AdSlot1

European inquiry into Panama Papers receives go-ahead

AN INVESTIGATION into the Panama Papers has been given the green light by European officials as authorities look to discover how wealthy individuals, politicians and multinational corporations were able to stash billions away in the Central American tax haven.

The European Parliament yesterday voted in favour of setting up a year-long investigation into the so-called Panama Papers, with an EU committee set to investigate alleged “contraventions and maladministration in the application by the EU Commission or member states of EU laws on money laundering, tax avoidance and tax evasion”.

The committee will have 65 members and 12 months to present its report. The vote to hold an inquiry was held in a plenary session at the European Parliament in Strasbourg.

The fight against tax fraud

Details of the mandate, which have been agreed by MEPs, stated: “In times when the European Union is still coping with the consequences of the crisis from the end 2000s, European institutions have a duty to ensure that the fight against tax fraud, avoidance and illegal activities is given priority and has the best legislative framework possible”

The mandate added that the Panama Papers has heightened the importance of the exchanging of tax information between tax authorities as well as the clampdown on nations which fail to agree to such legislation.

“Panama has so far been unwilling to implement the OECD’s Common Reporting Standard on tax information exchange, considered the new international standard of automatic exchange of tax information,” continued the mandate.

As it stands, Panama is listed as a tax haven by eight member states (Bulgaria, Croatia, Greece, Latvia, Lithuania, Poland, Portugal and Slovenia), while on 5 April, France re-included Panama in its national blacklist.

More tax experience needed

Reacting to the Panama Papers committee, Sven Giegold, a German Green MEP, said: “We have to research how it was possible to break European anti-money laundering legislation in Europe systematically.

“Because what the journalists have uncovered is that it was possible to open bank accounts and secretive companies and disguise the real beneficial owners of large amounts of money.”

Chas Roy-Chowdhury, head of taxation at ACCA, told Accountancy Age that the European Parliament’s decision is “a step in the right direction” towards a major offensive on widespread tax evasion, but more can be done by the Parliament to combat it.

“The European Parliament has always been great at setting up committees, but I would like to see people with more tax experience leading these inquiries from now on,” said Chowdhury.

Biggest data leak in history

In April, over 11 million documents belonging to Panamanian law firm Mossack Fonseca were leaked and reviewed by a team of more than 370 journalists from 76 countries, and allegedly show how the legal services company has aided its clients in evading tax, dodging sanctions and laundering billions in cash over 40 years, from 1977 to 2015.

David Cameron and Russian president Vladimir Putin have come under scrutiny over personal ties with the papers, while Icelandic president Sigmundur Gunnlaugsson resigned after his wife’s connection to the law firm sparked public anger.

Following the furore over his family connections to the papers, David Cameron quickly announced he was fast tracking plans to introduce a criminal offence for corporations that fail to stop their staff facilitating UK and foreign tax evasion, while on the same day, chancellor George Osborne announced that key EU allies Germany, France, Italy, Spain and the UK agreed to exchange data on company beneficial ownership registers.

In April, David Cameron also announced plans to create a  taskforce to investigate the financial affairs of companies mentioned in the Panama Papers.

The taskforce will be jointly led by HMRC and the National Crime Agency and draws on investigators, compliance specialists and analysts from HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority.

Related reading

/IMG/619/113619/hmrc-building
/IMG/427/118427/andrew-tyrie-mp
/IMG/375/162375/investigations-magnifying-glass
/IMG/254/147254/andrew-harding-exec-cima