Massive data leak unleashes backlash against tax dodgers

PANAMA CITY — Western leaders pledged to crack down on tax dodges by the rich and powerful Wednesday amid a mushrooming scandal provoked by revelations of a web of Panama-based offshore financial dealings. A day after Iceland’s prime minister stepped down after being named in a massive leak of 11.5 million confidential documents — the so-called Panama Papers — international attention turned to tax cheats, with Panama’s role in particular focus. France led global pressure on the Latin American nation, saying it would put Panama back on its own list of tax havens, four years after it had been removed. Finance Minister Michel Sapin called on the 34-nation Organization for Economic Cooperation and Development to do the same. “Unfortunately Panama has a bit of a tendency to make U-turns, to play the good guy and then the bad guy. This cannot go on,” Sapin told Parliament Wednesday. Panama hit back, however, after days of being hammered in the world media. “In Panama, there is a law that sets out retaliation measures against countries that include Panama in ‘grey lists’,” Alvaro Aleman, the minister for the presidency, warned France in a news conference. The retaliatory measures can include blocking foreign investment or withholding public tenders. Panama had earlier lashed out OECD head Angel Gurria, saying his description of the country as the last major tax haven impenetrable to law enforcement was “unfair and discriminatory.” Panamanian law firm Mossack Fonseca is at the center of the scandal after its papers were obtained from an anonymous source by German daily Sueddeutsche Zeitung and shared with more than 100 media groups by the International Consortium of Investigative Journalists (ICIJ). After a year-long investigation, the ICIJ and other international media on Sunday published the first wave of revelations, detailing the offshore financial activities of 140 political figures. Many of those identified insist they have done no wrong. Offshore financial dealings are not illegal in themselves, though they may be used to hide assets from tax authorities, launder the proceeds of criminal activities or conceal misappropriated or politically inconvenient wealth. The Group of 20 advanced economies has backed a series of tax crackdowns since 2009. That has led to a weakening of international banking secrecy, with 19 countries committing to automatically exchange clients’ financial information by 2018. One of the founders of the firm, Ramon Fonseca, said it had lodged a criminal complaint with Panamanian prosecutors over the breach which he blamed on a computer hack launched from abroad. “Nobody is talking of the hack, and that is the only crime that has been committed,” he said. US President Barack Obama said wealthy individuals and corporations were “gaming the system” by making use of tax code loopholes to which average taxpayers had no access. — AFP