved highly secretive bearer bonds, which were made illegal in the UK last year by David Cameron, and secretive shell companies. Some of these shell companies are clearly illegal, while others are not.
It is likely that some of those implicated are not doing anything illegal. In some very specific cases, it is ethical to hold money abroad (such as being paid in one country but living in another), but these criteria will not cover the vast majority of those implicated.
Many however will still be legal, even in unethical. The schemes and companies that have set up shell companies in Panama have huge legal departments, and the people involved will no doubt have been very cautious about actually breaking the law. Indeed Gunnlaugsson has said that he hadn't broken any Icelandic laws, and the President of Azerbaijan has said that his ‘children are grown-up Azerbaijani citizens. They can have their own business. This is not banned by any law’.
These leaks will have a huge fallout globally. The Icelandic government may well be falling, and the new Argentine government elected on an anti-corruption platform may now need a re-think. Messi, whose tax affairs have already landed him in trouble in Spain, may be in more trouble. Clearly Putin will ignore these revelations, as news channels close to the Kremlin already have. But what effect will they have in the UK?
Some Britons caught up in the papers toe the line between evasion and avoidance, while others blur the line. Some will have crossed the line, others will have knowingly hidden ill-gotten gains in an attempt to launder them. All of these cases need investigating, and HMRC likely doesn’t have the clout.
Richard Brookes warned that HMRC doesn’t have the man power to fully investigate under normal circumstances, due to savage funding cuts. They likely will not have the manpower to fully investigate the revelations in the Panama Papers either.
Despite the Conservative’s recent attempts to close tax loopholes, including banning bearer bonds, they’ve cut to the bones the agency that’s supposed to enforce their new rules. With so much of the information public, a lacklustre response by HMRC could damage Cameron’s government in their attempts to close loopholes, and make the Conservatives look complicit to the electorate. After all, several former Conservative MPs and Lords are either implicated in the scandal or connected to someone that is.BLOG COMMENTS POWERED BY DISQUS