Mossack Fonseca should be Good for Business
The biggest data leak in history could put many high profile individuals behind bars. It might also have a significant effect on the racier end of tax avoidance.
There are five obvious reasons why people might set up companies in places like the British Virgin Islands through the auspices of Panamanian lawyers.
- To hide stolen funds
- To evade tax
- To keep money that might be used for nefarious purposes such as blowing up innocent passers-by
- As part of legitimate tax avoidance arrangements
- To protect identity
It is hard to believe that any reader of this column would not frown on the first three points in this list.
When it comes to number 4, there could well be a measure of debate since no accountant is going to object to the implementation of legitimate tax planning. However, some might question whether some of the “legitimate” tax avoidance arrangements that need to be siphoned through (say) the Cayman Islands are really above board.
Therefore, it is only the last item that is indisputably acceptable as a justification for the activities of Mossack Fonseca, the legal practice that has suddenly hit the headlines in the last couple of days. Even then, the question arises as to why individuals would need to protect their identities in this way.
Even then, one has to ask why individuals or companies wish to protect their identities. There must be good reasons but not moving in circles of that type, this writer is struggling to think of very many. Surely most of us merely open a high street bank account without fear of the consequences.
Assuming that the foregoing paragraphs are broadly accepted, a significant proportion of accounts that are subject to what could be the most expensive leak in tax and possibly commercial history have been used to assist in the breaking of laws in assorted countries around the globe.
That will inevitably include the UK and surely we must all be hoping that, following David Cameron’s bold statements over the last couple of years, the authorities finally get a grip and investigate all of this data fully.
It was therefore sad to hear the former Attorney General, now chair of the Parliamentary Intelligence and Security Committee saying that we should continue to support dependent tax havens because otherwise the business would go elsewhere. Once upon a time, the British Empire stood for something a little more noble (or perhaps on reflection it didn’t).
In the meantime, a few steps might be sensible. First, it might be time to start building a few more prisons, obviously of the luxury variety. It can only be a matter of time before some very big names find themselves given the opportunity to spend time reflecting on their financial arrangements at Her Majesty’s Pleasure.
Secondly, George Osborne should be planning his 2017 Budget, bearing in a potential windfall that no Chancellor could even reasonably dream of. Between the billions of back taxes that could flow in and recovery of stolen goods in funds, these could be boom times for us all.
Thirdly and even better, accountants are likely to prosper as large numbers of very rich people desperately seek their services.
Fourthly, there has to be the possibility that a long series of by-elections will be in the offing as the full story of who has what in dodgy island bank accounts is revealed.
You can’t beat a good tax story and this one is as good as it gets.