Iceland’s Prime Minister Sigmundur David Gunnlaugsson resigned on Tuesday, becoming the first casualty of leaked documents from a Panamanian law firm, which have shone a spotlight on the offshore wealth of politicians and public figures worldwide.
The Panama Papers showed the premier’s wife owned an offshore company with big claims on Iceland’s banks, an undeclared conflict of interest for Gunnlaugsson, infuriating many who hurled eggs and bananas in street protests calling for him to step down, Reuters reported.

The banks collapsed as the global financial crisis hit in 2008 and many Icelanders blame politicians for not reining in their debt-fueled binge and averting a deep recession.
The more than 11.5 million documents, leaked from the Panamanian law firm Mossack Fonseca, have caused public outrage over how the world’s rich and powerful are able to stash their wealth and avoid taxes while many people suffer austerity and hardship.

Mossack Fonseca, which specializes in setting up offshore companies, denies any wrongdoing. On Tuesday, the Panamanian government sought to defend the country’s reputation.
Panama President Juan Carlos Varela’s chief of staff told a news conference that the government could retaliate after France announced it would put the Central American country back on its blacklist of uncooperative tax jurisdictions.

The official, Alvaro Aleman, said no Panamanian company had been found to have committed a crime.
He added: “We are not going to allow Panama to be used as a scapegoat by third parties. Each country (implicated) is responsible. The president had instructed the foreign ministry to contact all of the dozens of countries implicated.”

Gunnlaugsson quit ahead of a planned vote of no-confidence, hours after asking the president to dissolve parliament, a move which would almost certainly have led to a new election.
The deputy leader of his Progressive Party, Sigurdur Ingi Johannsson, told reporters the party will suggest to its coalition partners in the Independence Party that he himself should become the new prime minister.

Opposition parties said, however, that they still wanted a snap general election. Any new election could see victory for the anti-establishment Pirate Party, according to opinion polls.
With the fallout from the leaks reverberating across the globe, British Prime Minister David Cameron also came under fire from opponents who accused him of allowing a rich elite to dodge their taxes.

US President Barack Obama said the Panama Papers showed tax avoidance was a major problem and urged the US Congress to take action to stop US companies from taking advantage of loopholes allowing them to avoid paying taxes.

“We’ve had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem,” he told reporters.

“It’s not unique to other countries because frankly there are folks here in America that are taking advantage of this same stuff. A lot of it’s legal, but that’s exactly the problem.”

An Iceland government spokesman has said the claims against Iceland’s collapsed banks held by the firm owned by Gunnlaugsson’s wife totaled more than 500 million Icelandic crowns ($4.1 million). The prime minister has stressed his wife’s overseas assets were taxed in Iceland.

By Financial Tribune