With political aftershocks still being felt after the leak of the Panama Papers, the European Union’s five biggest economies, including Britain and Germany, have agreed to share information on company ownership to try clamping down on tax evasion.
The deal, announced Thursday in Washington, on the sidelines of the spring meetings of the International Monetary Fund, followed days of controversy. Disclosures in the Panama Papers led the prime minister of Iceland, Sigmundur David Gunnlaugsson, to temporarily step aside.
They have also embarrassed Britain’s prime minister, David Cameron, whose father’s name appeared among the millions of documents leaked from the Panamanian law firm Mossack Fonseca, describing use of offshore tax havens by some of the world’s richest and most powerful people.
Another casualty of the leak emerged in Spain, where the minister of industry, energy and tourism, José Manuel Soria, quit Friday.
Spain is one of the five signatories to the new information-sharing initiative, along with Britain, France, Germany and Italy. The British chancellor of the Exchequer, George Osborne, described it as a “hammer blow against those who hide their illegal tax evasion in the dark corners of the financial system.”
The announcement by the five countries was welcomed by the International Monetary Fund and by the Organization for Economic Cooperation and Development.
The United States is not part of the information-sharing plan. But a letter, released by the finance ministers of the five countries, called on all members of the Group of 20 to create a global information exchange that would “lift the veil of secrecy” that facilitates tax evasion.
On Tuesday, officials from the EU cited the Panama Papers in calling for fuller disclosures of tax dealings and offshore finances by the biggest multinational companies operating in Europe.
In Britain, Cameron and Osborne agreed to publish details of their tax declarations after it emerged that Cameron had benefited from an offshore investment set up by his father. The Panama Papers were also embarrassing for Cameron because they identified the British Virgin Islands, an overseas territory of Britain, as a major center of offshore activity.
In the early stages, the five European nations will conduct a pilot project under which they will automatically exchange information on the ultimate ownership of companies.
“It shows the benefit of working together,” Osborne said in a statement. “No single country can tackle international tax evasion alone — and Britain should never fool itself into thinking that it can do this by itself.”
Critics say that Britain has done too little to clamp down on tax evasion. Richard Murphy, a leading campaigner for more transparency, welcomed the fact that Germany had joined the new agreement but said that Britain was “not collecting this information from its own tax havens, and I don’t believe it is going to.”
“Until we get our house in order this is a hollow promise,” Murphy told the BBC.
“It’s a good first step,” Meg Hillier, who leads the House of Commons Public Accounts Committee, told the BBC. “One hammer blow doesn’t crack a nut, but it’s a great start.”