With the award to BBC Panorama and The Guardian of the Investigation of the Decade accolade at the British Journalism Awards for their part in the Panama Papers exposé, it is a good time to take stock of the U.K. impact and how journalistic efforts to shine a light on what they consider to be the darkest corners of international finance have fared since.
The Panama Papers revelations in 2016 by the International Consortium of Investigative Journalists (ICIJ) were dramatic. Some 2.6 terabytes of documents from Panamanian law firm Mossack Fonseca encompassing everything from records of beneficial ownership to copies of the most candid internal and external correspondence.
Not only had someone – still not publicly known – passed journalists the comprehensive client files of an offshore law firm but irregularities were obvious – from the backdating of documents to efforts to actively disguise the beneficial ownership of assets from onshore law enforcement agencies.
In the U.K., where the Panama leak information was acquired and analysed by HMRC, the main consequence has been in prompting scores of criminal and civil tax investigations into tax evasion and aggressive tax avoidance, the identification of a number of professional enablers of tax evasion and the recovery by HMRC’s own figures of over £200 million in back taxes.
Perversely, despite their high-minded public objectives and maybe looking to leap ahead with more scoops, the ICIJ refused to share all of the leak information with HMRC and other global law enforcement agencies but HMRC and its counterparts were successful in obtaining it anyway – seemingly, from the leaker and then exchanged amongst themselves.
The ICIJ and its U.K. affiliates at The Guardian and the BBC have since followed up the Panama Papers with two further major exposes of leaks from offshore service providers:
- in 2017, the so-called “Paradise Papers” – centred on the leak of c. 6m documents from reputable international law firm Appleby and its then trust business – both headquartered in Bermuda;
- at the end of 2021, the so-called “Pandora Papers” – based on the leak of c. 12m documents from 14 different and largely still unidentified offshore service providers.
Although announced with much fanfare, the Paradise Papers seemingly achieved little in the UK other than to embarrass wealthy clients like Sir Lewis Hamilton by exposing their offshore ownership structures and legitimate tax planning arrangements and to bring the BBC and The Guardian before the English High Court in light of their acquisition and publication of stolen confidential client records and Appleby’s need to identify exactly what records had been stolen. Appleby forced the BBC and The Guardian into an embarrassing private settlement in May 2018.
Tellingly, and much to the frustration of crusading journalists and politicians, there have been no statistics from HMRC about tax recoveries arising from the Paradise Papers – the additional information may have helped inform some of its more complex anti-avoidance enquiries but it seems a heavily resource constrained HMRC has struggled to make much headway in attacking the sort of carefully planned and expertly advised arrangements involved and has wisely decided it can better employ most of its limited resources elsewhere.
HMRC has no qualms about obtaining and analysing stolen offshore information. Although the admissibility of stolen information could be problematic in bringing possible criminal prosecutions unless corroborated from more legitimate sources, most HMRC investigations – even of deliberate wrongdoing – are conducted as civil investigations and rely upon HMRC making “discoveries” in order to raise tax assessments outside the normal enquiry window. Depending upon the facts and “behaviours” involved, HMRC can assess unpaid taxes going back up to 20 years and levy tax geared penalties and interest thereon. For civil tax collection purposes, a discovery is a discovery whether based upon leaked information or not.
As shown with the Paradise Papers, leaked offshore information is often of limited value – just as it would be if it came from a reputable onshore professional firm. Meanwhile, HMRC now has more offshore information than ever at its disposal from other sources – including from automatic data exchanges with overseas counterparts under Common Reporting Standard (“CRS”) and from close coworking with counterpart tax authorities which will use their information powers in their own jurisdictions to gather information on HMRC’s behalf.
Even most traditional tax havens are now CRS signatories and have agreed bilateral assistance arrangements with HMRC. What is more, HMRC now has pressing new onshore priorities in uncovering and pursuing the recovery of billions of pounds defrauded from Covid support schemes.
It is early to speculate what impact the latest Pandora Papers exposé will have but so far – at least where the U.K. taxman is concerned – it is looking like it might be another damp squib. Crusading journalists need to understand that there are perfectly legitimate reasons and ways for U.K. residents to hold assets through overseas arrangements and that greater transparency does not always lead to more tax.
Andrew Park is a tax investigations partner at Andersen in the UK.