Tax haven secrecy to go
To outside observers, like a punch-drunk prize-fighter, the government seems to be perpetually on the ropes, ducking and diving in an attempt to avoid lethal punches, many from its own side.
In the last week, the home secretary has been forced to resign over a scandal that could throw immigration policy into even greater uncertainty, while the Prime Minister’s flexible policy approach to leaving Europe and more particularly the customs union, is being threatened by a powerful faction within the Conservative party.
To compound the problems, leaks seem to be appearing on a daily basis, as the internecine fight hots up.
Such has been the controversy over these issues that many readers may have missed another major parliamentary defeat that could have a significant impact on the accountancy profession and our clients.
Under the provocative headline “'Dirty money': U-turn as Tories back plans to make tax havens transparent” the Guardian provides the background to a backbench revolt that has forced reluctant ministerial hands.
With effect from 2020, a proposal from the potent cross-party duo of that scourge of the tax avoidance industry Dame Margaret Hodge and another former minister Andrew Mitchell has led to a climb-down. The consequences that British overseas territories (many of which are tax havens) will be obliged to create public registers of corporate ownership.
Following on from the Panama Papers revelations and many other examples of potential wrongdoing generated by investigative journalists and whistle-blowers, this could have a devastating effect on those seeking to hide their wealth and avoid (or dare one suggest evade) taxes by hiding significant wealth in the British Virgin Islands, the Cayman Islands and 12 other territories.
It is hard to imagine why the British government would have tried to prevent such legislation going through, given that it should have a positive impact on its own coffers. In addition, it seems important to emphasise that those who are doing nothing wrong should presumably have no major issues regarding this change.
However, I can see one immediate problem that is likely to arise when the big day comes in a couple of years’ time. HMRC has been singularly unimpressive in its efforts to make any money from the ultra-rich in recent years, primarily due to lack of resources.
If it is suddenly presented with hundreds or even thousands of non-taxpayers who become what should be low hanging fruit overnight but are represented by the cream of the accountancy profession and the best barristers that lots of money can buy, will the department merely stick its head in the sand yet again and allow what could be billions of pounds of revenues to go uncollected?
One would hope that in these circumstances Philip Hammond is already putting together a budget for the recruitment of a significant number of new, top-quality staff members to help reap the benefits of this major development. In reality, given the government’s other problems such as those outlined at the start of this article, anyone with bank accounts in the 14 overseas territories will probably lose no sleep for the foreseeable future.
However, there could be a lot of work on the horizon for those of us with clients who have quietly been sheltering their wealth in the sunshine.