U.K. Becoming ‘Prime’ Tax Haven: EU Panama Inquiry Vice Chair

The U.K. is close to becoming a “prime tax haven,” according to the vice chairman of the European Parliament’s investigative committee on the Panama Papers, reports Bloomberg.

The British government is “sabotaging” work on the European Union’s blacklist for tax havens, despite promises to crack down on tax evasion, Fabio De Masi, a German member of European parliament and vice chair of the Panama Papers committee, said in a Feb. 9 news release.

The “mainland U.K. is also on its way to a prime tax haven,” he said. The EU “must get tough on tax havens and introduce hefty withholding taxes against non-cooperative jurisdictions as well as withdraw licenses of banks and lawyers that continue to aid tax dodging,” he added.

U.K. Delegation

The comments came hours before the Feb. 9 arrival of the European Parliament’s Panama Papers committee in London to hold secret fact-finding meetings to identify strategies against tax evasion.

During their two-day visit, the committee will meet U.K. accounting and legal professionals, academics, non-governmental organizations and representatives from HSBC Holdings Plc, according to a confidential plan of the committee’s trip, seen by Bloomberg BNA.

On Feb. 9, the committee planned to meet Meg Hillier, chairman of the U.K. government’s spending watchdog, academics and non-governmental organizations, including Oxfam and Transparency International U.K., according to committee’s agenda.

The following day, it will first meet with the U.K.'s special task force on the Panama Papers from Her Majesty’s Revenue and Customs, which announced in November 2016 it was investigating more than 30 companies or individuals with the National Crime Agency in relation to the data leak.

It will then meet with officials from HSBC, Britain’s largest bank by market capitalization, the Law Society of England and Wales, and the Institute of Chartered Accountants in England and Wales.

Panama Papers

Through the leak of more than 11 million documents from Panamanian law firm Mossack Fonseca & Co., the Panama Papers exposed wealthy individuals who created offshore entities to avoid taxes.

Prompting the U.K. to set up its own investigative team, the leak identified nearly 2,000 U.K.-based intermediaries—such as accountants, lawyers and tax advisers—who helped facilitate individuals or entities with tax evasion or avoidance. Nearly half of the companies listed among the Panama Papers were registered in the overseas U.K. territory of the British Virgin Islands.

PANA Committee

Set up two months after the release of the Panama Papers, the European Parliament’s inquiry committee—otherwise known as the PANA Committee—aims to investigate the misuse of European Union laws among the bloc’s member states through money laundering, tax avoidance and tax evasion. The committee will deliver a report on its work within the next year.

In November 2016, the U.K. achieved its first major victory against other EU nations since voting five months earlier to leave the bloc when it prevented its offshore territories—including Jersey, Bermuda and the Cayman Islands—from being automatically put on the EU’s tax haven blacklist.

At the vote, the U.K. fought off an attempt by a France-led group of countries to denounce territories with a zero percent rate of corporation tax as potentially “non-cooperative.”

BEPS Action 7

In addition to the U.K.'s actions against the EU’s blacklist, Mr. De Masi said the U.K. has mounted “strong opposition” to proposed measures from the European Council to increase the transparency of trusts—an entity that holds and invests money in it for the purpose of the trust’s beneficiaries.

He also highlighted plans from the British government to reject new guidance from the OECD to stop multinational companies avoiding tax through changes to the definition of a fixed place of business.

In December 2016, Her Majesty’s Treasury and Her Majesty’s Revenue and Customs said in a joint presentation that the government will not adopt the OECD’s changes for the definition of a fixed place of business outside of companies’ home countries, otherwise known as a permanent establishment.

Changing the definition for a permanent establishment is part of the seventh action of the OECD’s 15-action base erosion and profit shifting, or BEPS, project that it developed with the Group of 20 countries to tackle multinational companies avoiding tax by moving profits to low-tax jurisdictions.

The move risked upsetting other countries that already committed to adopting the Organization for Economic Cooperation and Development’s revised definition of a permanent establishment.

Some of the “OECD BEPS commitments, such as on rules for permanent establishments, are already being shelved” by the British government, De Masi said Feb. 9 on the U.K.'s stance for BEPS Action 7.

“The U.K. is at the heart of the world’s largest web of tax havens and intricately connected with the world of offshore finance,” he added.

With the U.K.'s overseas territories of “Bermuda, Cayman Islands, BVI-the who is who of global tax havens is thriving under the eyes of Her Majesty.”

U.K. Government

In response to De Masi’s comments, a government spokesman said in a Feb. 9 e-mailed statement that the U.K. has led the “fundamental reform of international tax rules” and stressed the country remains a “world-leader” in analyzing and uncovering complex offshore tax arrangements.


“As a result there are now far fewer places for tax avoiders and evaders to hide,” the spokesman added. “HMRC is meeting with the European PANA Committee, at its request, to brief it on the work of the UK’s Panama Papers Taskforce.”

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