Prime Minister David Cameron’s criticism of some of the tax arrangements of some of the rich and shameless as "morally wrong" certainly caught the headlines. Perhaps it can be put down (from a Conservative perspective) to the PM going off on one again. it was certainly a bizarre ‘Conservative’ moment - what’s next Japanese whalers endorsing the virtues of Greenpeace? Certainly from where I have been sat, this side of the bridge, ‘Conservative’ and ‘tax evasion’ have been happily juxtaposed for many years in the public perception.
I noticed that David Cameron appears to have rapidly clammed up, after his unexpected outburst. Perhaps he is now engaged in managed withdrawal (aka ‘retreat’) following his condemnation of celebrity tax avoiders yesterday, no doubt after less than coded warnings from Tory donors that his attacks on Jimmy Carr could open a world of tax avoidance related hurt.
After further thought DC may have decided to cut his losses and keep his head down, certainly the PM has declined to criticise the tax affairs of Take That star Gary Barlow (a recent recipient of a gong), happens to possibly involved in a similar tax evasion scheme to the one Carr used to cut his liabilities. No doubt some pretty senior Tories are fearful that Cameron’s comments could lead to an unwelcome media spotlight on the tax affairs of senior party donors and government (and not doubt former New Labour) ministers.
The Daily Telegraph (no great lover of Cameron admittedly) says that DC under mounting pressure to pay back cheap loans of £1.2 million to the Conservative Party from companies registered in tax havens before the last election. One £250,000 loan apparently came from Juniper Trading (which is registered in the British Virgin Islands). It was given in 2004 at 0.25 per cent below the base rate, to be repaid in 2029. Another £950,000 loan was apparently made by the Medlina Foundation, (based in Liechtenstein), at the base rate plus 1 per cent in the same year. Oops!
Now it does seem a bit rich for the Conservative Party to be taking advantage of loans from offshore firms, while the PM slags of celebrities, for using a tax avoidance scheme in Jersey. Most reasonable people accept (by now) that there is a real need to deal on a global basis with the problem of off-shore companies and those individuals who are actively engaged in tax avoidance, tax evasion and / or money laundering. The problem is that the UK is at the heart of the problem as it has consciously chosen not to regulate some of its crown dependencies.
The scale of the off-shore problem takes your breath away. The Cayman Islands; are currently home to some 12,000 corporations and have a population of 50,000, yet are home to 70% of the planets hedge funds. The British Virgin Islands (population 22,000) is home to 823,502 registered companies. General Electric paid no tax in 2010, yet made a $14.2 billion dollar profit. Barclay's has 181 subsidiaries registered in the Cayman Islands and paid little UK tax on its worldwide profits. The Dirty Digger's News Corp has 152 subsidiaries in tax havens across the planet (according to the US Government) and paid no UK corporation tax between 1998 and 1999.
US President Obama was absolutely right to suggest that the governments of the world should jointly tackle the issue of tax evasion and tax havens. The US President was spot on, if we actually tackled the tax havens, the tax avoidance and the questionable dealings of the derivative traders, hedge funds and the off balance sheet trading then we might go so way towards dealing with the consequences of the worldwide financial crash. I suspect that rhetoric aside hell might have a better chance of freezing over before that nice Mr Cameron and the other 18 millionaires in the cabinet actually do anything to close the tax loopholes – were that to happen then perhaps we would all be in it together?