Friday, 5 April 2013


Tax evasion and tax avoidance, one way or another, is rarely out of the headlines especially as many heavily indebted governments are increasingly keen to hunt down every tax dollar / euro / pound that is owed by tax evaders avoiding (unlike the rest of us) paying their dues to society.  This week, the International Consortium of Investigative Journalists [ICIJ] who are based in Washington DC, have in collaboration with international media, began publishing  results into their research into tax evasion and off-shore tax havens.

The journalists have been sifting through an electronic mountain of information - literally  millions of records leaked from Britain's offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world. The list is interesting from presidents, ex-presidents, oligarchs,  plutocrats, a daughter of a notorious dictator and a British millionaire who is accused of concealing assets from his ex-wife.

The shock waves resulting from the leak of some 2 million emails and other documents, mostly from the British Virgin Islands (BVI), should expose the scale of the offshore tax evasion trade and the identities of tax evaders. It has been estimated that wealthy individuals involved in tax evasion and tax avoidance could potentially have as much as $ 32 trillion dollars (£ 21 trillion pounds) stashed in overseas and off-shore tax havens – which if equally divided could perhaps roughly give around $3000 dollars to every living person on earth.

Across La Manche things may be starting to get interesting, Jean-Jacques Augier, President François Hollande's campaign co-treasurer and close friend, has now identified his hitherto secret his Chinese business partner. The French President is already wallowing in a scandal as it turns out that his former budget minister consistently lied about having a Swiss bank account for 20 years. On the other side of the planet, the Mongolia's ex finance minister and deputy speaker of its parliament may have to resign from politics as a result of his off-shore financial interests.

While there is nothing wrong with a company being based in a tax haven does not necessarily mean that a company is avoiding tax or taking advantage of the hitherto pretty impenetrable secrecy that tends to surround tax havens, even if the tax jurisdictions are closely associated with tax evasion. That said, tax havens tend to be masked by secrecy and low taxes, and there have been few attempts to identify them. UK Revenue and Customs does not provide a list of tax havens.

The ICIJ has done an excellent job with its naming project, which may damage the confidence of the world's wealthiest people, who can no longer be certain that the size of their fortunes remains hidden from governments and from their tax paying neighbours. As well as Brits hiding wealth offshore, the data reveals a staggering array of government officials and rich families from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states. The ICIJ data reveals that their secret companies are mostly based in the BVI.

The Westminster government may have half-heartedly highlighted shown a desire to clamp down on tax avoidance and the PM might have slagged off celebrities, for using a tax avoidance scheme in Jersey. Yet he seems to be acutely reluctant to deal the tax havens that happen to be UK Crown Dependent territories.  Most reasonable people accept 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. It’s all a tad embarrassing as the problem is that the UK is at the heart of the problem and has consciously chosen not to regulate its own crown dependencies.

The scale of the off-shore problem may take your breath away. The Cayman Islands; currently home to some 12,000 corporations has a population of 50,000, yet is home to 70% of the planets hedge funds (as of June 2012). The British Virgin Islands (population 22,000) is home to 823,502 registered companies. General Electric who paid no tax in 2010, made a $14.2 billion dollar profit. Barclay's has 181 subsidiaries (as of June 2012) registered in the Cayman Islands and paid little UK tax on its worldwide profits. The Dirty Digger's News Corp managed to base 152 subsidiaries in tax havens across the planet (according to the US Government) and managed to pay no UK corporation tax between 1998 and 1999.

US President Obama was 100% right to suggest that the governments of the world should jointly tackle the issue of tax evasion and tax havens. By tackling 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. Yet that nice Mr Cameron and the other 18 millionaires in the cabinet do seem to be stalling when it comes to closing  the tax loopholes.

The BVI has incorporated more than a million such offshore entities since it began marketing itself worldwide in the 1980s. Company owners' true identities are never revealed. Even the island's official financial regulators normally have no idea who is behind them. The British Foreign Office depends on the BVI's company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries, claiming that the tax-free offshore companies provide legitimate privacy.

Closer to home, in November 2012 a National Audit Office report revealed that of HM Revenue and Customs (HMRC) is struggling to curb aggressive tax avoidance schemes is costing the UK billions of pounds in lost tax. Much to the embarrassment of the Con Dems, tax evasion and tax evaders and the hunt for their concealed cash remains a big issue in the USA, in the UK you get the impression that the Conservative dominated Con Dem Westminster government hopes will quietly go away.

One result of the US government’s pursuit of tax evaders means that Switzerland's oldest bank is to close permanently after they pleaded guilty in a New York court to helping US citizens evade paying their taxes. It was the first foreign bank to plead guilty to tax evasion charges in the USA. Other Swiss banks have taken steps to prevent US citizens from opening offshore accounts to avoid paying tax. Yet here in the UK, the Con Dem Government has reduced the number of staff in Revenue and Customs from around 100,000 to 65,000 and plans to further reduce the numbers to around 50,000 by 2015.

The reality is that the UK Government is in up to its neck when it comes to tax evasion, it’s heavily involved in aiding and abetting tax evasion worldwide. British Overseas territories, including the Cayman Islands, help to hide around trillions from pounds from the different nation’s tax authorities. In the belly of the beast lies the City, which may explain Cameron’s reluctance to do anything about the problem as some of the city banks are hand in glove with drug dealers, dictators, rogue states and terrorists when it comes to money laundering and may perhaps also offer comfy lucrative seats on the board to former Westminster politicians further down the line.

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