Friday, 11 May 2012


PUBLISHED LETTER - THE GUARDIAN - 11th May 2012. – Original text.

In Guardian Letters, 9 May 2012, James Anderson of PAM, which advises on-shore and off-shore fund management, wrongly states that “Recovery of taxes payable on undeclared offshore income and capital gains…   …would sadly make almost no impact on the huge and unsustainable national debt mountains in Europe and America”.  But, repatriating the off-shore funds, gouged from the major economies, will quickly repay all the debts.

Accountants with Back-Duty experience know that where, say, $1.7 billion has been transferred to Cayman, as alleged in the recent Olympus case, the invoice from Cayman to Olympus is likely to be on non-commercial terms and not at arms length and therefore in breach of developed nations’ tax-laws. A claw-back of the tax-relief, plus compound interest, plus penalties – financial and criminal – plus tax on the off-shore capital income, will usually repatriate the total capital sum or more. The OECD estimate was $18 trillion off-shore in 2009, which would repay all national deficits. This river of illicit cash flows into Bonds, loaned back to the (indebted) communities who worked to create it. Over 30 years since deregulation, it requires only 353 such “funny-money” or “back-to-back” transactions per year to build up the $18 trillion; most of which could be clawed back via back-duty laws.  Mobilising the Intelligence Services to track and claw-back the funds would be a rapid way to pay off all the global deficits; repatriate first – ask questions later. And create good jobs for all our young people.

Noel Hodson - Oxford
Founding Partner, McVeigh Hodson - Blackstone Franks Accountants.


Notes - The alleged $1.7B invoice/s allegedly sent from a brass-plaque nailed to a palm tree in Cayman, allegedly to the main board of directors at Olympus in Tokyo or London will almost certainly have been granted tax-relief as a deduction from profits, by HMRC or the Japanese tax office - lets say, 25% tax or $425M. The home-country citizens in the UK or Japan have to fund this amount - and they lose the $1.7B, about 5,000 jobs, from being reinvested in their economy. Instead the $1.7B joins the so called "Free Markets" and the "Bond Markets", which then criticise the home-nations for having no cash and "mountains of debt" - then lend them the $1.7B at high interest rates, risk free and without any work or responsibility. They gouge it out, siphon it off, then lend us back our own money. It is a great wheeze if you can get in on it. This is where all the global cash and productive surpluses have gone to in the past 30 years; into off-shore funds, tax-havens and then back as high cost loans imposed on nations like Greece, Ireland, Portugal, Spain, Italy, Japan, UK and USA - We Are All Near Bankrupt Suckers - unless we retrospectively properly tax and repatriate that cash.


Finding such "Funny-Money" invoices and paperwork in breach of the rules automatically cancels the tax relief so the tax-relief granted earlier is "clawed-back" by the taxman. As such transactions are usually spotted years later, the taxman charges compound interest on the tax that should have been paid. E.G. As the paperwork was outside the rules, the taxman also charges a penalty - often double the orginal tax, another $425M. Over the years the $1.7B capital has been earning interest - in a tax haven so no tax was paid, for say, 5 or 10 or 30 years - and the taxman is entitled to charge tax on that income also, plus interest. If the people involved in making the transaction/s have deliberately misled the taxman - then criminal charges might be brought for false accounting or criminal conspiracy. It was such tax evasion and false accounting charges that sent the notorious USA gangster Al Capone to prison for a long time.

In America, tax advisors can be charged alongside their clients; so they always ask a new client, with whom they may end up sharing a cell, "Which prison bunk do you prefer Sir, - upper or lower?"

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