Panama Papers could lead to biggest tax investigation in living memory

The world’s media has focused on one major tax investigation story recently. A huge leak of documents has lifted the lid on how the rich and powerful use tax havens to hide their wealth.

The files were leaked from one of the world’s most secretive companies, a Panamanian law firm called Mossack Fonseca.

So what are the Panama Papers and what will the tax investigation implications be for those who are caught up in the scandal?

The files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax.

In one case, the company offered an American millionaire fake ownership records to hide money from the authorities. This is in direct breach of international regulations designed to stop money laundering and tax evasion.

It is the biggest leak in history, dwarfing the data released by the Wikileaks organisation in 2010. According to the BBC, who give an example of the scale of the data involved, if the amount of data released by Wikileaks was equivalent to the population of San Francisco, the amount of data released in the Panama Papers is the equivalent to that of India.

There are links to 12 current or former heads of state and government in the data, including dictators accused of looting their own countries.

More than 60 relatives and associates of heads of state and other politicians are also implicated.

The files also reveal a suspected billion-dollar money laundering ring involving close associates of Russia’s President, Vladimir Putin.

Also mentioned are the brother-in-law of China’s President Xi Jinping,  Ukraine President Petro Poroshenko, Argentina President Mauricio Macri, the late father of UK Prime Minister David Cameron and three of the four children of Pakistan’s Prime Minister Nawaz Sharif.

The documents show that Iceland’s Prime Minister, Sigmundur Gunnlaugsson, had an undeclared interest linked to his wife’s wealth. He has now resigned. The scandal also touches football’s world governing body, Fifa.

Part of the documents suggest that a key member of Fifa’s ethics committee, Uruguayan lawyer Juan Pedro Damiani, and his firm provided legal assistance for at least seven offshore companies linked to a former Fifa vice-president arrested last May as part of the US inquiry into football corruption.

The leak has also revealed that more than 500 banks, including their subsidiaries and branches, registered nearly 15,600 shell companies with Mossack Fonseca.

In all, the details of 214,000 entities, including companies, trusts and foundations, were leaked.

The information in the documents dates back to 1977, and goes up to December last year. Emails make up the largest type of document leaked, but images of contracts and passports were also released.

Dr Anjulika Salhan, a director and tax investigation specialist with Salhan Accountants commented: “Although there are legitimate ways of using tax havens, most of what has been going on here is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money.

“Some of the main allegations centre on the creation of shell companies, that have the outward appearance of being legitimate businesses, but are just empty shells. They do nothing but manage money, while hiding who owns it.

“HM Revenue and Customs (HMRC) are promising to act “swiftly” against tax avoiders as it joins tax authorities all over the world, in poring over the wealth of information contained in the Panama Papers.

“HMRC has apparently approached the International Consortium of Investigative Journalists (ICIJ) to request access to the 11 million leaked documents it has been handling over the past year and I believe it’s not an exaggeration to say that we could be looking at the biggest tax investigation in living memory.”

At Salhan Accountants, we work extremely hard for clients subjected to a taxation investigation. We not only clarify the issues and the process, but come up with solutions too. Our experience, professional reputation, forensic attention to detail and negotiating skills mean we are well-placed to achieve positive outcomes. Whether an individual or company, talking to us is your best step towards addressing a taxation investigation and moving on with your life. For more information about our taxation investigation services, please contact us.