Sigurdur Ingi Johannsson, a government minister, announced Tuesday that Iceland’s embattled prime minister, Sigmundur David Gunnlaugsson, offered his resignation amid a controversy over his offshore holdings. By THE ASSOCIATED PRESS on April 5, 2016. (Photo by Birgir Por Hardarson/European Pressphoto Agency)

The prime minister of Iceland resigned on Tuesday, succumbing to political pressure two days after an enormous leak of documents from a secretive Panamanian law firm about offshore shell companies and tax shelters.

The resignation of the prime minister, Sigmundur David Gunnlaugsson, was the first prominent political fallout from the document leaks known as the Panama Papers, which have shed a harsh light on the private financial activities of many rich and powerful people.

Officials around the world, from Europe to Asia to the Americas, were scrambling on Tuesday to contain the fallout — particularly in Britain, where Prime Minister David Cameron, who has portrayed himself as a champion of financial transparency, was battling revelations in the leaks that British-governed territories are vast havens of hidden wealth, including for members of his own family.

The leader of Britain’s opposition Labour Party, Jeremy Corbyn, called for an independent investigation into the tax affairs of all Britons linked to the Panama revelations — including Mr. Cameron’s family — and for Britain to impose direct rule on its overseas territories and dependencies, if necessary, to get them to comply with British tax law.

“The government needs to stop pussyfooting around on tax dodging,” Mr. Corbyn said.

Mr. Gunnlaugsson’s resignation was announced on television by Sigurdur Ingi Johannsson, a government minister and the deputy chairman of his Progressive Party, and it was confirmed by the state broadcaster, RUV.

It was not immediately clear whether Mr. Gunnlaugsson’s resignation will have broader repercussions for the government of Iceland, a tiny island nation of 323,000 that is still recovering from the global financial crisis eight years ago. But the revelations about Mr. Gunnlaugsson’s finances in the document leaks incited angry protests and raised pressure on him to quit the prime minister post, although he will remain the head of his party.

The leaked Panama Papers consist of more than 11.5 million documents, involving nearly 215,000 companies and 14,153 clients of the Panamanian law firm Mossack Foneca, according to the German newspaper Süddeutsche Zeitung. It shared the information with the International Consortium of Investigative Journalists, a nonprofit group, which helped analyze the data and shared it with a number of other newspapers, which began reporting the findings on Sunday.

The politicians, celebrities and sports figures identified in the leaks included close associates of President Vladimir V. Putin of Russia; President Petro O. Poroshenko of Ukraine; Prime Minister Nawaz Sharif of Pakistan; current and former members of China’s ruling Politburo; and FIFA, the worldwide association for soccer. It has also emerged that Mossack Fonseca worked with 33 people or companies that were the subject of international sanctions, including a relative of the Syrian president, Bashar al-Assad.

Mr. Gunnlaugsson had insisted on staying in office after the leaked documents revealed that he and his wealthy partner, now his wife, had set up a company in 2007 in the British Virgin Islands through Mossack Fonseca. The documents also suggested that he sold his half of the company to her for $1 on the last day of 2009, just before a new law went into effect that would have required him as a member of Parliament to declare his ownership as a conflict of interest.

Mr. Gunnlaugsson had said that the leak contained no news, adding that he and his wife, Anna Sigurlaug Palsdottir, had not hidden their assets or avoided paying taxes.
Iceland Leader Walks Out of Interview

Before stepping down as Iceland’s prime minister, Sigmundur David Gunnlaugsson walked out of an interview when the topic turned to his name in the leaked Panama Papers.

By SVT, VIA ASSOCIATED PRESS on April 5, 2016. Photo by Swedish Public Service Broadcaster, via Associated Press. Watch in Times Video »

But the company, Wintris Inc., lost millions of dollars as a result of the 2008 financial crash, which crippled Iceland, and the company is claiming about $4.2 million from three failed Icelandic banks. As prime minister since 2013, Mr. Gunnlaugsson was involved in reaching a deal for the banks’ claimants, so he was accused of a conflict of interest.

In Britain, repercussions centered on Mr. Cameron’s late father, Ian, a stockbroker and investment manager, who was among those named as having used the Panamanian law firm to set up a company based offshore in the British Virgin Islands, a British overseas territory.

While there was no suggestion of illegal activity, the overseas investment fund paid no British tax, and the opposition Labour Party wants to know if Prime Minister Cameron retained any interest in the offshore fund, which he denies, and wants him to publicize his tax returns.

In a further embarrassment to Mr. Cameron, who has claimed leadership in the global fight to crack down on tax havens, the documents also reveal that Britain’s self-governing overseas territories, especially the British Virgin Islands, proved a favored location for companies handled by Mossack Fonseca.

According to the International Consortium of Investigative Journalists, 113,000 of the nearly 215,000 companies Mossack Fonseca is known to have arranged were set up in the British Virgin Islands. A further 3,000 were set up in other British jurisdictions, including British Anguilla, Jersey, the Isle of Man and Britain itself, according to The Guardian, which also has access to the leaked documents.

The economy of the British Virgin Islands is largely based on such secrecy, with just over half of all government revenues coming from incorporation fees. More than 950,000 offshore companies have been incorporated there.

With economic inequality a growing political issue in Britain, Mr. Cameron’s privileged upbringing and personal wealth make him vulnerable to such attacks, particularly at a time when his government is reducing spending on welfare payments to the poor.

The political temperature over the leaked documents has been rising in Britain since Monday, when, asked whether Mr. Cameron’s family still had money offshore, his official spokeswoman, Helen Bower, described this as a “private matter.”

Holding money offshore would not be illegal, providing interest earned was declared to the authorities. Despite saying that he is “very relaxed” about calls to publish his tax return, Mr. Cameron has not done so.

Reports about the Cameron family’s Panamanian connections first surfaced in 2012 when it emerged that Ian Cameron was a director of a fund established in Panama in 1982 called Blairmore Holdings, named after a family mansion in Scotland.

Though there is no suggestion of illegality, the leaks have shown how the company used bearer shares, which do not identify owners by name, to conceal who was investing in Blairmore Holdings.

Mr. Cameron said: “I own no shares, no offshore trusts, no offshore funds, nothing like that.” His office said later that neither he, his wife nor his children benefit from “any offshore funds.”

By Steven Erlanger and Stephen Castle

Source: NYTimes.com