Another month, another tax scandal. This time it’s the so-called Panama papers: 11.5 million leaked documents from the Panamanian law firm Mossack Fonseca obtained by the German newspaper Süddeutsche Zeitung.
According to the BBC, the papers give details of the tax-avoiding – and sometimes evading – financial machinations of 214,000 entities and constitute the biggest leak in history.
Cue great displeasure among the masses. As I write, crowds are gathering outside the Icelandic parliament to demand that prime minister Sigmundur Gunnlaugsson stand down over allegations he concealed investments in an offshore company. In the UK, the leader of the opposition, Jeremy Corbyn, is calling for direct rule to be imposed on British overseas territories and dependencies, such as the beach-fringed British Virgin Islands, if they do not comply with UK taxation law.
Some by now rather well-rehearsed arguments have been zipping round the airwaves, with plenty of people leaping to the defence of offshore financial centres.
“In my experience of working with expatriates and international investors, who have generally more transient lifestyles, offshore accounts are preferable simply for convenience,” said Nigel Green, founder and chief executive of deVere Group. “Offshore financial centres allow those who qualify to do so to use legal, bona fide international investment products to form part of a robust and sensible financial planning strategy.”
So parking money offshore is sensible, ’specially if you have a busy, transient lifestyle – whatever that is. I’m not aware that nomads are big users of offshore accounts.
Others have pointed out how much has been done to improve tax transparency around the globe. And they are right. We obviously don’t have total transparency, though, or we wouldn’t have these scandals.
Then there’s the argument that offshore centres aren’t really about avoiding tax; they’re about greater investment flexibility, convenience and other innocuous stuff. I offer you the following from the website of Fidelity Corporate Services in the British Virgin Islands:
“Reduced tax and increased confidentiality are just two of the main benefits which can be achieved by a proper application of the offshore company. However, it would be erroneous to believe that an offshore company incorporated in a no-tax jurisdiction ‘flies above’ all the complicated tax regulations in force in the high-tax jurisdictions. Contrary to a popular belief, having an offshore company in itself does not relieve its owner from all personal tax liabilities in his home country. A clever use of an offshore company, however, can reduce, defer or completely eliminate some tax that would otherwise be payable by his business.”
Hmm. Sounds like it’s about tax avoidance to me. Of course, some will point out that there is a difference between tax evasion, which is illegal, and tax avoidance, which isn’t. And that’s right. There is a difference.
But is tax avoidance – and I’m sorry to use this old-fashioned word – honourable? The people of Iceland don’t think it is.
Is tax avoidance even sensible? If we strain our craven little souls and try to take a bigger-picture view, surely we will see that it doesn’t make sense to try to trim our contributions to what is essentially ourselves.
These past few months, I’ve been living on the Outer Hebrides, the kind of small community where these kinds of things are brought more sharply into focus. I’ve made a pretty exhaustive list of what I personally get for my income and council tax: libraries (two plus one mobile); doctor’s surgery; local hospital with air ambulance to nearest city if necessary; arts centre; coast guard; sports centres (two); commercial piers (three); roads; subsidised ferries; running water; eagle hide; public conveniences; free Gaelic lessons if desired; a selection of well-situated benches and picnic tables.
I’m happy to pay my fair share. It would be dishonourable not to. Would it not?
Fiona Rintoul is editorial director at Funds Europe
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