08 April 2016 by Henry Ker
Fallout from the Panama Papers leak
This week 11.5 million documents from legal firm Mossack Fonseca, based in Panama, were leaked to the media. This is largest ever leak in whistleblower history – bigger than the WikiLeaks revelations of 2010.
The documents shed light on hundreds of accounts and companies primarily set up to minimise tax liabilities of their owners. There have also been allegations that the funds held here may have been involved in fraud and money laundering.
Influential figures from across the globe have been connected to the firm. These individuals include 12 current or former heads of state and government, such as Icelandic Prime Minister Sigmundur Gunnlaugsson, who has since stepped down after protests over his failure to declare an interest in the company Wintris when entering parliament in 2009. He sold his 50% stake to his wife, Anna Sigurlaug Palsdottir, for $1 eight months later. There has also been criticism of the British Prime Minister, David Cameron, after the leak revealed connections to his father’s offshore company.
The allegations have far reaching consequences and have led to worldwide calls for countries to take action against tax havens, in particular their ability to allow shell corporations to exploit lower tax regimes. The information revealed that more than 500 banks, including their subsidiaries and branches, registered nearly 15,600 shell companies with Mossack Fonseca.
The papers have sparked investigations in several countries, including HMRC in the UK and the Australian tax office, which is looking into 800 people named in the leaks. The FCA has promised a crackdown on money laundering and has written to 20 regulated banks over the allegations.
Mossack Fonseca has stated it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing.
Co-op Group Chief Executive Richard Pennycook has requested a 60% cut to his total pay package because the job is no longer as difficult. He stated the business is now ‘in calmer waters’ and he had requested a reduction to reflect the revised demands of the current job.
Alongside cuts in incentive payments, his base salary will fall from £1,250,000 to £750,000. He also stated the pay cut is ‘by no means the main news’, which is in fact the recovery of the Co-op group and credited his 70,000 colleagues' ‘dedication’.
US pharmaceutical company Pfizer has dropped its planned merger with Allergan because of plans to change US tax laws.
The Pfizer-Allergan deal was valued at $160 billion (£113 billion), and would have been the biggest example of an ‘inversion’ merger. An inversion merger is where a US company merges with another company which operates in a lower tax rate country (in this instance Ireland). The US Treasury recently announced plans to prevent inversion mergers. It would also have been the biggest pharma-merger in history.