Tax evaders at Credit Suisse decide before 24 March: withhold information from the tax authorities?

Next week, the deadline for preventing the provision of information to the Netherlands by the Swiss Federal Tax Authority (FTA) will close. Following the UBS, Credit Suisse has now also received a request to provide information about its ‘tax evaders.’ Although the only possible conclusion, in my opinion, is that this is a fishing expedition and therefore not permitted based on the Treaty, information will be provided if no objection or appeal is brought against the request. If a ‘saver’ has not (yet) been disclosed to the tax authority in the Netherlands, the stakes may be high.

Zurich, Switzerland - September 9, 2012: Main entrance of the Swiss bank's Credit Suisse headquarter on Zurich Paradeplatz.

Credit Suisse exchange of information

After it was announced at the end of last year that the Swiss bank had provided UBS with information on the request of the Tax Authority, Credit Suisse also informed its Dutch ‘tax evaders’ on 4 March 2016 that – unless an objection was filed – that it will provide their banking information to the Dutch tax authority via the Swiss Federal Tax Authority. This time it concerns a group request, whereby the banking information of all Dutch citizens who had an account at Credit Suisse, with a balance of at least EUR 1,500 between February 2013 and the end of 2014 will be provided. Information about bank accounts that have been closed in the meantime will therefore also be exchanged.

Following the initial success with the UBS and Credit Suisse, it is expected that similar group requests will be made to the Swiss banks Julius Bär, UBP and Sarasin.

Deadline until next week

Credit Suisse has now also sent a letter to a group of identified Dutch savers with the request from the Swiss tax authority as an enclosure. These savers must respond to the letter within 20 days after the letter – so, before Thursday, 24 March – providing either an address in Switzerland or a Swiss authorised representative.

If there is no response, there is threat of an ‘anonymous publication’ in the Bundesblatt – the ‘final decision’ will be published here, which will mean:

  • that, according to the Swiss tax authority the requirements for information requests have been met;
  • that the request from the Netherlands can be executed for the period from 1 February 2013 to 31 December 2014;
  • that the information was requested from the Credit Suisse by the Swiss tax authority;
  • that the parties involved cannot file any objection or appeal against this.

Doing nothing is providing information

The previous group request to the UBS showed that information about savers who did not respond was actually provided to the Netherlands. More and more (ex) UBS account holders are receiving post from the Tax Authority stating that they have been identified as an account holder. It looks like (a lot) more information from Switzerland has been provided than the ‘approximately 100’ that have been reported so far.

Various objectors that had indicated in Switzerland that the voluntary disclosure procedure has started in the Netherlands have been able to successfully stop the provision of information. The procedures that were appealed at the Swiss court are still on-going and we the outcome of these is still pending. The race of the Dutch tax authority is therefore not over yet. Given the text of the Treaty, it is my expectation that the (highest) court in Switzerland will ultimately rule that the group ‘fishing’ request has to be rejected.

Well-founded appeal

After the final decision – which may or may not be published in the Bundesblatt – the appeal for this group of Credit Suisse savers may be appealed within 30 days. All cards have to be on the table for this, however: all the reasons why the persons involved disagree with the provision of information to the Netherlands must be stated directly in the appeal.

To prevent the provision of information, the following has to be done within this 30-day term:

Request for ‘banking institution correspondence’

The latest development in the land of voluntary disclosure is that the Tax Authority is now routinely requesting the foreign bank’s correspondence. The Tax Authority, moreover, claims that providing this letter or these letters is supposedly mandatory. Correspondence that shows that a saver was aware of possible or intended provision of information, or in which it is states that the obligation to report equity to the Dutch tax authority is, however, not relevant for the levy.

After all, the tax to be paid does not depend on whether your bank wrote about tax obligations or the possibility of information being provided to the tax authorities. The correspondence may, however, be incriminating: the knowledge of which means that you are too late for voluntary disclosure? Because it is not relevant to the amount of the tax to be paid, taxpayers are therefore not obliged to provide this and the tax authorities therefore cannot force them to do so. In my opinion, the Tax Authority is abusing their power by making this request.

Voluntary disclosure is still possible

The interest that the tax authority does have (or thinks they have) is the penalty interest: these types of letters could be used to prove that the disclosure is too late. This, however, is still open to debate. It has not yet been determined what the final ruling is going to be on the justification of the Dutch group request. In other words, anyone that knew that they were on ‘the list’ following the group request, did not have to expect that information would be provided to the Netherlands and that the tax authority would track them down anyway. Voluntary disclosure is therefore still possible.

Mr. V.S. (Vanessa) Huygen van Dyck-Jagersma

Knew or should have known of VAT fraud

Combating VAT (turnover tax) fraud has been on the agenda of the European member states, including the Netherlands, for several years. Many rulings have been issued in recent years in particular by the Court of Justice of the European Union concerning the consequences of committing tax fraud. The line pursued in these rulings appears to be as good as complete now. In short, a taxable person is not entitled to invoke the right to deduction of input tax, apply the zero rate or obtain a refund if he knew or should have known of fraud elsewhere in the chain. In pursuing this line, the discussion on fraud cases will focus on the question of whether the taxable person knew or should have known of the fraud. I will discuss this in more detail below.

Closeup portrait, shocked, surprised, speechless business senior mature man, worker, employee, holding empty wallet, isolated white background. Bankruptcy, financial difficulty. Human face expression

Turnover tax levy

The Turnover Tax Act 1968 states that a tax is levied on all goods and services that are for sale in the Netherlands. Entrepreneurs charge the turnover tax (more commonly known as VAT) to the final buyer of the product or service. Often, before a product is purchased by the end consumer, it has gone through several links in the chain of entrepreneurs. ‘Something’ is added at each of those links by each of those entrepreneurs.

Every entrepreneur in the chain must charge VAT to his buyer (entrepreneur or consumer). The entrepreneurs in this chain collect the VAT from their buyers and pay this VAT to the Tax Authorities. On the other hand, the entrepreneur may then deduct the VAT charged to him. This ensures that the VAT levy between the entrepreneurs in the chain is tax-neutral and payment of the VAT ultimately rests with the end consumer. This is the person that ‘consumes’ the product or the service.

Example of a chain

Nederlands Engels
Leverancier grondstof Raw materials supplier
Producent van grondstof naar mobiele telefoon Raw material to mobile phone manufacturers
Groothandel mobiele telefoons Mobile telephone wholesaler
Winkel/verkoper mobiele telefoons Mobile phone shop/retailer
Consument die de mobiele telefoon koopt Consumer that purchases the mobile phone

 

The chain from entrepreneur to consumer does not have to play out only in the Netherlands. In practice, the chain regularly extends across Europe and the world. For example, the suppliers of the raw materials and the manufacturer are located in Italy and the wholesaler, retailer and consumer are in the Netherlands.

The assumption then is also that the VAT chain between the entrepreneurs VAT neutral. To facilitate this, intracommunity supplies and acquisitions of goods was incorporated into the VAT levy. The entrepreneur that supplies goods intra-communally to another entrepreneur (for example, the manufacturer to the wholesaler in the aforementioned chain example) does not have to charge VAT, but can deduct the VAT charged to him (with the purchase of the raw materials from the supplier) in advance. The VAT levy on the supply of the mobile phones is therefore actually moved from the manufacturer to the wholesaler in the example. The wholesaler then charges VAT to the shop/retailer. That link may also take place via the system of intra-community supplies and acquisitions.

What constitutes fraud?

The turnover tax system makes certain that VAT is susceptible to fraud. After all, the advance tax deduction is in no way linked to the payment of the relevant turnover tax. There is therefore a chance that, for example, the wholesaler does not declare the intra-community acquisition of the mobile phones, charge the shop/retailer VAT, and then does not pay that VAT to the Tax Authorities. In that case, there is a flaw in the VAT levy. The wholesaler has received the VAT, but does not declare it. This creates a financial advantage for him. In order to actually gain that advantage, the wholesaler disappears. This is often solved in the chain by establishing a new wholesaler, often with the same goal.

This type of fraud is generally called ‘carrousel fraud.’ There is no fixed definition for the concept ‘carrousel fraud,’ but various descriptions can be found. The core [1] of these descriptions is always that there is an invoice flow (real or not) that corresponds with trade transactions with at least one of the parties involved charging VAT in their own country, while he knows that he will not be declaring that amount on his tax return. The VAT that this party does not pay to the Tax Authorities will, however, be deducted by his buyer.

To match the description of a ‘carrousel fraud,’ it is no longer relevant that the goods go full circle (‘carrousel’). The crucial factor is that one party charges VAT, knowing that he is not going to declare it to the Tax Authorities and that his buyer will deduct the VAT that was charged to him. This seems to open the way for the case law that has been mainly set by the Court of Justice of the European Union to ensure that carrousel fraud cases also apply to all types of VAT fraud.

Apparently, the financial benefits of VAT fraud are lucrative enough that people are engaging in this on a large scale. This means that significant amounts of VAT cannot be collected. This is a cause of frustration for the European Union and the member states and they want to do their utmost to quash this type of fraud. This, however, may not involve taking rash action. The ‘good’ entrepreneurs should not have to suffer because of the ‘bad’ entrepreneurs’ actions. But what makes you a good entrepreneur? And when does the case law of the Court of Justice of the European Union apply to your ‘VAT fraud’?

Knew or should have known?

To determine if someone is a ‘good’ or a ‘bad’ entrepreneur, it must first be established if the entrepreneur in question is himself a fraud. If it is determined that this is indeed the case, this entrepreneur will, in fact, lose all this rights. As follows from the following paragraph, this entrepreneur will not be entitled to his right to deduct input tax in advance, to apply zero rate or a refund for number acquisition. However, it is usually not the ‘bad’ entrepreneurs that end up suffering the consequences of VAT fraud. These ‘bad’ entrepreneurs’ business is often set up with the goal of committing VAT fraud and making (a lot of) money before disappearing into the sunset. The chances of the Tax Authorities catching this ‘bad’ entrepreneur and recouping the wrongfully collected monies (or unpaid taxes) are therefore minimal.

It is therefore primarily ‘good’ entrepreneurs that have to deal with the adverse consequences of VAT fraud. The only way to avoid these adverse consequences is if the entrepreneur in question did not know and could also not have known of the VAT fraud.

These concepts of ‘knew’ or ‘should have known’ are not clear at a glance. Although the first concept, ‘knew,’ is clearer than the second, ‘should have known,’ it will have to be established what the knowledge of the entrepreneur was, using the facts and circumstances.

In the past, I made a comparison with ‘knew’ or ‘should have known,’ as it is used in the criminal and penalty law. For the ‘knew’ concept, a connection could be sought with the concept of ‘intent’. Intent is when someone knowingly and intentionally commits a finable or punishable offence. In other words, if someone consciously undertakes a specific action. If we apply this to VAT fraud, this means that the entrepreneur in question knows that VAT fraud is being committed, but that he nevertheless continues to participate in that transaction or in that chain in full awareness. In practice, it will not be this situation that gives rise to discussion between the parties, but the question of when a business owner ‘should have known’ of the VAT fraud in the chain.

For the explanation of ‘should have known,’ a connection may be sought with the concept ‘gross negligence’ from the penalty and criminal laws. Gross negligence is when the party involved did not want the relevant consequence, but it can be blamed on his negligence, carelessness, or neglect that the consequence has occurred. It can be deduced from this that a ‘good’ entrepreneur must be attentive and must act with due care. To comply with this, the entrepreneur has a certain obligation to investigate. This obligation to investigate means that an entrepreneur must do everything that may reasonably be expected of him to ensure that his actions are not part of a fraud chain (Court of Justice, Mahagében, 21 June 2012, joined cases no. C-80/11 and C-142/11 (Peter David).

Consequences of knowing of fraud?

It must be assessed for each taxable action whether the entrepreneur ‘knew or should have known’ that VAT fraud was being committed (Court of Justice, Optigen, 12 January 2006, joined cases C-354/03, C-355/03 and C-484/03). Within a chain, this may cause the entrepreneurs to be treated differently. One entrepreneur may have acted in good faith (did not know and also could not have known) and another entrepreneur may have known or should have known of the fraud.

If it is established that an entrepreneur knew or should have known of the VAT fraud, this will have significant consequences. It follows from the Italmoda ruling that in that case an entrepreneur is not entitled to the right to deduction of input tax, to apply the zero rate and/or obtain a refund for number acquisitions. These penalties even occur if the national legislation does not provide for this option. The Supreme Court even explicitly takes this into consideration in the ruling of 18 March 2016, no. 11/02825, ECLI:NL:HR:2016:442 (see ground for the decision 2.1 and 2.2).

If the entrepreneur has already exercised his right to deduction of input tax in the turnover tax return, he will receive an additional assessment to pay back the amount wrongfully deducted in advance to the Tax Authorities.

  1. The other possibility is that the entrepreneur exported the goods to another country with the application of the zero rate. If the entrepreneur can be charged with knowing about the VAT fraud, he will not be permitted to apply the zero rate, despite that the conditions ((i) right to dispose of the goods has been transferred, (ii) the goods are physically moved from one Member State to another and (iii) the goods have been supplied to an entrepreneur who has declared this as intra-community acquisition) have been fulfilled. The Court of Justice therefore rules that not all conditions have been fulfilled. The word ‘all’ refers to the fact that no VAT fraud must be committed. In this case, the entrepreneur will receive an additional assessment for turnover tax, in which the goods and/or services are taxed for VAT at the rate of 6% or 21%.
  2. Finally, there is the option to refuse a refund for number acquisition. In that case the entrepreneur has paid the VAT, but he is not entitled to a VAT refund.

The Court of Justice is of the opinion that VAT fraud must not pay off and that every effort should be made to combat and prevent such fraud. Should such fraud occur anyway, this may and should be dealt with severely, according to the recent case law of the Court of Justice. That this may possibly result in a breach of the fiscal neutrality in the VAT, the principles of legal certainty or the legitimate expectations is not important. Those principles, according to the Court of Justice, can and must be put aside if a taxable person knew or should have known of the VAT fraud in one of the links of his chain and in doing so jeopardised the proper functioning of the common VAT system.

At this time, there is still on-going discussion as to whether the Tax Authorities can handle all three possibilities for one taxable person simultaneously, i.e. refuse the deduction of input tax and the zero rate and the refund. If the Tax Authorities were allowed to apply all three options alongside each other, this would create a double or triple tax. This cannot and could not have been the intention of the Court of Justice’ ruling. After all, the entrepreneur will then be ‘punished’ twice or thrice. The entrepreneur, for example, does not get deduction of input tax for the same goods and moreover, instead of being able to apply the zero rate, has to pay 6% or 21% VAT to the Tax Authorities. That would be a double charge.

The basic premise should therefore be that the Tax Authorities must choose from the three options. The Tax Authorities must refuse either the deduction of input tax, or refuse to apply the zero rate or refuse to grant the refund. That this should be the point of departure also follows from the way in which the Court of Justice has formulated the answer to the stated prejudicial questions. In answering these questions, the Court of Justice includes “refusal of the right to deduction, exemption or refund of the tax on the added value” (underlining ML). By using the word ‘or,’ the Court of Justice shows that a choice must be made from the three options.

This reading/explanation of the Court of Justice’s ruling on the decision to be made is also shared by A-G Ettema in her conclusion of 1 February 2016.

Scope of ‘knew or should have known’

I have already explained that ‘knew or should have known’ of the VAT fraud has considerable consequences for an entrepreneur. The entrepreneur may lose his right to deduct input tax or to apply the zero rate. But can this case law of the Court of Justice be applied one on one in every situation? I wonder.

What if a tax consultant or a lawyer assists a foreign entrepreneur in a Dutch VAT fraud case. This tax consultant or lawyer will send a bill to the entrepreneur in question. It is likely that the service provider knew or should have known of the possible fraud being committed by his client. After all, the service provider will have received procedural documents with an explanation of the suspicion (if it is a criminal case) or the corrections by the Tax Authorities (if it concerns a fiscal correction and a fine). Can the service provider still be ‘careless’ in his declaration in applying the zero rate and send it to his client? Can the service provider be confronted with the refusal to deduct input tax for, e.g. the paper that the declaration is printed on, or the pen he used for his signature?

The Court of Justice has not given a definite answer to these questions yet. The procedures that have been presented to the Court increasingly looking like ‘genuine’ cases of fraud. The inspector and also the prosecutor, like to quote the phrase, ‘Surely it could not be that…’. I think that phrase equally applies to this. Surely it could not be that a service provider is confronted with the case law of the Court of Justice in the area of VAT fraud and therefore loses his right to apply the zero rate or to deduct input tax because he provided legal representation to an entrepreneur who is suspected of/confronted with VAT fraud.

Conclusion

 VAT fraud is a cause of frustration to both the European Union and the member states. With assistance of the Court of Justice, every possible effort is being made to reduce VAT fraud and, in the best-case scenario, to prevent it. Although a distinction is made here between ‘good’ and ‘bad’ entrepreneurs, this distinction is very flimsy. Only an entrepreneur who did not know or could not have known that VAT fraud was taking place will be immune from this problem.

 It is therefore also important that even if entrepreneur is doing everything right himself, but he does know or should have known that one of the links in his chain is committing VAT fraud, the entrepreneur will not get off scot free. He knows or should know of fraud and can therefore also be confronted with the adverse consequences, namely:

  • refusal of the application of the zero rate, in which case the entrepreneur still has to pay the regular rate of 6% or 21% to the Tax Authorities, or
  • refusal of the right to deduction of input tax, in which case the entrepreneur must pay back VAT deducted in advance, or
  • refusal of the refund for number acquisition, in which case the entrepreneur has paid the VAT but does not have it refunded.

Due to this hard line in the case law, the core of the discussion with the Tax Authorities in VAT fraud cases will increasingly focus on the question of whether the entrepreneur ‘knew or should have known’ of the VAT fraud. So far, these concepts have not been given sound definitions, so there is room for the entrepreneur to escape the adverse consequences of VAT fraud in his chain.

[1] Dr. R.A. Wolf, LLM, Carrouselfraude, Fiscaal Wetenschappelijke Reeks (Carrousel Fraud, Fiscal Science Series), no. 15, SDU publishers, chapter 3.

Marloes Lammers, Attorney at Law

 

The Panama Papers – naming and shaming

This week the news services are falling over themselves regarding the information that they want to publicise about the Panama Papers. The reporting initially covered the working method employed by the Panamanian service provider, but as time goes by, more and more names of the service provider’s customers are being disclosed. But what is the relevance of publicising these names? What is keeping them from presenting the facts in a negative way? In short, the reporting ties in perfectly with naming and shaming.

Stand, sun, sea, palm beach chair. So one imagines a tax haven.

Panama Papers

The Panama Papers are documents from the service provider’s (internal) administration in, you’ve already guessed it, Panama. This service provider provides legal advice and trust services to its customers. As the press releases show, the customers are from a variety of backgrounds. Not only heads of governments would avail of the service, but also the butcher around the corner.

The Panama Papers would divulge the service provider’s working method. That working method would entail the service provider setting up an offshore company for a natural person. A share of the natural person’s assets would be incorporated into this offshore company. What is the advantage of that? The most straightforward advantage that comes to mind is – of course – that various tax rates can be used. In most cases, the offshore company will be established in a country where the tax rates are somewhat more attractive than in the country where the natural person resides. But that is not by a long shot the reason why all natural persons invest offshore. Other reasons could be spreading the risks or protecting the natural person’s estate.

The current press releases only bring the initial benefit (reducing the tax burden) to light because this is obviously ‘juicy gossip’ and sells well. This is quickly followed by the fact that it would not be quite so easy to derive from the information from the offshore companies which natural person is hiding behind the company. While normally speaking that would be a ‘disadvantage’, or as Johan Cruijff used to say ‘every disadvantage has an advantage’ of this working method, this is not the case with the Panama Papers. After all, it seems from the news reports that the cooperative of journalists were able find out which natural persons are behind the offshore companies relatively easily based on the information known to them.

How the documents from the service provider’s administration wound up in the hands of Süddeutsche Zeitung is still a mystery. That newspaper has in turn shared the files with the ICIJ (The International Consortium of Investigative Journalists), an international association of journalists. This association, which includes the Dutch newspapers the Trouw and the Financieele Dagblad, is working on analysing the documents. Bit by bit, information is being disclosed to the outside world.

The journalist association shrouds itself in mystery, while the service provider takes the stand that the computers have been hacked. This immediately raises the question whether the Tax Authority should be allowed to use the information in a legal proceeding or has this information been obtained by illicit means. Given the case law in the area of microfiches from the KBLux bank affair, this will most likely not be the case with the tax authority and will be glossed over as usual.

Tax avoidance vs. tax evasion

A man is but a man and (apparently) every man, big or small, fat or thin, preferably wants to pay as little tax as possible. Given that there are also people at the top of all large international companies, this also explains why these companies are keen to avail of complicated constructions and advance certainty by means of tax rulings, etc. A lot has been said about this in the past months.

The country where a natural person has to be pay tax depends on his/her place of residence (Article 4 of the Dutch State Taxes Act). To reduce the tax burden a natural person will have to initiate a working method that ensures that part of his assets are transferred, so that this can be accommodated elsewhere (read: in a country with a more lucrative tax system). That is also the direct crux of the Panama Papers.

The bottom line is that the working method of the Panamanian service provider is that an offshore company is set up for the natural person. The core of the working method is that a share of the natural person’s assets is incorporated into the offshore company. Consequently, the tax levy of the natural person’s country of residence no longer applies, but that of the country where the offshore company is established. The tax levy of this country is usually considerably lower than that of the natural person’s country of residence. This therefore offers a direct advantage.

The question that then remains to be asked is whether the financial advantage gained qualifies as tax avoidance or tax evasion. That qualification is extremely important because everyone is within their right to avoid tax (reduction of the tax burden within the boundaries of the la), while tax evasion (reduction of the tax burden outside the boundaries of the law) is a criminal offence.

While not all of the facts and circumstances of the issues surrounding the Panama Papers are known yet, we all have to make do with the information exposed by the journalists, the media is already screaming ‘blue murder’ and every effort is being made create the impression that it is all about tax evasion. That conclusion, however, cannot be reached just like that.

Tax avoidance only applies if the reduction of the tax burden is effected outside the boundaries of the law. It may well be the case that the natural person incorporates a share of his/her assets in an offshore company and does not declare his/her stake in that company on his/her income tax return. Whether this involves the Panamanian service provider’s customers, is not known. That information is only known to the relevant customer and possibly the Tax Authority of the natural person’s country of residence. While the customer concerned does not feel the need to justify its financial wheeling and dealing publically, the Tax Authority is bound by the obligation of confidentiality (AWR, Article 67) and will therefore also have to ‘keep their mouths shut’. In short, that’s playing right into the hands of the journalists, because this gives them ammunition to continue to speculate and make assumptions, which the majority of people believe to be true.

Naming and shaming

As I already mentioned, the initial publication on the Panama Papers focus on analysing the Panamanian service provider’s method of working. The first names of this service provider’s customers were quickly publicised. While these were foreigners yesterday, as of today, there are also Dutchmen among them. But is it necessary to publicise the service provider’s customers by name and in doing so give the impression that this is a matter of tax evasion? And what do we stand to gain by publicising these names?

If it is a case of tax evasion, is it any worse if it concerns a footballer or a former member of the Supreme Court? I don’t think so. Article 69 of the AWR states that “anyone that intentionally fills out a tax return provided for under the Tax Act incorrectly or incompletely (…) whereby they do not pay enough tax, that person will be fined, punished (…).” This legislative text does not make any distinction between different tax obligations. Be it the butcher on the corner, the footballer or a former member of the Supreme Court, if he/she files an incorrect or incomplete tax return, he/she is equally liable to punishment.

This does not exclude dubious reporting of information. The information that is provided on the former member of the Supreme Court initially suggests that the member in question has used his/her Supreme Court membership for an offshore company. However, on closer examination (insofar as all the facts are known) it transpires that the offshore company was only set up 11 years after the Supreme Court membership ended. Even so, public opinion will not bear this in mind, but rather emphasise that even a former member of the Supreme Court has made use of an offshore company to reduce his/her tax burden.

The only reason for naming the names of the service provider’s customers in newspaper articles is therefore within the context of ‘naming and shaming’. ‘Naming and shaming’ basically comes down to certain, unsatisfactory situations being exposed publically. In this case, the natural person is exposed by a publication (naming) and the announcement and/or information is portrayed in this publication in a bad light (shaming). That is exactly what has happened in the current news coverage. Customer names are publicised, and the information painted in such a light that any random reader will think that the person in question has evaded tax and is therefore a villain.

While freedom of the press goes too far, that same freedom is still subject to certain boundaries. You see, the press hounds may not injure a person’s good name or reputation. The Supreme Court deems rumours being presented as facts and the accuracy of the information not being first verified as the deciding factor for defamation. So, before going to press, certain information has to be verified to ensure its accuracy. Whether that was also done in the case of these Panama Papers is doubtful. A number of reports did indeed point out that the Tax Authority was asked to respond, but the Tax Authority have an obligation of confidentiality and are unable and will not provide any information on the accuracy of the information. There is nothing to indicate that the customers concerned, who have been now been named and shamed, have been asked to respond.

In short, as interesting as the information from the Panama Papers may be, the cooperative of journalists would do well to disclose this information in an accurate and proper manner. To my mind, that manner should be such that naming and shaming is avoided. After all, that does not in any way whatsoever contribute to the tax levy in, for example, the Netherlands. Hopefully the cooperative of journalists will take this into account before publishing the information.

Conclusion

The world is in turmoil after announcement of the Panama Papers. The manner in which this information is being exposed raises the necessary questions. The cooperative of journalists are not afraid to name and shame. In doing so, the Panamanian service provider’s customers are shunned as tax fraudsters, while there are known facts that do not (yet) give any cause for this. Making use of an offshore company does not automatically imply tax evasion (a criminal offence), but may qualify as tax avoidance (everyone’s right, because this falls within the boundaries of the law). The latter may well not strike a positive chord either, but it doesn’t necessarily mean that anyone involved is a villain or fraudster