City of London seen as tax haven at centre of worldwide system, says John McDonnell

Read more: Labour the 'party of makers and doers' says John McDonnell

The Government has allocated £10 million for a new cross-agency taskforce to look at the papers but the shadow chancellor is urging ministers to go further.

Leading a debate on tax avoidance and evasion, Mr McDonnell told MPs that the world of offshore tax havens has been "constructed piece by piece by multinational corporations and the super rich" and is "aided by shady offshore operations like Mossack Fonseca".

But it is also helped by "supposedly reputable accountancy firms here in London playing their part".

"PWC have, according to the Public Accounts Committee, aided tax avoidance, and I quote, 'on an industrial scale'," he said.

"Deloitte have advised big businesses on avoiding tax in African countries. Ernst and Young act as tax advisers to Facebook, Apple and Google.

"Just last month KPMG had one of its tax avoidance schemes declared illegal by the High Court.

"Altogether the big four accountancy firms in this country earn at least £2 billion annually from their tax operations but it isn't just them."

Mr McDonnell said banks headquartered in London have been "particularly proficient in directing their funds to Mossack Fonseca shell companies", naming HSBC and RBS subsidiary Coutts.

"Supposedly reputable companies are aiding and abetting the systematic abuse of our tax system," he said.

"We should be clear about this: the City of London is now being viewed by many as a tax haven in the middle of a dense network of havens created for the super rich to avoid the taxes the rest of us must pay."

Labour is calling on the Government to implement the party's Tax Transparency Enforcement Programme which includes plans for an independent public inquiry into the Panama Papers.

The party also wants HM Revenue and Customs to be "properly resourced" so it can investigate tax avoidance and evasion.

The leaking of the Panama Papers prompted a row over the Prime Minister's investment in an offshore trust.

Treasury Minister David Gauke said the taskforce investigating the Panama Papers would have the use of sophisticated technology and experts and will have powers to prosecute criminals.

In addition British firms have been asked to declare their links to Mossack Fonseca by the City regulator.

Mr Gauke said: "The taskforce will include analysts, compliance specialists, and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority.

"Between them these agencies will have some very sophisticated technology, experts and resources to tackle money laundering and tax evasion anywhere in the world.

"This taskforce will report to the Chancellor and the Home Secretary on their strategy by taking action and we will update Parliament later this year.

"I stress the point that the taskforce will have total operational independence if they find people to prosecute, they will prosecute them, if they find information of illegality they can act on it and in addition, the independent Financial Conduct Authority has writen to financial firms asking them to declare their links to Mossack Fonseca."

Mr Gauke also defended the Government's record: "This is a Government that year in year out closes loopholes, this is a Government that has led to the OECD work on base erosion and profit shifting, this is a Government that has given more powers to HMRC, this is a Government that has seen a significant fall in the tax gap, particularly in the context of the avoidance, this a Government that has a proud record on dealing with tax avoidance and tax evasion and dealing with all of these abuses in the tax system."

But he was criticised by SNP economy spokesman Stewart Hosie for allegedly equating success with money.

Mr Guake had claimed Labour was "hostile to wealth", saying: "Too often in the past week, Labour has appeared to be motivated by something else, and that something else is hostility to the wealthy.

"Not for dodging taxes but just for being wealthy - for being successful, for earning money and for wanting to pass it on to their children, for doing things that millions of people aspire to do."

But Mr Hosie said: "Success is not merely measured in monetary terms.

"There are many, many successful people who will forgo stashing cash in the attic or the bank or indeed the offshore tax haven."

Mr Hosie said he was "delighted" the subject was now under real scrutiny.

He said: "The cat's out of the bag on this one. It's not just Mossack Fonseca, this is the tip of the iceberg. The public will not allow this matter to be quietly swept under the carpet again."

Tory Kevin Foster (Torbay) said: "All of us recognise there's more work to be done to try and capture those revenues that escape all taxation in all jurisdictions, and the role we can play as the UK in building up the capability of developing nations to crack down on tax avoidance that costs them even more than it does ourselves."

Labour's Catherine McKinnell (Newcastle upon Tyne North), chairman of the all-party parliamentary group on anti-corruption, said a great number of her constituents had been in contact to share their concerns.

She said: "The vast majority of people in this country play by the same rules and have very little choice about the contribution they make to the public purse. It's not about envy or anger at wealth, whether it be earned or inherited, but it's about the fact that those at the top end of the income scale seem to play by an entirely different set of rules and it understandably makes people angry and the Government must take genuine steps to level the playing field and to regain the public's trust."

It was unacceptable, she said, that prosecutors of economic crime, tax evasion, corruption and fraud were "effectively operating with one hand tied behind their back".

She said: "Ahead of next month's anti-corruption summit the Government could send out the clearest message to the rest of the world that the UK is serious about tackling economic crime in all of its forms, and its facilitation, and I therefore urge the Government to take the opportunity to take this important step to arm our law enforcement agencies and courts to properly hold companies to account."