Can we close the loopholes that make the Paradise Papers kind of tax behaviour legal?
Why do we tolerate financial secrecy?
Companies and individuals obviously want know who they are doing business with. Markets work less efficiently when we allow anonymous ownership. Corruption is more profitable. And taxes are less effective, and less fair, when some can hide their income streams and assets. Estimates suggest $500bn of tax revenues are lost globally to multinationals’ avoidance, and $200bn to evasion, with lower-income countries hit hardest by both.
The UK is involved in the world’s biggest financial secrecy network through its Overseas Territories and Crown Dependencies. The government should make a start addressing this today – by requiring each one to introduce public registers of beneficial ownership for companies, trusts and foundations.
This must be the standard for every jurisdiction that wishes to participate in the benefits of globalisation.
Eliminating anonymous transactions will make markets and states work better. Why wouldn’t we do it?
This question pre-supposes that the offshore jurisdictions such as the ones that appear in the Paradise Papers exist only for the purpose of exploiting loopholes or promoting tax schemes.
The reality is that they are in fact generally used for legitimate trading and investment purposes. Indeed, of all the disclosures so far, not one has evidenced any illegal activities, which is notable given the millions of files examined by the International Consortium of Investigative Journalists.
The idea that offshore jurisdictions are being used to shelter vast sums of taxpayer money – for the purposes of tax avoidance – is simply false. For example, the investment made by the Queen was not a “tax scheme”, but instead a mundane investment fund of the kind held by pension funds across the UK and which delivered absolutely no tax benefit compared to a similar fund in the UK.
The nature and reason for these investments has been the subject of inaccurate reporting based on innuendo and emotion. It’s about time we had some facts.