Panama Papers Compel Iceland Prime Minister To Resign

The Panama Papers claimed its first casualty as Prime Minister Sigmundur David Gunnlaugsson of Iceland resigned recently. The documents leaked from a law firm based in Panama showed the wife of the premier owning an offshore company with considerable claims in bank in Iceland, which is a conflict of interest for the prime minister. It resulted to street protests against the premier as protestors called for his resignation.

The 2008 global financial crisis resulted to the collapse of numerous banks and politicians were blamed by Icelanders for not controlling the situation and prevent a recession.

The documents were leaked from Mossack Fonseca, a Panamanian Law firm. It resulted to public outrage over the way rich and powerful individuals are able to hide their wealth while avoiding taxes even as ordinary citizens have to deal with hardships and austerity measures implemented by the authorities.

But, Mossack Fonseca denied breaking any laws. The company in the middle of the Panama Papers controversy specializes in establishing offshore companies.

The chief of staff of President Juan Carlos Varela of Panama said in a news conference that the government will react to an announcement by France that it would blacklist the country for being an uncooperative tax jurisdiction. Alvaro Aleman said no company in Panama has doing anything wrong. He added that they will work on preventing Panama from becoming “a scapegoat by third parties.” He said all countries implicated should be held accountable. The foreign ministry of Panama was ordered by the president to get in touch with the countries implicated in the controversy.

Friends of President Vladimir Putin of Russia along with the relatives of leaders of Pakistan, China and Britain were mentioned in the Panama Papers along with the Ukrainian president. Gunnlaugsson resigned before a vote of no-confidence, hours after he asked the president to dissolve parliament. The move is expected to lead to a new election.

Sigurdur Ingi Johannsson, deputy leader of the Progressive Party of the prime minister, said the party will make a suggestion to its partners to make him the new prime minister. However, opposition parties are calling for a snap general election. Opinion polls in Iceland showed the Pirate Party will win a new election.

The fallout of the Panama Papers affected a good number of high-profile individuals around the world. Prime Minister David Cameron of Britain was also criticized for allowing the elite to avoid taxes. On the other hand, the reports were described as groundless by the Chinese government. The leak showed that the families of former and current Chinese leaders had offshore accounts.

President Barack Obama of the United States said the leaked documents showed that tax avoidance is a big problem and appealed to the US Congress to act on stopping US-based companies from using loopholes to allow them to avoid taxes.

President Obama said the Panama Papers should serve as a reminder that tax avoidance is an international problem that is not unique to other countries since there are some Americans who take advantage of the situation. He added that the fact that it is legal makes it a problem.

A spokesman for the government of Iceland said claims against banks in Iceland held by a company owned by the wife of the prime minister reached 500 million Icelandic crowns or $4.1 million. However, Gunnlaugsson said the overseas assets of his wife are taxed in Iceland.

Panama Papers Compel Iceland Prime Minister To Resign - image credit: bbc.com

Government bonds of Iceland saw a major selloff as 10-year bond yields went down to 5.891 percent due to the uncertainty.

Labour Party leader Jeremy Corbyn of Britain said the government should deal with tax havens and Cameron should work on stopping the elite from avoiding taxes. Corbyn indicated that tax rules for the wealthy elite should be the same one used for ordinary citizens.

He added that Britain has a significant accountability since a good number of tax havens are British overseas territories, including the Cayman Islands and the British Virgin Islands. Other tax havens are also British crown dependencies, including the Isle of Man and Jersey.

Media who accessed the Panama Papers indicated that around 100,000 companies established by Mossack Fonseca were registered at the British Virgin Islands, where ownership details may not be filed with the government.

While Cameron portrayed himself as a supporter in the struggle against tax evasion, the Panama Papers put him on the spot since his late father and some members of the Conservative Party were included in the list of clients of Mossack Fonseca. But, Cameron denied owning any shares or having any offshore funds. He also said his family does not benefit from any offshore funds.

Similar denials were issued by other prominent figures as regulators and prosecutors have started to review the investigation conducted by the International Consortium of Investigative Journalists or ICIJ as well as other media organizations. Among the nations that conducted inquires are the Netherlands, Sweden, Australia, Austria, France, New Zealand and Britain.

Panama is among the most secretive offshore haven in the world and did not sign a global transparency initiative. Mossack Fonseca said its business was misrepresented by media and it was a victim in a campaign against privacy. The Hong Kong office of the company said it was never formally investigated or charged for any wrongdoing in its nearly four decades of existence.

The company said in a statement that they do not provide advice to their clients on how to run their businesses and they do not link up with the companies they help establish. The company also said they only earn through professional fees and have not direct connection with the operations of the businesses of their clients.

The Panama Papers also showed that families of President Xi Jinping and other officials were also linked to offshore companies. Foreign Ministry spokesman Hong Lei of China said the ministry will not give any comments on groundless accusations when asked on whether an investigation will be conducted based on the Panama Papers.

Local access to the reports were also limited by Beijing as state media indicated that reports from the West were biased against leaders of countries outside of the West. But, necessary actions will be taken by the tax department of the Hong Kong government.

The two biggest wealth managers, HSBC and Credit Suisse, rejected hints that they used offshore structures in allowing clients to evade tax. The ICIJ said the two companies were among the financial institutions that established structures to make it difficult for investigators and tax collectors to monitor the flow of funds.

Football star Lionel Messi of Argentina and Barcelona was among the famous personalities drawn into the controversy. While tax authorities in Spain revealed that an investigation is being conducted for tax irregularities involving the football star based on the Panama Papers, his family denied any wrongdoing.

Posted by James Fried on Wednesday April 06 2016, 11:20 PM EDT. All trademarks acknowledged. Filed under Uncategorized. Comments and Trackbacks closed. Follow responses: RSS 2.0