George Osborne, the chancellor, and ministers from the UK’s extensive network of tax havens are among key witnesses that MEPs intend to call as part of a major inquiry set to be launched into the Panama Papers.

Leaders of the European parliament meet in Brussels on Thursday to approve the creation of an influential 65-member “inquiry committee”, which is expected to target the tax avoidance industry nurtured by Britain and other European member states.

According to draft documents, the committee will have a mandate to investigate “alleged contraventions and maladministration in the application of Union law in relation to money laundering, tax avoidance and evasion”.

The final wording of the mandate will be decided at Thursday’s meeting between Martin Schulz, president of the European parliament, and leaders of the various political groupings, before being approved by a vote by MEPs on 23 June.

“We absolutely need to have George Osborne there,” said Molly Scott Cato, a spokesperson on tax affairs for the Greens in the European parliament. “The chancellor needs to explain why we continue to have this bizarre limbo in the overseas territories. We need to move into the 21st century and regularise the situation as regards those overseas territories.”

Half of the 214,000 shelf companies represented by Mossack Fonseca, the offshore law firm at the centre of the Panama Papers, were incorporated in the British Virgin Islands.



In public hearings broadcast over the internet, the committee intends to call ministers, tax officials and bank bosses, alongside lawyers and accountants specialising in offshore arrangements. “We need to bring these people out of the shadows so that they are publicly accountable,” said Cato.

Half a million people have signed a petition calling on EU regulators to prosecute banks that let their clients hide their assets in tax havens and do not report suspected tax evaders to the authorities.

The parliament estimates that tax evasion and avoidance costs the EU between €50bn (£38.7bn) and €70bn a year. It claims that the losses from money laundering are on a “huge scale”.

The draft mandate states: “Moral hazard that arises from situations where some tax payers contribute all tax payments which are foreseen by tax legislation, while others can abuse loopholes of the different tax systems undermines citizens’ trust in the democratic system.”

The committee will assess whether member states failed to enforce the 2005 anti-money laundering directive and failed to punish institutions found to have breached money laundering rules. It will also look at allegations that states failed to follow a 2011 directive, which compels European countries to alert each other and share information when they suspect tax evasion.

According to the draft mandate, the committee will assess: “The alleged failure to take the appropriate measures to prevent the operation of vehicles that allow to hide their ultimate beneficial owners from financial institutions and other intermediaries, lawyers, trust and company service providers or any other vehicles and intermediaries that allow the facilitation of money laundering, as well as tax evasion and tax avoidance in other member states (including looking at the role of trusts, single-member private limited liability companies and virtual currencies).”

The inquiry is expected to begin in September and continue for a year. The committee cannot impose penalties, but it can make a non-binding request for a full inquiry by the European commission.

The inquiry committee proposed for the Panama Papers is the most powerful tool available to the European parliament. It can investigate breaches of EU law by member states and check if the commission acted in accordance with its duties under EU treaties.

It has more clout in requiring organisations to hand over documents and compelling witnesses to give evidence than the two previous “special committees” set up by the European parliament to investigate corporate tax avoidance through Luxembourg after the LuxLeaks revelations of November 2014.

LuxLeaks and the Panama Papers were published by the Guardian working as part of cross-border collaborations with dozens of other media groups organised by the International Consortium of Investigative Journalists in Washington.