Paradise Papers: The danger of tarring all those named with the same brush

 
Julian Harris
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Melbourne 2006 Queen's Baton Relay: Bermuda
The latest mega-leak of financial documents centres on Bermuda (Source: Getty)

The proceeds of some extremely nefarious activities are channelled through offshore financial vehicles, allowing fraudsters and kleptocrats to enrich themselves to the detriment of millions of honest and hardworking citizens.

The latest leak of 13.4m documents, known as the Paradise Papers, aims to shed light on this murky underworld and follows an earlier leak – known as the Panama Papers – nearly two years ago.

Both publications sent shockwaves throughout the world, dominating headlines with a plethora of allegations aimed at various members of the rich and famous.

Read more: US commerce secretary Wilbur Ross among prominent figures featured in Paradise Papers

Where these stories lead to the exposure of criminal activity, they should of course be celebrated – but we must beware the temptation to apply a broad brush across everyone named in the documents, or even across the offshore financial sector itself.

Some boring yet relevant facts must be taken into account. First is the reality that a very large number of Brits benefit from offshore investments via their pension pots.

Second is that there is nothing illegal nor immoral about such practices. There are numerous reasons for funds to be located in so-called tax havens; for example, to avoid unreasonable and illogical double or triple taxation from investments made across borders. Full tax can then be paid when the proceeds are brought back home.

The sector also provides a crucial service to innocent people in unstable parts of the world who fear their assets could be seized, especially at times of political febrility. South American and Middle Eastern countries have significantly higher rates of offshore use than, for example, western European nations.

Widespread interest in the Paradise Papers is healthy, and will hopefully trigger further improvements in global transparency standards, which have been sharpened in recent years.

Read more: Hammond hails Panama Papers taskforce progress

However, there is a danger that the reaction to the Papers spreads a fallacy that offshore investing is increasingly practiced by high-earners and inherently linked to tax evasion. Such generality is inaccurate and unfair, but also poses a greater risk of obscuring the handful of genuinely scandalous and criminal stories that may emerge from the leak.

It would be a great shame if the details of these cases went unheard amid a cacophony of outrage aimed at people with famous names and perfectly legitimate tax arrangements.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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