The Paradise Papers leak: What does it mean?
Oh dear. We are off again. Just when you thought that the world of tax was beginning to shed its murky reputation, The Guardian and various equivalents across the globe have dropped another bombshell.
Whereas in the past, most of the dodgy dealings in offshore tax havens seemed to be associated with either the naive or those that did not seem overly concerned about reputational risk, the ironically nicknamed Paradise Papers, hacked from the Appleby law firm in Bermuda and other offshore territories, are something else.
To discover that the Duchy of Lancaster, effectively the Queen’s business and investment arm has allegedly put her money into a tax haven will come as a shock to everybody, almost certainly including Her Majesty. If you have a unique exemption from tax then why on earth would you want to put cash into something that looks dodgy with only one apparent advantage – the ability to reduce your tax liabilities? Heads could roll, possibly literally given the powers of the crown.
Lord Ashcroft’s alleged involvement to the tune of £450m might come as less of a surprise, given his past track record. If nothing else, it might cause enough of an uproar about non-dom status to present the government with a heaven-sent opportunity to restrict this even further.
Intellectually, it is very difficult to understand why non-doms should get preferential tax treatment in the UK when they don’t in many other countries.
It isn’t just the British that have found themselves in the spotlight on this occasion. If the revelations are accurate, it appears that a significant number of President Trump’s closest associates have also taken the opportunity to invest in arrangements set up by Appleby, including arrangements that apparently tie in with Russian political bigwigs.
Readers will have been interested to note the statement in the Guardian that “Appleby prides itself on being a leading member of the “magic circle” of top-ranking offshore service providers”. One trusts that the firm knew exactly what it was doing and will be able to maintain that reputation when the full import of these revelations, based on almost 13½ million leaked documents, is understood.
Just reading the headlines, others who may end up with egg on their collective face if the allegations are true include Twitter, Facebook, Nike and Apple, along with some of the biggest names in the film and TV industries and the owners of two Premier league football clubs.
The conclusion that the Guardian reaches is that when it comes to tax there was one law for the rich and another for the poor. Many in the profession might believe that there is nothing wrong with this. However, eventually the goose that laid the golden egg might be slaughtered if the populace decides that it is unfair for the rich and powerful to pay tax at little more than 1% or 2%, while they are committed to levels that vary between 20% and 45% (in reality considerably higher in this country once slightly less obvious factors such as NIC and VAT are included).
Perhaps the saddest indictment of the tax avoidance and (it seems highly likely in this case) evasion industry is a statement that I understand has been made from Bermuda using the old adage that if we didn’t do it someone else would. Some of the most vindictive totalitarian genocides have been facilitated by those using exactly the same logic.
As with all of its predecessors, this story will run and run. If nothing else, it might divert a little attention from the equally unsavoury sleaze scandals that have dominated the media over the last few days.