Our weekly Offshore Wrapper, by George Turner
The end of decency
For years the attitude towards Russia from major offshore financial centres such as the City of London has been: “Give us your money, we don’t care where it comes from.”
To this end, we have seen the government introduce proposals that would no longer make it a criminal offence for financial institutions failing to carry out adequate customer due diligence. (These proposals were later withdrawn after protest from campaigners).
A country obsessed with limiting immigration has introduced fast track investor visas, which gives residency to foreign citizens with loads of money.
The visas, which require an investment of £1m, have been purchased overwhelmingly by Russian citizens.
To get a visa, unlike poorer immigrants, you don’t even have to learn English. Though perhaps this makes some kind of twisted sense. After all, it is easier for your banker to take your money off your hands if you can’t speak English.
Now questions are increasingly asked as to whether the UK’s thirst for hot money has rendered the UK captured by the City of London.
A Downing Street aide last week was photographed carrying a document which said that the UK government was drawing up plans to exempt the City of London from any sanctions on Russia. Ben Judah, writing in the The New York Times argues that the UK is ready to betray the US in order to safeguard Russia’s loot – so much for “special relationship”.
The Observer this weekend asks the really important question in its editorial – how much does any of this really benefit the people living in London? The Russian press, meanwhile, ask: “Who are you calling corrupt?”
Who benefits from financial secrecy?
Similar questions are being asked by the Nassau Guardian on whether the island’s tax haven status is actually benefiting the people of the Bahamas.
The government of the Bahamas is virtually bankrupt, and there are proposals to introduce VAT to bridge the gap. The real problem, however, has been that many wealthy Bahamians have been avoiding taxes for years and those less well off are now being asked to pick up the tag.
Indeed, the government’s official charged with implementing VAT has been discovered to have owed $100,000 in taxes going back 20 years. You cannot make this stuff up.
Tax avoiders feeling the squeeze
This week the press heard the squealing of accountants unhappy at the latest HMRC attempts to crack down on tax avoiders.
As pointed out by the Financial Times, tax avoiders can gain an advantage by appealing decisions of the HMRC, something which can let them hold onto the money for years, even if they have little chance of winning their claim.
But now HMRC is proposing clearing a large backlog of cases. It wants to do this by making people pay up front for a disputed tax bill that involves using a tax avoidance scheme similar to those already defeated by the courts.
The revolution will not be tweeted
The Telegraph reports this week on the popular uprising gripping San Francisco over the economic consequences of the technology industry. While the city cuts public services, tax avoiding companies put on private buses for their employees.
People not working in the tech industry, who are seeing rising rents and poor public services, are less than impressed and have taken to blocking the buses.
The tech geeks appear to have lost their famous West Coast cool over the incident. One Silicon Valley billionaire compared the bus protesters to the Nazis and called for rich people to have more votes than the poor.
No one likes beancounters, and they don’t care
The denizens of Silicon Valley may not understand why their tax dodging antics prove so unpopular. But the boardrooms of other industries seem to get it – at last.
A study published by a global tax advisers organisation said that the majority (76%) of chief financial officers surveyed believe the public exposure of corporate tax avoidance techniques have harmed their reputation.
However, only 31% said that they were taking any action as a result. So the message from most of the the corporate world seems to be, “No one likes us, we don’t care.”
Other TJN blogs this week
As the Ukraine crisis deepens the West is forced to think the unthinkable: the City of London may well be the enemy within.
In a welcome move, the International Monetary Fund is inviting civil society to submit comments on its consultation on tax ‘spillover’
Looks like the amended European Union’s savings directive is back on the agenda
In elegant style this Exposed campaign video shows how the web of global corruption ensnares each and every one of us, starting with ten year old schoolgirl Grace
Tax haven Delaware plans to revive earlier efforts to allow judges to be hired out for how everyday secret rulings
More signs that the walls of the once-mighty Washington Concensus are crumbling, the IMF has reported that “a more redistributive tax systems appears to lead to higher growth.”
Also on the theme of waning power, Politico magazine says that “Russia thinks . . . the West is now all about money”
And on the same subject, as deposed Ukrainian despot Viktor Yanukovych fled eastwards, word emerged that his presidential compound belongs to a UK registered company
The Taxcast! Featuring the Bahamas, where plenty of locals are none too happy about having to pay more tax, while interantional players pay little or nothing.