The ICIJ Release of the “Panama Papers” Tax Haven Investigation

Alicia Bertrand, Taxnet Pro

On April 3, 2016 the International Consortium of Investigative Journalists (ICIJ) released details regarding their in-depth investigation of offshore tax havens used by Mossack Fonseca, a law firm based in Panama. The information leak is believed to be the largest of its kind dealing with offshore tax havens.[1] The information released, including financial data and the related names of certain parties (including politicians, professional athletes, businesses and celebrities), is being referred to by the ICIJ as the “Panama Papers”.

The Panama Papers include approximately 11.5 million leaked records, including information related to the internal operation of Mossack Fonseca, emails, financial spreadsheets, passports and other corporate documents. The records allegedly detail how 214,000 offshore entities connected to people in more than 200 countries and territories used banks, law firms and offshore shell companies to conceal financial assets.[2] Persons of note alleged to have illegal offshore financial holdings include: the President of Argentina, Mauricio Macri; the President of Ukraine, Petro Poroshenko; Iceland's prime minister, Sigmundur Davíð Gunnlaugsson; the King of Saudi Arabia, Salman bin Abdulaziz bin Abdulrahman Al Saud; numerous associates of Russian President Vladimir Putin; movie star Jackie Chan; and professional soccer athlete Lionel Messi.[3] The ICIJ claims that “more than 500 banks, their subsidiaries, and their branches – including HSBC, UBS and Société Générale – created more than 15,000 offshore companies for their customers through Mossack Fonseca”.[4] In response to ICIJ’s inquiries, the firm has denied any illegal activity, and co-founder of Mossack Fonseca, Ramón Fonseca, has stated to Reuters that the firm was hacked, and the data leak is part of an “international campaign against privacy”.[5]

Media outlets[6] have reported that certain Canadian businesses and politicians have links to Mossack Fonseca. Canadian resident taxpayers are permitted to invest in entities resident in tax haven countries and may have various bona fide tax planning reasons for doing so. Canadian resident taxpayers are required under the Income Tax Act to report foreign holdings worth more than $100,000 to the CRA (see Form T1135). Failure to do so may result in significant penalties. The CRA’s efforts to fight international tax evasion and aggressive tax avoidance includes the Offshore Tax Informant Program (OTIP), which allows the CRA to award individuals financially for providing information related to major international tax non-compliance that leads to the collection of taxes owing. In the 2016 Federal Budget tabled last month, the Federal Government committed CAD$444.4 million over the next five years to combat tax evasion and avoidance.[7]

Globally, many tax authorities have provided the media with statements regarding the Panama Papers. For example, the United Kingdoms’ HMRC reiterated that it is committed to tracking tax evaders and has requested that the ICIJ share information with HRMC to enhance its ability to examine any UK tax implications related to the Panama Papers.[8] The Australian Taxation Office also stated that it is committed to investigating the 800 Australians listed in the Panama Papers. France’s Finance Minister, Michel Sapin, stated that the government intends to verify the authenticity of the leaked documents, and to then review and investigate appropriately.[9]

The ICIJ has stated it will release a full list of individual and company names in early May 2016.

This information is current to April 5, 2016. The information contained herein is of a general nature and/or opinion and is not intended to address the circumstances of any particular individual, group, or entity. Although we attempt to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice. Thomson Reuters publications should not be construed as legal advice on any specific facts or circumstances. The contents may not be quoted or referred to in any other publication or proceeding without the prior written consent, to be given or withheld at our discretion.

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