Iceland's prime minister Sigmundur David Gunnlaugsson is to resign, becoming the first casualty of leaked documents from a Panamanian law firm which have shone a spotlight on the finances of an array of politicians and public figures worldwide.

The Panama Papers showed the premier's wife owned an offshore company with big claims on Icelandic banks, infuriating many in his country who joined mass street protests calling for him to resign.

The findings emerged from more than 11.5 million secret files obtained by the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung, The Irish Times and other media partners which show the inner workings of the Panamanian law firm Mossack Fonseca, one of the largest shell-company registration agents in the offshore world.

Mossack Fonseca denies any wrongdoing.

Among those named in them are friends of Russian president Vladimir Putin, relatives of the leaders of China, Britain and Pakistan, and the president of Ukraine.

Mr 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.

Earlier, Iceland’s president Olafur Ragnar Grimsson refused a request from the prime minister to dissolve parliament and call 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.

Iceland’s opposition parties still want a snap general election despite Mr Gunnlaugsson’s decision to resign. “It is clear our demand for new elections still stands,” Left Green Party leader Katrin Jakobsdottir said.

Fallout reverberates

With the fallout from the leaks reverberating across the globe, British prime Mmnister David Cameron also came under fire from opponents who accused him of allowing a rich elite to dodge their taxes.

And in China, the Beijing government dismissed as “groundless” reports that the families of President Xi Jinping and other current and former Chinese leaders were linked to offshore accounts.

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 U.S. 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 is legal, but that’s exactly the problem.”

Thousands gathered outside the Icelandic parliament in Reykjavik on Monday to protest about what the opposition said was Mr Gunnlaugsson’s failure to disclose a conflict of interest over his wife’s offshore company, which has big claims on Iceland’s collapsed banks.

The prime minister has stressed his wife’s overseas assets were taxed in Iceland.

A government spokesman has said the claims against Iceland’s collapsed banks held by the firm owned by Mr Gunnlaugsson’s wife - totalled more than 500 million Icelandic crowns ($4.1 million).

Iceland’s main commercial banks collapsed as the global financial crisis hit in 2008 and many Icelanders have blamed the North Atlantic island nation’s politicians for not reining in the banks’ debt-fuelled binge and averting a deep recession.

Icelandic government bonds saw their biggest sell-off in five months due to the uncertainty, with yields on 10-year bonds jumping 15.6 basis points to 5.891 per cent.

‘Abuse must stop’

In Britain, the leader of the opposition Labour Party demanded that the government tackle tax havens, saying it was time Cameron stopped allowing “the super-rich elite” to dodge taxes.

“There cannot be one set of tax rules for the wealthy elite and another for the rest of us,” Labour leader Jeremy Corbyn said. “The unfairness and abuse must stop.”

He said Britain had a huge responsibility since many tax havens, such as the British Virgin Islands and Cayman Islands, are British overseas territories, while others such as Jersey or the Isle of Man are British crown dependencies.

According to the Mossack Fonseca files, more than half of the 200,000 companies set up by the firm were registered in the British Virgin Islands, where details of ownership do not have to be filed with the authorities.

Mr Cameron has cast himself as a champion in the fight against tax evasion in British-linked territories. But he was put on the spot by the leaks, which named his late father and members of the ruling Conservative Party among the list of clients who used Mossack Fonseca’s services.

Mr Cameron said he did not own any shares or have offshore funds.

“I have a salary as prime minister, and I have some savings, which I get some interest from, and I have a house,” he said. “I have no shares, no offshore trusts, no offshore funds, nothing like that.”

Other leading figures and financial institutions responded to the leak with denials of any wrongdoing as prosecutors and regulators began a review of the investigation by the US-based International Consortium of Investigative Journalists (ICIJ) and other media organisations.

Britain, France, Australia, New Zealand, Austria, Sweden and the Netherlands are among countries that have started inquiries.

French finance minister Michel Sapin said Paris would put Panama back on its blacklist of uncooperative tax jurisdictions. The Central American country is one of the most secretive of the world’s offshore havens and has refused to sign up to a global transparency initiative.

Mossack Fonseca has set up more than 240,000 offshore companies for clients around the world. The law firm says it is the victim of a campaign against privacy and that media reports misrepresent the nature of its business.

Mossack Fonseca’s Hong Kong office said on Tuesday the firm had never been charged with or formally investigated for criminal wrongdoing in its nearly 40 years of operation.

“We do not advise clients on how to operate their businesses. We don’t link ourselves in any way to companies we help incorporate,” the firm said in a statement.

“Excluding the professional fees we earn, we don’t take possession of clients’ money, or otherwise have anything to do with any of the direct financial aspects related to operating these businesses.”

‘Groundless accusation’

The reports also pointed to offshore companies linked to the families of Chinese President Xi and other powerful figures.

Chinese Foreign Ministry spokesman Hong Lei, when asked if the government would investigate tax affairs of those mentioned in the documents, told reporters the ministry would not comment on “these groundless accusations”.

Beijing also moved to limit local access to coverage of the matter. State media denounced Western reporting on it as biased against non-Western leaders.

The Hong Kong government said its tax department would take “necessary actions” based on any information it received.

Credit Suisse and HSBC, two of the world’s largest wealth managers, dismissed suggestions they were actively using offshore structures to help clients evade tax.

Both were among the banks that helped to set up complex structures that make it hard for tax collectors and investigators to track the flow of money, according to ICIJ.

The famous personalities drawn into the affair also included soccer star Lionel Messi. Spanish tax authorities said they are investigating allegations of tax irregularities involving Barcelona’s Argentinian striker after the release of the documents.

Messi’s family released a statement denying wrongdoing and saying it “never used the company” involved in the matter.

Reuters