Panama Papers cut a swath through countries and industries

World leaders including Vladimir Putin and Xi Jinping have been implicated in the scandal following the leak of 11m documents from secretive Panamanian law firm, Mossack Fonseca. Reports suggests that 72 current and former heads of state have offshore connections, which could relate to tax dodges or illicit activity. Pakistan's Prime Minister Nawaz Sharif is under particular pressure to answer questions regarding his significant wealth following the leaks; Pakistan is already vulnerable on a number of levels including the balance and sharing of power, hence there are fears that this scandal could inflame the situation. The documents also name banks such as Nordea Bank, Societe Generale and UBS and FIFA's ethics committee comes under scrutiny, with links shown between Uruguayan lawyer and committee member, Juan Pedro Damiani, and former senior FIFA vice-president, the recently accused Eugenio Figueredo. Furthermore, Anglo-Australian mining firm BHP Billiton was highlighted in reports relating to the Panama Papers due to concerns that two of its BVI-registered company's were authorised to received significant amounts of money and it has links to at least 19 other companies registered on the islands. 

The Anglo-Australian mining giant BHP Billiton authorised two of its companies in the British Virgin Islands to receive large amounts of money, sparking a “high risk” warning at the Panamanian law firm Mossack Fonseca, new documents reveal.

The documents disclose details of BHP’s structure, and show the corporate giant is linked to at least 19 companies registered in the BVI with the assistance of Mossack Fonseca.

Mossack Fonseca acts as an agent for clients interested in setting up companies in countries such as the BVI, the Seychelles, Niue and others. Data on the company has been obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Guardian and other media outlets.

Multinationals often use offshore entities in countries such as the BVI to minimise their tax bills. But a spokeswoman for BHP Billiton said it “does not engage in aggressive tax planning” and was committed to transparency.

The documents show that two of the BVI companies linked to BHP Billiton – BHP Billiton Finance South Africa Limited and BHP Billiton UK Holdings Limited – were assessed as “mandatory high risk” by Mossack Fonseca.



The warning formed part of what is known as an “enhanced due diligence” check undertaken by the firm, when it identifies clients who may be undertaking riskier business ventures.

The risk assessment document for BHP Billiton Finance South Africa Limited states the region where its business takes place is Australia. It said: “Authorised capital is higher than the norm. The company’s activity is not stated.”

The files recommend that Mossack Fonseca “request the source of funds and or source of wealth for this company”, information about its beneficial owners and the reason for the high capital. A beneficial owner is the person or entity who ultimately owns the companies.

Both risk assessments indicate Mossack Fonseca was unclear about who actually owned the entities.

A spokeswoman for BHP said in response to questions about the risk assessment: “As regards Mossack Fonseca’s internal assessment, based on a recent review of our historical filings and correspondence, it does not appear that we were aware of this assessment, nor the basis on which the assessment was conducted. Therefore, we are unable to comment on this.

“Mossack Fonseca was engaged by BHP Billiton in an administrative capacity only. Our understanding is that it was provided with information that was necessary to fulfil these activities.”

The spokeswoman said the two companies were subject to UK tax on their worldwide income, and the reason they had been set up in the BVI “was simplicity in relation to making distributions from a corporations law perspective and choice of functional currency from a reporting perspective”.

“BHP Billiton Holdings UK Limited is an investment company which holds significant assets of the BHP Billiton group. The capital of this company reflects the value of those assets.

“BHP Billiton Finance South Africa Limited was established to provide financing to the BHP Billiton Group in South African Rand. Since formation of the company, the shareholders funds (which includes paid-in capital) for this company have not exceeded US$300m, which is not material having regard to the size and funding requirements of the BHP Billiton Group. Post the May 2015 demerger, this company is no longer owned by the BHP Billiton Group.”

BHP has disclosed the existence of its BVI companies to the US Securities and Exchange Commission in a number of different filings.

BHP Billiton has faced heavy scrutiny in Australia over its offshore tax arrangements and has been accused of using a complex web of companies to minimise Australian tax it pays. It was criticised for its responses to questioning in an inquiry by the Australian Senate into tax avoidance. The Labor senator Sam Dastyari said during the April 2015 hearings: “BHP’s failure to give answers and basic information was far from satisfactory.”

Company executives were unable to answer a series of questions about their effective tax rate in Singapore, whether they had received an adverse assessment from the Australian Taxation Office and whether they had received a tax office position paper over their tax liabilities.

The Australian Senate inquiry’s report is to be released shortly and is expected to call for sweeping changes of Australia’s corporate taxation system.

BHP Billiton’s annual disclosure report states: “Our global company structure … means that all foreign subsidiaries within the Group are controlled foreign companies of either BHP Billiton Limited or BHP Billiton Plc.

“This means that, in addition to the local country tax rules, they also come within the scope of the international and anti-avoidance tax rules applying in Australia or the United Kingdom to prevent multinational companies from obtaining inappropriate tax advantages by operating through low rate jurisdictions.”