14 Nov 2017
With each super-data leak, such as the Panama Papers and now the Paradise Papers, the heat is increasingly being turned up on lawyers and other tax intermediary professionals for their role in facilitating structures or advising clients.
The law firms named in such scandals will usually state that they are innocent and even threaten legal action against accusers, but that defence has failed to hold back the barrage of criticism and allegations.
And so, in response to mounting public pressure, governments usually announce plans to tackle tax loopholes and clamp down on unscrupulous solicitors, bankers and other advisers.
On Tuesday it was the turn of the EU’s tax chief, who called for the fast-track of new rules to better monitor tax intermediaries, blaming them for the “shocking” tax optimisation schemes they sell following recent offshore data leaks.
As part of the plans, Pierre Moscovici wants lawyers, bankers and consultants who assist with such schemes to declare them to the authorities of the buyer’s country.
If the schemes are found to be illegal, tax authorities should be able to consider them as prosecution material. However, if they are found to be legal, then tax administrations [could] be able to spot [any emerging] fault and rectify it.
The EU Commissioner for tax and financial affairs said he was not surprised by the Paradise Papers revelations as it has been long-known that multinationals, wealthy taxpayers, consulting firms and banks work hand-in-hand to exempt huge amounts of income from taxation.
Elsewhere, Moscovici was quoted likening tax professionals that abet tax evasion to “vampires that fear the light,” saying transparency was the best deterrent.
His comments come two months after the UK’s Solicitors Regulation Authority (SRA) warned that lawyers providing tax planning services stand to face greater scrutiny in line with the government’s plans to clamp down on aggressive tax avoidance schemes.
It said that solicitors could find that schemes once considered legitimate could be reassessed by tax collector HMRC and deemed no longer acceptable.
SRA chief executive Paul Philip said solicitors play an important role in helping tax payers meet their legal obligations, however “we are concerned that some solicitors are facilitating tax avoidance schemes aggressively in ways that go beyond the intentions of Parliament.”
On Tuesday UK politicians discussed the Paradise Papers in parliament, with some stating the need for reform.
But how will law firms and tax advisors named in future data hacking scandals react?
Appleby, the law firm at the heart of the Paradise Papers, tried a take a different approach to other firms central to previous data leaks.
Instead of speaking about the hack after the International Consortium of Investigative Journalists expose was published, Appleby went ahead of investigative journalists and publicly spoke of the data leak before it was revealed, defending its work and clients in a one-page statement.
Did the tactic work?
Events last week and today – top clients secrets splashed globally, governments discussing new rules and lawyers being labelled all sorts – suggest not.
By Irene Madongo
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