Written by Cécile Remeur,
The practices and policies of taxpayers and tax jurisdictions that make revenues and tax bases opaque, reducing tax bills and resulting in lost resources for countries, have been continuously in the news over recent days. Yet, the ‘Panama papers’, revealed as a result of a joint journalistic investigation (under the auspices of the International Consortium of Investigative Journalists – ICIJ), differ from previous leaks by the sheer bulk of documents revealing cases covering many taxpayers (individuals) in a wide range of countries. In contrast, previous leaks referred more to aggressive tax planning by corporations.
The leaked documents (11.5 millions) include emails, shareholder registers, bank statements, internal reports, passport scans and company certificates. They cover nearly 40 years of business transiting by a Panama-based law firm showing numerous ways to exploit secretive offshore tax regimes to hide opaque transactions (referring to avoidance, evasion or money laundering). Based on the leaked documents, articles have been published by the journalists participating in the investigation. The available information comes from the journalists’ articles published daily since
3 April 2016. A number of news organisations have created specific webpages on the ‘Panama papers’ (see for instance among the collaborating partners of the ICIJ: Süddeutsche Zeitung, the Guardian, Le Monde, Le Soir, El Confidencial, L’Esspresso).
The content of the ‘Panama papers’, which were leaked to and highlighted by the media, some at a time, focus on some of the global tax policy issues and challenges.The articles present how the papers reveal the use of offshore structures by individuals which had recourse to the services of the Panama-based law firm at stake. The services include incorporating and administering companies in offshore jurisdictions for fees. Offshore structures are not as such illegal, and some uses are all legal. Yet they can be used for tax avoidance purposes when related funds are not declared or hidden.
The articles draw a shadowy world of financial transactions, which calls for a dire need to increase transparency as a means to tackle the problem. The ‘Panama papers’ confirm that tax avoidance is a global problem, which can be answered by a global response, including all countries. Remaining ‘holdouts’ jeopardise the progress made to reduce secrecy and opacity in order to deter, detect and address tax evasion. Work done, in the framework of the OECD working with the G20, aims at improving the exchange of tax information through a global Common Reporting Standard (CRS) for the Automatic exchange of information (AEOI). Very recently, in his report to G20 finance ministers (26-27 February 2016) the OECD secretary-general informed them that that Panama was back-tracking on its commitment to AEOI.
At EU level, the implementation of the AEOI was adopted in December 2014 as an amendment to the Council Directive 2011/16/EU concerning administrative cooperation in the field of taxation (DAC).
Other aspects are equally important, some of which were also highlighted by leaks such as recently the so-called ‘Lux-leaks’ referring to corporate tax avoidance related to tax rulings. This led to improved legal provisions on information exchange between tax administrations (as a second amendment to the DAC, which is about to undergo a third amendment to implement the BEPS action 13 which provides for a corporate country-by-country reporting).
