After weeks of mounting pressure and criticism, Iceland’s Minister of Finance, Bjarni Benediktsson, finally came out on Wednesday in support of purchasing leaked documents that reportedly contain information on 417 wealthy Icelanders and their holdings in international tax-havens. In a press release, the ministry promised the Directorate of Tax Investigations its full political and financial support in acquiring the documents, and in a TV interview that same night Bjarni insisted that the government would not cuddle tax dodgers: Everyone had to pay their fair share to society.
It might seem strange that the Minister of Finance feels the needs to make a public announcement that he does not condone tax evasion.
Accusations of corruption and crony capitalism
It has taken the government at least nine months to reach this decision. News first broke in May last year that an anonymous informant had offered Icelandic authorities the documents for purchase. However, it was only in early December that the Ministry of Finance gave the go-ahead, authorizing the Directorate of Tax Investigations to purchase the documents, but under stringent conditions.
Revelations earlier this month that the bank HSBC had assisted wealthy clients in hiding billions in tax havens revived public interest in the issue. Among the clients HSBC had helped were six companies with ties to Iceland and one Icelandic citizen who had hid a total of 1.3 billion ISK.
And that was just one bank: It seemed obvious that all told there had to be billions more hidden in tax havens. So, why hadn’t the government purchased those leaked documents?
The answer seemed obvious: Corruption and crony capitalism. Of course Bjarni Benediktsson was just protecting his wealthy nephews, business buddies and party backers! Such suspicions were strengthened when the Director of Tax Investigations, Bryndís Kristjánsdóttir, announced she believed it was impossible to meet the ministry’s conditions for purchasing the documents.
A parliamentary resolution
So, when Bjarni finally announced his support for purchasing documents he had lost his case in the court of public opinion. If he had at some point believed he could wait until the whole issue blew over—or that he could shift the blame on the Directorate of Tax Investigations—by Wednesday he seemed to have realized he had lost that bet, and with it his credibility.
What seems to have finally convinced him the game was up was that the day before, MPs from the Left-Green Alliance announced they would introduce a parliamentary resolution to provide the Director of Tax Investigations with Parliamentary support. Given the public attention the issue was getting, it would be extremely difficult for Conservative and Progressive MPs to side with Bjarni. Faced with a parliamentary debate and a vote, he was bound to lose.
Bjarni had no choice but to back down.
A defeat turned into a victory?
However, by speaking unequivocally, avoiding the sort of whining self-pity we have grown accustomed to from our Prime Minister, Progressive Party chair Sigmundur Davíð Guðlaugsson, and even apologizing for his previous criticism of the Director of Tax Investigations, Bjarni even seemed to score a few points.
Kjarninn claimed he had effectively “turned the tables in his favour”, and made those who had suggested his previous obstinacy was due to his criminal nepotism, “look silly.”
Well, that’s just silly.
While it is true Bjarni handled his defeat admirably, and that he does look like a tower of statesmanship whenever we have a chance to compare him to the Prime Minister, that analysis is rather curious.
It is obvious Bjarni only backed down when he had been totally boxed in, and there is every reason to question his conditions for the purchase of the documents.
It is also clear that not everyone in the Conservative Party approves of the government pursuing wealthy tax dodgers by any means. Heimdallur, the Reykjavík division of the Conservative Party’s youth division, has come out against Bjarni’s decision, arguing it is unconscionable that the Director of Tax Investigations become accessory to crime by purchasing illegally acquired documents.
Then, there is the issue of cuts to the Directorate’s budget. Currently, it can only close 100 cases annually, which means it will take years before it can investigate all of the 417 new cases. Such delays might be quite significant as the statute of limitations run out. In any case, tax dodgers can soon avoid any serious legal repercussions, since the government plans to introduce a bill giving tax dodgers amnesty if they “correct” their past tax returns to account for any assets or income they might have omitted.
Still, it is a victory
But, no matter why or what happens next, the decision by the Ministry of Finance to back the purchase of the documents is a major victory. It is clear the ministry would not have acted had the pressure from the public and the media been more muted.
By forcing the ministry to do the right thing, the public and the media showed that it is possible to sway the government, even when it is determined not give in.
Magnús Sveinn teaches economic history at the University of Bifröst.