Germany may punish off-shore tax firms

Germany is considering scrapping tax benefits for companies that do business with tax havens abroad as a reaction to the Panama papers, Der Spiegel magazine reported yesterday.

Banking watchdogs across Europe have begun checking whether lenders have ties to the massive document leak from Panama that showed how offshore companies are used to stash clients’ wealth.

Four decades of documents from Panamanian law firm Mossack Fonseca, which specialises in setting up offshore companies, showed widespread use of those instruments by global banks and triggered investigations across the world.

German finance minister Wolfgang Schaeuble has advised his staff to make proposals on how the government could financially punish firms that do business with tax havens via offshore companies, Der Spiegel reported.

One idea was to scrap tax incentives for such companies, it said, adding the ministry hoped firms would then raise the pressure on ruling politicians abroad to change tax policy.

A spokeswoman for the finance ministry declined to comment on the magazine report, but she said Berlin was working on an action plan for more transparency in this context.

Mr Schaeuble would present details of this plan at the IMF and World Bank meeting in Washington next week, she added.

Switzerland’s financial watchdog FINMA said earlier this week that banks must clamp down on money laundering, as the Geneva prosecutor opened a criminal probe.