Apr 25 2016

Panama Papers: Labour and SNP launch joint tax transparency attack against David Cameron at PMQs

David Cameron faced sustained attacks from Labour and the SNP over the staffing levels of the UK's tax watchdog during Prime Minister's Questions (PMQs), as the fallout from the explosive Panama Papers leak continues.

Jeremy Corbyn continually pressed the Conservative leader on the issue after Cameron admitted to selling shares in his late father's offshore investment fund, Blairmore Holdings.

The prime minister insisted that the government has given £800m ( $1.14bn) more to HMRC in a bid to crack down on tax evasion and avoidance. But the Labour leader pointed out that the 2016 budget showed the department's funding will fall from £3.3bn to £2.9bn by the end of the parliament in 2019/20.

"It's not how much money you spend on an organisation, it is how many people you can have out there collecting people's taxes and making sure the forms are properly filled in," Cameron replied.

He added: "He asks about what we are doing on the Panama Papers, we have a £10m cross-agency review to get to the bottom of all the relevant information... in terms of taking action in tackling tax havens, this government has done more than any previous one."

The SNP's leader in the House of Commons, Angus Robertson, also pushed Cameron on the matter. The nationalist claimed around 3,250 Department for Work and Pensions (DWP) staff are investigating benefit abuse, while just 300 HMRC workers are probing tax evasion and avoidance.

However, Cameron dismissed the figures as "completely bogus". The prime minister also insisted that the UK's new register of beneficial ownership would be open to the public and stressed Britain's crown dependencies and overseas territories (apart from Guernsey and Anguilla) would let HMRC officials look at their registers.

But Corbyn pointed out the government of the Cayman Islands has declared victory over the beneficial ownership agreement.

"This is what we wanted, this is what we have been pushing for three years for, a disaggregated system which leaves the beneficial ownership information intact with the service providers but accessible by the general registry and accessible by the law enforcement agents in Cayman," premier Alden McLaughlin reportedly said.
What a Brexit could mean for US banks

Before, one bank forbade staffers from even an utterance of the word. Now, reality may be setting in.

The United Kingdom will soon settle the debate to quit the European Union with a vote, but the ramifications of the decision will be felt by banks far outside Europe.

Banks in the U.S. that have operations in the EU will have a new headache in an already-difficult year should U.K. voters opt out of the political and economic union. And most of the biggest banks operating on Wall Street have key operations in places like London and Ireland, which could turn into a management nightmare instantly should U.K. residents vote June 23 to opt out of the governing collective.

U.S. and European banks alike that benefited from "passporting" regulations that let them run trading operations in U.K. locations like London would have to hastily revisit those operating plans, one analyst says. Some banks may consider relocating trading operations to cities like Amsterdam or Frankfurt if the U.K. opts out of the EU.

"At the moment they can run operations out of London," said George Karamanos, head of European bank equity research at Keefe, Bruyette and Woods. "If they lose that, it means that no longer can they run regulated activities out of London."

Citigroup could be poised to remove operations from the U.K., judging by what the bank's CEO recently said. The bank declined to address specifics on how it would handle the Brexit, until an actual decision is made.

"We operate in most of the 28 EU countries, and so we have a lot of flexibility in terms of what we could do," Citigroup CEO Michael Corbat said last week in response to an analyst question on the potential Brexit. "We run a significant bank out of Ireland, we have trading, we've got people in a number of the countries so we would have options in terms of where we would choose to headquarter a European trading business… we've got contingency planning but we've got a lot of potential options if that's the path it goes down."

Most other banks didn't reveal specifics about Brexit plans when pressed by analysts on their quarterly earnings calls. Elsewhere, they have to disclose more information. A Reuters report Wednesday said United States financial regulators are demanding updates from Wall Street firms about their plans to manage their way through a Brexit and related fallout that could impact banks.

"We're paying very close attention to it," Goldman Sachs CFO Harvey Schwartz said on the bank's earnings call Tuesday. "Whether we're monitoring it from a market and credit risk perspective or from a strategy perspective."

The argument for the U.K. remaining in the EU points toward a better economic standing for all parties that belong to the union. The argument for Brexit focuses on border security, which has become a crucial issue in Europe as refugees flee conflict in Syria and as a spate of terror attacks have struck key European cities.

Although Britons had largely favored the U.K. remaining in the European Union, recently sentiment has shifted and the vote June 23 will be closely watched not just for the repercussions it could generate at banks, but for international diplomacy and legislation as well.

And while Wall Street does not want to be seen as meddling in matters of international diplomacy, there's no mistaking what they want, one analyst said.

"Large banks are uniformly against Brexit due to the confusion of re-doing banking, clearing, [and other] relationships," said Erik Oja, U.S. banks analyst at S&P Global Market Intelligence.

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