Panama data leaks spell 'end of secrecy for the super-rich'

David Cameron is facing growing pressure to reveal more details over how his late father Ian ran an offshore fund which allegedly paid no tax in Britain

Rex

Nicholas Cecil, Political Editor @nicholascecil|Jonathan Prynn, Business Editor @JonPrynn

5 April 2016

London's super-rich were today warned the secrecy over their tax affairs can no longer be guaranteed.

Wealthy people who have hidden millions in tax havens were told these funds could now be made public by being hacked or via data dumps like the “Panama Papers”.

Barry Vitou, head of the global corporate crime team at London-based international lawyers Pinsent Masons, said: “This is the new now. Secrecy can no longer be guaranteed when these sort of things are happening.”

The warning, after the massive leak from Panama-based law firm Mossack Fonseca, came as:

David Cameron faced growing pressure to reveal more details over how his late father Ian ran an offshore fund which allegedly paid no tax in Britain.
There were claims that HSBC successfully lobbied to keep Syrian President Bashar al-Assad’s cousin and financier Rami Makhlouf’s bank accounts open at the start of the country’s civil war despite advice from Mossack Fonseca’s compliance team to cut ties.
This followed US sanctions on the Makhlouf family amid corruption fears.
Banks HSBC and Credit Suisse dismissed suggestions they were actively using offshore tax avoidance structure. Credit Suisse chief Tidjane Thiam said: “We as a company, as a bank, only encourage the use of structure when there is a legitimate economic purpose.”
Tax authorities around the world were stepping up probes into the raft of claims against scores of high profile-individuals.

The massive leak of more than 11 million documents from Panama-based law firm Mossack Fonseca has already led to damaging revelations about political leaders, business chiefs and sports stars around the world.

Credit Suisse chief Tidjane Thiam dismissed suggestions the firm was actively using offshore tax avoidance structures

Reuters

Tax expert Ray McCann, from London-based New Quadrant Partners, a boutique legal practice which advises the wealthy, and a Council member of the Chartered Institute of Taxation added: “The days are over when an individual could rely on secrecy as a way of ensuring that a transaction is effective.”

Clive Stevens, head of taxation at London accountancy firm Kreston Reeves, estimated that “tens of thousands” of wealthy London based individuals could be affected by the fall out from the Panama leaks.

But he believes the city may ultimately benefit, stressing: “When there is no place to hide people should be bringing their assets into view onshore in the great global centres like London and New York.”

Political leaders were caught in the spotlight after the first raft of allegations emerged from the “Panama Papers” including over people close to Russian president Vladimir Putin and Chinese leader Xi Jinping.

Mossack Fonseca denies any wrongdoing.

But in echoes of the 2009 expenses scandal which shamed MPs, hundreds more individuals now face the humiliation of their financial affairs being dripped out in public over coming months.

Already, some rich business executives have been fronted up by journalists about whether they have been engaged in tax avoidance scams, for example to avoid paying tax on a London property deal, which while not illegal will be seen by many people as dubious.

Many more now face having to defend the use of offshore accounts and other questionable tax practices.

Phones4U billionaire John Caudwell, reputedly one of Britain’s biggest income taxpayers, stressed the “moral” case for people to pay this levy in the UK to fund public services and the British way of life.

He told BBC radio: “From a sense of morality people need to pay their income tax in the UK. People who are enjoying all the benefits of the UK, the wonderful civilisation, a wonderful country, ought to pay their dues.”

Bashar Assad's cousin Rami Makhlouf

But he argued that the Government had left the tax system “open to be abused” as the rules were “a little bit vague” and there were “grey areas” between acceptable tax reduction and where it becomes “very aggressive”.

He added: “What we need is very, very clear guidance from the Government as to what tax avoidance will not be tolerated.

“You almost need a list of activity that is acceptable like ISAs and everything else being very heavily penalised for incorrect behaviour.”

Meanwhile, Mr Cameron faced growing pressure to be more open about his late father Ian’s use of an offshore fund Liberal Democrat leader Tim Farron said: “When asked in 2015 about his tax affairs the PM said he was ‘very relaxed’ about providing transparency.

He should stick to that approach now and be as open as possible about his finances.

“However this issue is about the sunny places that shady things happen and I again call on the Prime Minister to live up to his promises and end the tax avoidance culture of UK territories.”

But former Attorney General Dominic Grieve defended Downing Street’s stance in refusing to comment on the details of Ian Cameron’s financial affairs allegedly revealed in the Panama Papers.

He said: “I understood he said he had no shares in offshore companies so that would appear to answer the question.”

Asked again if it is a private matter, Mr Grieve added: “I think with public figures ultimately we do have a need for transparency.

“It’s worth bearing in mind we have a register of interests at Parliament where we’re obliged to set out very clearly areas of our financial interest which go way beyond what ordinary members of the public have to do, and I’m entirely comfortable with that.”

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