As the 11 million so-called “Panama papers” leaked into the public domain drag celebrities and wealthy individuals into the limelight, will this change the way in which shell companies are used in future property transactions. The use of overseas shell companies has been a bone of contention for many tax offices around the world. The release of the “Panama papers” has in many ways vindicated their pursuit of those allegedly using offshore tax havens to shield their wealth. So what can we expect next?
More attacks on overseas tax havens?
The first thing to say about the Panama papers is the fact that using overseas shell companies and financial services is not illegal. These are quite legitimate uses of financial services but the problem comes if the assets and the income are not declared to an individual’s or company’s local tax authorities. Do not automatically assume that everyone mentioned in the Panama papers is guilty of any crime even if this would seem to be the assumption that many in the media are making.
It is therefore likely that we will see governments around the world focusing upon so-called tax havens with many under British jurisdiction coming under specific pressure. The UK government has already announced plans to make public the identity of those acquiring property in the UK using offshore shell companies. So, while the Panama papers have certainly grabbed the headlines it would be wrong to suggest that the UK authorities are not already on the case.
Will this impact demand for London property?
There are billions of pounds of UK property owned by often mysterious overseas shell companies therefore any attack on these so-called tax havens could impact the short to medium term demand for UK property from some overseas investors. Whether this reduction in demand will lead to a reduction in prices remains to be seen because even during the most difficult of economic times demand for London property in particular remained extremely strong.
It is not just the UK which has been dragged into the Panama situation indeed today we saw the first major casualty in the shape of Iceland’s Prime Minister who was mentioned in the leaked papers. It is unclear whether he has done anything wrong from a criminal point of view but it has certainly created a backlash amongst the Icelandic population.
Was this always on the cards?
Isn’t it ironic that the UK government only recently began a major crackdown on overseas tax havens and hey presto we have the release of 11 million highly confidential documents about the financial affairs of thousands of people and companies. The Internet brings so much to the business world but also offers hackers the opportunity to steal confidential documentation and release this into the public domain. Once this information has been released to the public it is impossible to retrieve as many high-profile investors, politicians and celebrities have found out.
The ongoing Panama situation could potentially have a major impact upon future tax planning and especially the use of overseas shell companies to acquire properties around the world.