Mention the adjective “offshore” and it will almost certainly provoke a pavlovian response from journalists, especially those with any affiliation to bodies like the Washington DC -based International Consortium of Investigative Journalists (ICIJ).
“Offshore” is invariably associated with nouns like “tax haven”, the rich” and “tax evader”. So when presented, with a stash of files from banks or law firms that operate in “offshore financial centres” it seems fair game to disclose the content, albeit on a highly selective basis.
For in journalism anything to do with “celebrity,” “notoriety”, and “the rich” invariably sells given the voyeuristic tendencies of what is almost certainly a fairly high proportion of the population in general and status-seeking politicians in particular.
When something like the “Paradise Papers” turns up, therefore, it is the equivalent of manna from heaven. And not just for the journalists or publications associated or affiliated with the ICIJ. Given that “journalism” increasingly seems to be more about “churnalism” these days just about every other title will be in on the act.
After all, no matter how the documents were obtained, or whatever their provenance, journalists, the publications for which they work, and grandstanding politicians can always cite “the public interest” to excuse any transgressions in this respect, much less invasions of personal and/or corporate privacy.
And sometimes they could be right.
Tax evasion is a big problem. As the work of respected researchers and authors like Brooke Harrington* and Gabriel Zucman** shows rich individuals and big corporations routinely evade tens of billions of pounds, dollars and euros of tax through their ability, with the connivance of a raft of accounting, legal and tax professionals, to create a spider’s web of structures that effectively arbitrage different tax regimes around the world. Trusts, or perhaps more pertinently offshore trusts, often play a critical role in these arrangements.
The result is that rich individuals and corporations often have marginal tax rates that are much lower than even the poorest taxpayers pay in the countries in which they reside and operate.
But are the details contained within the “Paradise Papers” likely to reveal anything of consequence in this respect?
Not being a member, affiliate or even an associate of the ICIJ, much less having access to the documents in question, this is an impossible question to answer. No doubt all will be revealed in time.
At the moment, however, most of the revelations amount to little more than titillation.
One of the recurring terms rolled out to qualify many of the revelations contained in the articles covering the Paradise Papers published so far is that the individuals and institutions mentioned were not actually doing anything illegal, or even immoral.
The fact is that, almost by definition, if one wants to invest in foreign countries, or hold certain types of asset, it makes absolute sense to invest in a structure registered or domiciled in another jurisdiction. And this could be one of the offshore financial centres that journalists routinely label as a “tax haven”.
Want to get exposure to India’s booming economy? Then it makes good sense to invest through a vehicle registered and domiciled in Mauritius as a result of the tax agreements that exist between the two countries.
The problem, as always, is that a lot tends to get lost in translation or through the typical journalists’ misunderstanding of the way in which various investment structures work along with their tax treatment.
The reality is, for these people, is that anything and everything to do with investing “offshore” is tax evasion.
The results, as with the case of HM Queen Elizabeth II’s alleged investments in “tax havens” can be hilarious. The Duchy of Lancaster, which invests on her behalf, once had very small holdings in a couple of private equity vehicles that were registered and domiciled “offshore”.
As a consequence Jeremy Corbyn, the leader of Her Majesty’s Loyal Opposition in the House of Commons, appeared to imply when fielding a question from a journalist on 6 November that she should apologise for her activities.
I hold a number of vehicles some of which are either registered and domiciled in offshore centres like Guernsey or invest in other firms and vehicles registered and domiciled in other offshore centres, almost certainly including some of the usual suspects, such as the Cayman Islands.
Furthermore they are sanctioned by HM Revenue and Customs (HMRC) as the vehicles concerned are all deemed to qualify for inclusion within an Individual Savings Account (ISA) or Self Invested Personal Pension (SIPP).
So needless to say if Mr Corbyn expects me to apologise for avoiding, let alone evading tax, the answer will be in the negative.
But then all those members, affiliates and associates of the ICIJ, the publications that “scape” or churn their “researches” and politician cheerleaders are not exactly slouches when it comes to using offshore financial centres or “tax havens” to manage their finances as thewealthnet has pointed out on previous occasions.
Just ask Dame Margaret Hodge and The Guardian!
*Brooke Harrington. Capital Without Borders: Wealth Managers and the One Percent, Harvard University Press, Cambridge Massachusetts and London, 2016.
**Gabriel Zuckman. The Hidden Wealth of Nations: The Scourge of Tax Havens, University of Chicago Press, 2015.