Tax havens are “parasites” that help create the social inequalities that have propelled populist leaders such as Donald Trump and Vladimir Putin to power, leading tax and corruption experts are to tell the European parliament.



The Nobel prize-winning economist Joseph Stiglitz and the Swiss anti-corruption expert Mark Pieth have set out a series of recommendations for reforming the offshore economy in a report to be presented to the parliament’s Panama Papers inquiry on Wednesday.

The pair made headlines earlier this year after walking out of the Panamanian government’s inquiry into the offshore tax evasion scandal. They resigned citing interference from president Juan Carlos Varela’s administration, which did not want the inquiry’s work published.

“I make a direct link between offshores and these populist politicians,” said Pieth in an interview with the Guardian. “People get angry because they are the victims of aggressive globalisation, but the paradox is populist politicians use those inequalities to come to power and many of them hide their money offshore.”

The Panama Papers uncovered a $2bn (£1.6bn) money laundering scheme, run through Switzerland and the British Virgin Islands, in which a St Petersburg cellist appeared to be standing in as the beneficiary of a fortune amassed by the Russian president.

The UK was a big part of the problem, said Pieth. Britain should force its offshore centres to be more transparent or “let them go”.

Mossack Fonseca, the law firm at the centre of the scandal, had its headquarters in Panama, but more than half of the offshore companies it acted for were located in the British Virgin Islands, which remains under UK rule.

“The UK has a responsibility,” said Pieth. “Many of these havens are creations of the UK, they are a legacy of the colonial empire, either you let them go, or you still keep them under the protective umbrella, but then you have to take responsibility for them. Britain should see to it that they abide by the rules that have been developed internationally. The British Virgin Islands is one of the biggest problem spots in the world.”

In their report, Overcoming the Shadow Economy, Pieth and Stiglitz call for new global standards. These include:

Publicly searchable registries of the beneficial owners of each corporation, trust, foundation, or other entity, in every country.



Compelling all tax haven companies to file an annual report, setting out the names of their owners, the jurisdictions in which they operate, and a full set of tax returns.



Tighter controls on lawyers and formation agents, including a duty to know who their customers are and what they use offshore companies for.



A curb on the number of nominee directorships any one person can hold. Some individuals make a living from lending their names to hundreds of companies, acting as stand-ins to disguise the real owners.

There is also a call for tighter controls to combat the widespread money laundering through property – typically using luxury apartments in New York and London. Any buyer paying cash should disclose their identity rather than hiding behind an anonymous offshore entity. The US has recently introduced such a requirement in certain districts.

The fact that the US and Europe have not yet tackled secrecy havens is “testimony to the power of the interests of those who benefit from secrecy”, the authors say.

“There is a widely shared perspective that these havens only exist because the United States and Europe have looked the other way – influenced by their own 1%.”