The Paradise Papers: Some conclusions

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Philip Fisher
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It appears that after three Panorama episodes and vast amounts of media coverage the story of the leaked Paradise Papers has little further to offer. As such, this seems a good time to step back and see what can be learned.

This article has been written as a response both to the revelations themselves and reactions to them.

The latter have included outrage in many quarters. For example, the journalists involved and Meg Hillier, the current chair of the House of Commons Public Accounts Committee, not to mention her (much maligned in these pages) predecessor Margaret Hodge.

At the other end of the scale, equally outraged accountants and professional advisers have been eager to assert their views that all of the arrangements highlighted must have been in compliance with legislation in every relevant country and therefore this is a storm in a non-existent teacup.

It is fair to say that if individuals and companies have been working within the legislation, utilising loopholes offered to them, then their behaviour and actions should not be questioned from that perspective. The question of morality is another matter and always causes controversy and it seems unlikely that anyone on either side of that fiery debate will back down.

One point that may begin to become more relevant is reputational risk. The likes of Starbucks may well not have welcomed all of the attention and picketing that resulted from their efforts to avoid UK taxation. Similarly, Lewis Hamilton, Dermot Desmond who has the largest stake in Celtic and Apple may not welcome or wish to have repeated the kind of publicity that they have received over the last three days.

Where I wish to focus in this article is on two other aspects:

  1. Tax Legislation

The answer which is consistently given whenever investigations of this type take place runs along the lines that “everything that we are doing is within the law and we have fully complied with all of its requirements”.

This applies equally to Apple and individuals such as the TV stars and sports personalities highlighted as a result of these leaks, not to mention the various high-profile media investigations over the last five years.

Every recent chancellor of the exchequer has declared his intention to clamp down on what they regard as abusive tax avoidance. However, to date, their efforts have been limited although not entirely negligible.

The courts have also done their bit in situations where advisers have gone over the top and implemented schemes that were deemed to be in breach of legislation.

Since it is apparent that literally millions of people in this country object to the loss to the exchequer of funds as a result of what are often highly artificial arrangements, surely it is time for the government of the United Kingdom to take the necessary steps to draft clear and comprehensive legislation in a number of areas with direct intention of cutting out some of the many perceived abuses.

  1. Implementation

It is impossible to tell exactly what has and hasn’t happened from newspaper articles and brief coverage as part of often shallow TV investigations that are designed to entertain rather than fully inform.

However, it seems highly likely from the data provided by Panorama, including partially redacted copies of legally binding documents, that the tax authorities in a number of countries could have a field day with this information.

As so often with the cleverest tax planning arrangements, the theory almost certainly works but the requirements are so complex that those attempting to implement the plans frequently fail to do so correctly.

The result is that what should have been a tax avoidance scheme becomes merely a failure to pay tax correctly in accordance with the law.

This might be the most fruitful field for HMRC to pursue over coming months and given the parlous state of the economy at the moment, Philip Hammond might very much welcome the additional revenues that result.

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By DJKL
08th Nov 2017 11:05

"The question of morality is another matter and always causes controversy and it seems unlikely that anyone on either side of that fiery debate will back down."

As of course, if arrangements are legal, is the morality of parties reading stolen information about the financial affairs of various individuals and publishing details of same. I do not expect ,when I have guests at home, to say, "pop up to my study if you want to smoke and don't look at the papers", I don't not need to make that last statement, it is implicit re morality / manners that it would be an invasion of my privacy. What we have here is theft coupled with handling stolen goods by the media, great example of morality.

The public "right" to know is only on point where the activities are illegal, so maybe those publishing ought to have a thought that morality is not merely theirs to cast around but applies to other facets of human behaviour.

I am not keen on illegal tax evasion, but frankly the current crop of articles has the media as judge, jury and executioner, (Salem revisited) what about the presumption of innocence, oh, lets ride roughshod over that, we must be right, we are the media after all?

Sickening bunch of hypocritical b******s.

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08th Nov 2017 12:49

I have to say I am with DJKL on the point of "morality", if such a word is actually relevant to tax planning.

The public have no right to know, it's salacious mongering by media outlets based on, as pointed out stolen data.

In addition who wouldn't try and minimise their tax ? If i could afford to save (instead of keeping Mrs D in shoes ) I'd use an ISA. Why not avoid tax on interest. If i had £10M to invest, why on earth would i ensure that more tax than the law requires was paid. This phrase "the right amount" is oft bandied about, but it is not a thing easily defined.

Politicians and treasury officials from around the world write the tax laws - it's up to them to get it right.

Also i like the phrase "storm in a non-existent teacup"

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08th Nov 2017 13:50

I think that if we want to add 'morality' into the tax system, we also need to add equity.

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08th Nov 2017 17:11

Of course much of this is not illegal, but at the same time you can have the likes of Bono spouting how we need to be more charitable whilst he ensures he pays little or no tax.

If these things are legal why are people so touchy - Starbucks avoids tax legally....why are they bothered what the British public think....does it perhaps not reflect them in the best light.....

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