Panama Papers: Offshore tax link not a good look for PM

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This was published 7 years ago

Panama Papers: Offshore tax link not a good look for PM

By Nassim Khadem

Political campaigns are all about perceptions.

This week Prime Minister Malcolm Turnbull was found to have done nothing illegal when named in the Panama Papers.

But at a time when the issue of tax minimisation is at the forefront of a federal election campaign, having, in his past business life, been a director of a company incorporated in the British Virgin Islands – what many in the tax world have long labelled a secret tax jurisdiction – is not a great look.

On Friday, Turnbull's spokesman told Fairfax Media: "The audited consolidated accounts of Star Mining NL and all of its controlled entities including Star Technologies are public documents, as the Prime Minister has made clear.

Malcolm Turnbull is not the only politician facing heat as a result of the Panama Papers.

Malcolm Turnbull is not the only politician facing heat as a result of the Panama Papers.Credit: Alex Ellinghausen

"There is no suggestion he has acted other than appropriately at all times. On the important question of international tax avoidance, the Turnbull government is equipping the ATO with the toughest anti-tax avoidance rules in the OECD."

According to The Australian Financial Review – which has been privy to private documents obtained by International Consortium of Investigative Journalists – the Prime Minister and former NSW Labor premier Neville Wran were both on the board of a company serviced by Panama-based law firm Mossack Fonseca.

Turnbull and Wran were on the board of Star Mining NL and its subsidiary in the British Virgin Islands, Star Technology Service, which had been incorporated by Mossack Fonseca two years earlier.

The accounts of Star Mining show it was a resident in Hong Kong. Turnbull and Wran were appointed directors of the British Virgin Islands subsidiary in December 1993.

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The company was set up by Mossack Fonseca to explore development of an estimated $20 billion Siberian gold mine called Sukhoi Log, but Turnbull has said that he didn't know it was incorporated by the law firm, and since the company didn't make a profit, it didn't pay tax.

Still, the use of a British Virgin Islands company, while completely legal and common at the time, poses questions about why have limited visibility?

He and Mr Wran resigned from Star Mining and Star Technology in September 1995.

The Prime Minister also responded to allegations Star Technologies had made donations to Russian politicians. Turnbull's spokesman told Fairfax Media the Prime Minister was not aware of any such donations in the time "during or prior to" being a director.

On Friday Turnbull told ABC Radio's Jon Faine – "I have always paid tax in Australia. I have paid tax on all of my investment income, I always have done. I've always paid a lot of tax."

He continued spruiking government's diverted profits tax to hit multinationals – which the the federal budget papers estimated would raise an $3.9 billion over four years, as well as $678 million for the ATO to establish a tax avoidance taskforce with almost 400 new staff.

Turnbull is not the only politician facing heat as a result of the Panama Papers.

The more than 11 million files over a period from 1977 through to December 2015, which were leaked to a German newspaper and then shared with the ICIJ, has shown links with UK Prime Minister David Cameron, Russian President Vladimir Putin, the king of Saudi Arabia and Iceland's former prime minister.

Cameron, who immediately moved to publish his own tax affairs to fend off media, has also promised a cross-agency task force to investigate the revelations concerning Britain in the Panama Papers.

At Cameron's global anti-corruption summit in London this week – where he came under heat for not inviting representatives from jurisdictions like the British Virgin Islands – he pledged an agency to return stolen assets to countries including Nigeria, Ukraine, Sri Lanka and Tunisia.

Following the Panama Papers there have been calls for governments to make it illegal for people to conceal their relationships with offshore "shell companies" – those with no apparent operations, employees or physical assets.

The papers, based on leaked Mossack Fonseca files, highlight the problem of authorities being unable to find the true beneficial owners of companies registered in no-tax or low-tax jurisdictions. Even Mossack Fonseca itself was unaware of the true beneficial owners of companies at times.

In April, Assistant Treasurer, Kelly O'Dwyer told the Guardian that Australia would establish a public registry of beneficial ownership.

"It does improve transparency. It means that the public and law enforcement agencies know who ultimately controls the company," she said.

But the final wording that came out from the Australian government following Mr Cameron's summit was more vague: "Australia is committed to exploring, via public consultation, options for a beneficial ownership register for companies," its statement on Australia's commitments said.

Shadow assistant treasurer Andrew Leigh warns against a backdown: "The government will be behind the G20 if it does this," he says.

He likened the potential backdown to what the Liberals did on Labor's tax transparency laws that required the tax details of private companies with over $100 million turnover to be publicly published. In the end, following intense lobbying from business, Treasurer Scott Morrison did a deal with the Greens, and the measure was watered down to only impact companies with over $200 million turnover.

"It's like we are watching the same movie all over again," Leigh says.

Leigh on Friday called on the Prime Minister to "come forward and give an open and transparent answer to a range of questions to do with his dealings with the British Virgin Islands".

"Simply put, the Prime Minister ought to tell Australians whether he considers the British Virgin Islands to be a tax haven. He should answer the question as to why an ASX-listed firm, with an interest in a Siberian gold mine, needed to set up in the British Virgin Islands. He needs to account to Australians as to the briefings that he was provided during his time as director, as to the tax and revenue implications of setting up in the British Virgin Islands.

"If it's good enough for David Cameron to front the British press and give a full account of his late father's dealings with Mossack Fonseca, it's good enough for Malcolm Turnbull."

Mark Zirnsak, from the Tax Justice Network, agrees that while Mr Turnbull has not been involved in anything illegal, "it's not a good look".

Zirnsak says there needs to be strong definition of beneficial ownership and that the register needs to be backed by strong offences.

Even the ATO – which is looking at 800 Aussie names linked to Panama including 80 serious cases – told the April 21 hearing of the Senate inquiry into corporate tax avoidance, that while that was ultimately a decision for the government, such a register and closer sharing of information between tax authorities around the world would make it easier for those using secret jurisdictions to be identified.

Tax Commissioner Chris Jordan told that inquiry – which happened before the links to the Prime Minister were publicly known – that firms acting for companies incorporating in British Virgin Islands or other secret tax jurisdictions would simply say, "We set up a company for these people over in Panama ... with assets being managed by someone in Hong Kong. That is the way they say, 'We don't have anything,' which is part of this problem."

"Unless you get that total global picture then we here, or no one country, is going to be able to solve that [problem]," Mr Jordan said.

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