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(English) Usual Suspects? Co-conspirators in the business of tax dodging

By Ben Schumann

Date: January 23th, 2017

A Study Commissioned By The Greens/Efa Group In The European Parliament

On April 3, 2016, the biggest leak and international tax dodging scandal to date was revealed to the public by the International Consortium of Investigative Journalists (ICIJ). The “Panama Papers”i consisted of 11.5 million leaked documents from the Panamanian law firm Mossack Fonseca, detailing how the corporate service provider helped create 214,488 offshore entities around the world. This leak came after the Offshore Leaks in 2013ii but before the Bahamas Leaks in 2016iii.

The ICIJ merged information from these three leaks into one publicly available dataset called the Offshore Leaks database. Green / EFA Members of the European Parliament inquiry committee on the Panama Papers (PANA committee) decided to have a look at this information to find out more about the intermediaries between wealthy clients and corporate service providers like Mossack Fonseca, which create and manage offshore business on demand.

Despite the limitations of the database, section 1 of the report provides interesting results in terms of geographical allocation of intermediaries:
Hong Kong is the number 1 country when it comes to hosting intermediaries mentioned in the Panama Papers, the Offshore Leaks and the Bahamas Leaks.
 Following Hong Kong, the top 10 countries where intermediaries are located are: United Kingdom, United States, Taiwan, Switzerland, Singapore, the Bahamas, China, Panama and Indonesia. This shows that the issues uncovered in the Panama Papers or the Bahamas Leaks are global in scope, reaching way beyond the countries their names highlight.
Asia is the continent hosting the highest number of intermediaries but Europe accounts for nearly a quarter of all intermediaries listed in the database. Two countries from the European continent – the United Kingdom and Switzerland – are mentioned among the Top 10 countries hosting intermediaries.
Asia, Europe and North/Central America combined make up 90% of all intermediaries, leaving South America, Africa and Oceania far behind in the offshore business.
Looking at the European Union more specifically, we have noticed the important role the United Kingdom is playing, followed by Luxembourg, far beyond Spain, Cyprus or even France and Germany.

Section 2 of the report looks in more detail at who these intermediaries are. We have compiled a list of 140 international intermediaries (active in at least three different countries) from large banks to the famous “Big 4” accounting companies but also other intermediaries, less known to the wider public.
Swiss banks UBS and Credit Suisse take the first two places in the Top 20 ranking of international intermediaries, creating together as many offshore entities as the next three in line (less known to the public).
On the 140 identified international intermediaries, 127 (nearly 90%) have at least one active business unit or subsidiary located in Europe. This shows that Europe is a highly desirable location for international intermediaries.
 Unsurprisingly, banks from Switzerland and Luxembourg are at the heart of the business of offshore-company intermediation. But major French banks seem to have been very involved as well, since three of the main French banks (Société Générale, Crédit Agricole and BNP Paribas) rank among the Top 10 European banks.
All of the big 4 accounting firms (Deloitte & Touche, Pricewaterhouse Coopers, KPMG and Ernst & Young) are identified as international intermediaries, with Deloitte (12) and PwC (18) making it in the Top 20 of international intermediaries.
Many names among these 140 international intermediaries remain unknown to the wider public. They are law firms, corporate service providers, consultants which intervened as middle-men and middle-women between wealthy clients and service providers like Mossack Fonseca. These new actors were probably on no one’s radar so far but some follow-up would be needed to find out more about their services.
The report also provides a series of recommendations to European Member States, the European Commission and the European Parliament inquiry committee on the Panama Papers, including:
1. All European Member States should start inquiring as to the role of intermediaries mentioned in this report;
2. All European Member States and the European Parliament should agree on measures to strengthen enforcement authorities’ powers and capacities to ensure that legislation against money laundering and tax evasion is fully and properly implemented by intermediaries registered in the EU;
3. Member States should – if not already the case – adopt national legislation to ensure proper and independent supervising authorities for all types of intermediaries;
4. Member States should adopt and apply stronger sanctions – coordinated at the European level – against intermediaries providing assistance for aggressive tax planning;
5. The European Commission should present as soon as possible a legislative proposal with concrete measures to disincentive advisors and intermediaries from providing potentially aggressive tax planning schemes;
6. European Member States should start a political dialogue with Hong Kong, Switzerland and the United States over the regulation of intermediaries and coordinated actions to ensure anti-money laundering standards are consistently applied by these countries;

Members of the European Parliament inquiry on the Panama Papers are invited to use the findings of this report for the final committee conclusions expected in 2017.

We would like to draw readers’ attention to the fact that the data we used for this report come from the International Consortium of Investigative Journalists (ICIJ) and relates to the Panama Papers, Offshore Leaks and Bahamas Leaks revelations. We acknowledge that such data represents only a fraction of all activities provided by intermediaries and may put a more specific emphasis on certain practices or countries, since information came from files and registries from Panama and the Bahamas, given anonymously to the ICIJ. However, as illustrated in this report, this partial data makes it possible to provide certain conclusions concerning the identity of these intermediaries and their geographical locations

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