Iceland's Prime Minister Sigmundur David Gunnlaugsson was taking a break from politics Wednesday after a massive data leak from a Panama law firm suggested he and his wife secretly channelled funds to an offshore tax haven in the Caribbean.
Gunnlaugsson made the announcement late Tuesday, but did not formally resign.
Fisheries and Agriculture Minister Sigurdur Ingi Johannsson would serve as a prime minister "for an unspecified amount of time," according to a statement issued by the premier.
Gunnlaugsson, who faces a looming no-confidence vote, had been urged to resign following the leak, but rejected any wrongdoing by himself or his wife.
He said he would stay on as leader of the Progressive Party.
A poll commissioned by public broadcaster RUV showed that 81 per cent of voters polled wanted Gunnlaugsson to resign.
The current government's term is scheduled to end in April 2017.
The leak of 11.5 million documents from Panama-based law firm Mossack Fonseca, which details how money was funnelled to shell companies in tax havens, has called into question the finances of numerous politicians, sports stars and celebrities from across 80 countries.
After obtaining the documents from a Mossack Fonseca employee, German daily Sueddeutsche Zeitung enlisted the help of the Washington-based International Consortium of Investigative Journalists (ICIJ) and other media organisations to analyse them. The Panama-based law firm at the centre of a massive data leak has rejected any wrongdoing.
Organization for Economic Co-operation and Development (OECD) General Secretary Jose Angel Gurria accused Panama of failing to act on international financial data exchange, calling the country the last major nation to still allow offshore funds to be hidden from tax authorities and prosecutors.
The country hasn't stuck to promises to follow international standards for tax transparency, Gurria said in Berlin on Tuesday.
The government of Panama rebutted the OECD's critique, saying Panama has been made out to be the single scapegoat, even though the so-called Panama Papers mention 21 other countries, Presidential Minister Alvaro Aleman said Tuesday.
Aleman pointed out that Panama recently changed a series of laws related to regulating the financial sector.
In February, the OECD Financial Action Task Force removed the country from the list of states with deficient international exchange of financial and tax information.