Panama Papers: Iceland, UK leaders feel the heat as revelations spread

The fallout from the Panama Papers documents leak spread across the world on Tuesday as Iceland's prime minister faced calls to resign and Britain's David Cameron was urged to clamp down on UK territories being used as tax havens.

Thousands of people protested outside Iceland's parliament on Monday night demanding Prime Minister Sigmundur Gunnlaugsson resign over allegations he hid investments in an offshore company.

Gunnlaugsson refused to quit after details about his involvement in a company called Wintris, which he owned with his wife, were revealed in the leak of 11 million documents from Panama-based law firm Mossack Fonseca.

Icelandic opposition parties say they plan to hold a confidence vote.

In London, Prime Minister David Cameron faced political and personal scrutiny, as opposition Labour Party leader Jeremy Corbyn said the government should consider imposing direct rule on British territories and dependencies operating as tax havens to ensure that they comply with UK tax rules.

Cameron also faced personal embarrassment when it emerged that his late father, Ian Cameron, ran a fund based in Switzerland and the Bahamas to avoid UK taxes.

Corbyn told the BBC he said had no problem with direct rule if territories and crown dependencies were not complying with UK laws.

“The point is that they are not independent territories. They are self-governing, yes, but they are British crown dependent territories,” he said.

“Therefore, surely, there has to be an observance of UK tax law in those places. If they have become a place for systematic evasion and short-changing the public in this country, then something has to be done about it. Either those governments comply or a next step has to be taken.”

Downing Street insisted the revelation about Cameron's father was a personal matter and that the UK was “ahead of the pack” on dealing with tax evasion.

However, the Cameron connection was splashed all over the front pages of Britain's newspapers as critics argued that money made by Ian Cameron had generated wealth for his family and heirs.

The scandal has sparked investigations in Australia, New Zealand, France and Spain. In the US the Department of Justice is reviewing the documents in search of evidence that could be used in a prosecution.

The files also unearthed am alleged billion-dollar money laundering ring involving associates of Russian President Vladimir Putin.

In China, the documents have revealed that close relatives of seven current or former Chinese leaders have been found to have links to offshore firms, including President, Xi Jinping.