Saturday, 21 April 2012


The Guardian’s Saturday issue, 21 April 2012, brings a letter writer’s dilemma; to comment on the Cameron’s family tax-havens or the cyberspace war. Both are crucial to our future and happily they can be linked.

The Internet is recording all our personal data – and – all our financial data. There is no hiding place.

All that is lacking in the battle to repatriate taxes and capital from tax-havens (which were a British invention) is the political will. Very, very, very few off-shore arrangements would stand up to scrutiny by “the ordinary man on the Clapham omnibus” under past and current UK, USA or EU tax laws. Most could and should be unscrambled, back at least 30 years, and the funds taxed and repatriated.

The usual weak spots in the tax-free paperwork are:
The owners who shovel funds overseas must thereafter be at “arms-length” from the ownership and management, which means handing the capital to a Panamanian tobacco chewing lawyer to do with as he likes. The management must be in the tax-haven – which means all key meetings must be held there (now modified for teleconferencing). Or, the owners must live in the tax-haven – Cayman is interesting for about 3 days; over populated Monte-Carlo has a sewage problem; Switzerland pre-licenses home celebrations of more than a handful of guests.

UK to Funny-Money-Land transactions have to be on “normal commercial terms” including accurate valuations of properties, IPR  and assets transferred, interest charged, management-fees and the sale of brass nails at $2,000 a nail. Values can be assessed retrospectively. Bent accountants and lawyers who file-dress the transactions quickly lose their creative-flair and give the game away in silly descriptions. All “brass-plate” firms – where your family “charity” pins a plaque to a coconut palm and calls it an office, then channels £10 million through it – are un-commercial, thus illegal and the transactions can be unwound and taxed.

Essentially – if a family has set up a “trading-post” operation to dump profits for example in Jersey (a fun island for one afternoon) that off-shore company must be real, with real goods, real employees, really managed in Jersey by real residents, run on normal commercial terms and the owners, resident in London, New York, Paris etc must have no material interest or control. In the deeply relaxed decades since Thatcher set up the Margaret Thatcher Foundation as a charity in Berne, few if any off-shore entities have kept strictly to the rules – and so could be retrospectively taxed by the owners’ nations. These rules even apply to the complex international transactions of banks and huge multinationals – and their top executives.

How? The intelligence services particularly track criminal money globally – for obvious reasons. Remember how they recouped every penny of miners’ union funds, hidden offshore in the 1980’s. They sometimes visit your friendly, secretive Delaware branch of your favourite bank and get copies of accounts – but they mostly track money via the Internet. A special task force of, say 500, intelligence officers in each major economy could be formed to do what Dave Hartnett, head of UK tax collecting, and the major audit firms, have astonishingly and completely utterly failed to do – to list the off-shore firms and critically examine their bent paper work since 1980. The teams could earn a good commission on all tax collected and paid. With up to $18 trillion in tax-havens, by OECD estimates, the agents have much to play for – and many millions to earn – as they heroically save the global financial system from recession.

If western governments are too coy, too busy, too polite, too complicit to reclaim the $18 trillion, and repay every global fiscal deficit – even in Greece – then the new Internet citizens, the Hacktivists, could take on the job; and earn the praise of their countries and governments.

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