I am not sure it is a universal truth that if you believe in what your company does then you should use its products. But it seems that at HSBC it might. As the Guardian reports:
Stuart Gulliver, the HSBC chief executive who has vowed to reform the crisis-hit bank, sheltered millions of pounds in a Swiss account through a Panamanian company and remains tax domiciled in Hong Kong.
Leaked files show that the Derby-born Gulliver, who is due to present HSBC's annual report on Monday in the wake of the international controversy over its Geneva-based private bank, was also one of its clients, holding about £5m in a Swiss account.
Two things. First, the bonuses appear to relate to periods when Mr Gulliver was not working in the UK. Second, Mr Gulliver is apparently not domiciled here. In that case let's be clear that not a law can have been broken.
But is this a non-story though? I suggest not. If it's true, and I think it safe to assume that the Guardian thinks that it is, then this is significant.
Without any doubt at all Panama is one of the more dubious tax havens in the world. Why use a Panamanian company? Only because you quite emphatically do not want anyone to know what you are doing.
Second, why hold the money in a corporate name rather than your own? Same reason. It's layering of secrecy. The money's not just in a tax haven, but in a secret company from another jurisdiction that is a tax haven that is almost wholly non-cooperative on information exchange.
Third, hold the money in a company and the EU Savings Tax Directive did not apply for the last decade, and nor was the income credited to the company personal for tax reasons.
I reiterate, that's legal. And I reiterate, that's not the point, for three reasons.
First, it confirms HSBC is headed by a man who very definitely believes in tax havens and their uses. That's like having a dinosaur in charge now.
Second, a man who is part of the problem is not part of the solution, and it is clear if this story is true that Mr Gulliver is now part of the problem.
And third? That comes down to tax and that non-dom status. Questions need to be asked about that, because the story is often told (not least in the comments on this blog) that domicile is a legal concept that is very hard to shake off. But I can see no sign that Mr Gulliver had a domicile of origin in Hong Kong. He was born in the UK and brought up in Plymouth of parents who he said had very modest means. He was educated here. He has lived here regularly, albeit not permanently, by any means. He has had a home here for a decade. But he has a domicile in Hong Kong. My question - and I stress, it's a question - is firstly how and why? And second it's why do we permit this to happen still, even if he no longer makes use of the status, as the Guardian article might imply. Put bluntly, should we really have a special tax rule just for those with wealth. Or should that, like tax haven secrecy, now be consigned to history?
This appears to be good work by the Guardian, precisely because of the questions it gives rise to, and there are plenty of them.
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There are several learned articles on the subject of trust to be found here
http://plato.stanford.edu/
For those who defend the right to mitigate their tax affairs via legal loopholes or to increase profits by extraction rather than creation it is a site worth a visit. HMG, HMRC, HSBC and politicians in general would do well to consider the implications of what is written there.
One of the factors contributing to the maintenance or degradation of trust is the use of language. Communication underpins or undermines trust through an individual comparison of the words used between their accepted meaning and the other evidence held by the individual.
No doubt Mr. Gulliver will issue an apology for the ‘oversight’ of neglecting to mention circuitous banking arrangements. I will accept it of course and put it on the shelf next to the apologies for PPI, Forex, Money Laundering, Gold & Silver price manipulation and Rate Swap abuse. Anyone know how many there are in the ‘set’?
“Of course, besides the word of the speaker, hearers also causally depend in believing testimony on other fundamental sources of knowledge like perception, memory, learning, and inference.” Adler, Jonathan (ed.), “Epistemological Problems of Testimony”, Stanford Encyclopedia of Philosophy rev 2012.
Is he remaining domiciled in Hong Kong as the bank will return its head office there after this all dies down.
I am pretty sure he is claiming he has a “domicile of choice” which is Hong Kong.
There is case law covering the position where a person gains a “domicile of choice” and subsequently lives in the place that is their “domicile of origin” with a very specific intention to return and reside permanently in the place that is their “domicile of choice”. In those cases the “domicile of choice” will remain in force.
A “domicile of origin” can be very sticky and hard to shake off, but only if you don’t really want to have a permanent home elsewhere. If you live somewhere for many years and build up many connections to that place it will be easy enough to demonstrate that you have a “domicile of choice”. If you take up employment with a UK bank the problem falls to HMRC to prove you have abandoned your “domicile of choice” and that you have come to the UK with the intention of residing permanently.
The press speculation about his UK tax affairs and his position at the bank could ultimately demonstrate just how temporary his time in the UK is.
Even if he has abandoned his “domicile of choice” and now has a UK “domicile of origin” he still has a non-domiciled wife and has had time to put other arrangements in place.
Test it in court then
The problem with testing it in court is that even if a court finds that he is UK domiciled, you will struggle to find a court that will say his wife is UK domiciled.
That makes it very easy for him to give anything he earns in the year to his wife and she could then use the remittance basis. It is difficult to believe he wouldn’t have seen this coming and done it years ago. [I know that there is an argument that this could be viewed as a Transfer of Assets Abroad, but again the courts are unlikely to entertain that idea if it is a straightforward gift and not part of some wider arrangement.]
Heard of settlememts legislation?
And gifts to non-doms?
You perhaps slightly misinterpreted what I was trying to say. I am aware of the settlements legislation, but I meant he could gift what is left of his earnings (after tax has been paid) to his wife and in subsequent years she could invest the gifted funds outside the UK where they could roll up tax free. I am working on the assumption that he is paying tax on income earned through a UK company. This does not amount to a settlement because a straight forward gift of cash is not a transfer of a right to income.
The only catch with gifts to a non-dom is IHT liability if it is a PET (albeit that it would be at a lower rate for a lifetime gift). It should be exempt anyway if it can be shown to be a gift out of income rather than capital. Even if none of this is possible an election could be made to be treated as domiciled for IHT purposes and that election would fall away several years later if she left the UK.
Good evening.
Having read your blog and the Guardian article it seems that a useful summary of the story is that over 10 years ago Mr Gulliver broke no laws and today you don’t like the rules on domicile.
I have some sympathy with your views on the domicile rules but there are surely better examples than Mr Gulliver to show their failings? After all even if he had been UK domiciled he would have paid no UK tax while working in Hong Kong.
You say the Guardian article is good journalism but the reality is it’s just confusing mud-slinging.
You suggest that more challenges should be made in the courts but since domicile includes a person’s intentions and beliefs you’d need to be a mind reader and have a jury full of the same to have any chance of winning.
There are better windmills to tilt at.
I wonder how many times I have been told that over the last decade?
Note the award I got last night
I am by no means always right but n this one I will trust my own judgement
Having heard the boss talk about this in soundbites, it seems pretty disingenuous that he’s repeatedly saying “I’ve paid all the tax I should have in the UK.” That’s not really the problem is it? Even if he has paid the tax due in Hong Kong on his bonuses, what sort of tax has he paid? I’m not at all clear whether the money that was paid to his Panama company was PAYE’d (or whatever the equivalent in HK is). Seems to me much more likely that it was something akin to the scam that Premier League footballers run with their basic salary being payrolled and image rights being sold to an offshore company, so they can take loans from them or if they’re feeling altruistic, maybe a dividend, but whatever, certainly pay an awful lot less tax and save their employer the NI to boot.
Don’t know enough about tax to give an opinion to be honest, I’m an auditor who had to resit Tax at my finals on ACA but it stinks at a number of levels as far as I’m concerned.
That claim – I’ve paid all the tax owed by law – is the classic tax avoiders defence
Of course they have
But they put in place mechanisms to make sure that the sum due was less than expected