I have suggested that if we are to reform offshore we have to start at home, and have detailed a programme of reform that many governments would have to undertake. I have also suggested a programme of reform for secrecy jurisdictions and for the international arena that regulates those secrecy jurisdictions. But that is not enough. Regulation enforces rules. The fact is that hearts and minds also have to be won over for change to be effective in the long run. For this to happen there needs to be reform in the philosophy of tax, offshore and opacity.
My particular concerns here are twofold. The first is that we have forgotten why we allowed the incorporation of companies in the first place. My second is that we have also forgotten why it was we allowed trusts to come into existence.
This is not the moment for an extensive discussion of either issue: suffice to say that both limited companies and trusts are designed to alter property rights. Limited companies ring fence those rights, attributing them to an artificial legal person who (quite extraordinarily if you stand back for a moment and think about it) is not responsible for its debts if it runs out of cash, leaving that debt for others to then suffer. That is a quite exceptional privilege to grant to the owner of a limited liability company. That privilege is granted by society. I think there is an obligation that is expected by society in exchange – and that is an account of to whom this privilege has been granted and an account of what they do with it. This is why companies should place information on public record, and yet over many years appreciation of this fact has diminished to the point that it is now thought that the right to privacy that an individual has when transacting in their own name (except with regard to land – where the public interest requires disclosure) extends to the ownership, management and the accounting of limited companies. It does not. This has to be appreciated once more.
Likewise, trusts reorganise property rights, quite artificially. This too requires account to be made of the advantage to do so that the existence of trust law permits. These are not natural rights. They are rights granted by society through legislation to members of society. It is quite reasonable that society demand obligation in return, and I strongly recommend that it do so.
Offshore has done much to advance the right to exploit these structures whilst denying all obligations arising from doing so. By doing that it has diminished property rights universally, distorted well being and almost certainly undermined the effective operation of many economies. It is as such at the forefront of the need for reform in this area.