The world's media is full of discussion of the so-called 'Panama Papers' this morning. This is the leak of 11.5 million documents form Panamanian law firm Mossack Fonseca. The documents cover many years, but include papers as recent as 2015. This is not an ancient archive: this is an indication of what is happening now.
So far (and I may be wrong about this as yet) I have read nothing from the revelations that suggests there is something new to learn on the techniques used by offshore. This is a tale of secrecy through the use of trusts owning shell companies, managed by nominees with bearer shares playing a part and all the usual suspects - starting with the British Virgin Islands - lined up to play a role.
In terms of the revelations on people I suspect no-one is going to be surprised that those around Gaddafi, Mubarak and Assad used or use shell companies.
Nor is the suggestion that high ranking Russians use such companies to export their capital a surprise.
Iceland comes as a little more of s surprise though. And it is also, in part, where the lessons that need to be learned begin to become apparent. The involvement of senior politicians there is already leading to calls for elections, and rightly so. But let me link those themes, because this is what I think needs to be done.
First, let's be clear that offshore secrecy is about corruption of normal process and accountability even when its use is apparently legal. This is, in itself, a direct assault on the requirement for full disclosure that is necessary for the effective functioning of politics, government, business and markets. Without that disclosure all of these activities that are and have to be built on trust fail, and over time do so to increasing degrees. In that sense offshore, even if supposedly legitimate, is an assault on the way of life we apparently wish to lead. It is nothing less than economic warfare as a result.
Second, let's be clear that the so-called legitimacy of much of offshore is wholly dependent on something readily apparent in the statement from Mossack Fonseca in which they said:
We are not involved in managing our clients' companies. Excluding the professional fees we earn, we do not take possession or custody of clients' money, or have anything to do with any of the direct financial aspects related to operating their businesses.
What this makes clear is that Mossack Fonseca comply with the theory of offshore I created in 2009 where the concept of 'elsewhere' is paramount. This means that Mossack Fonseca deal with what is in front of them and what happens in the place of incorporation of the company they supply and claim all is compliant ad legitimate in that place knowing full well that everything that is of substance about the entity happens 'elsewhere', to which they turn a complete blind eye. The pretence is that this is none of their responsibility. I argue that it most definitely is, and is where the change in focus on offshore regulation must now take place. The splitting of tasks that lets each accountant, lawyer and banker claim that what they saw was legal when they know that the operation as a whole may not be has to end.
Third though let's focus on how real change has happened offshore. As I mentioned recently, when John Christensen and I set out to tackle offshore head on we decided that the best way to do it was on the front page of newspapers. The aim was to simply make the risk of using such places too high. This leak continues that tradition, and so I warmly welcome it. But there is another aspect to this: HMRC and other UK regulators have to play their part. The leak of more than 6,000 names from HSBC led to one prosecution by HMRC. This must not happen again. If Iceland can topple a government over this then HMRC can prosecute those with undeclared links: the time for action to put those who are abusing on the front page of papers has arrived so that the reputational risk of using offshore becomes too great for anyone to do.
And last? It has to be said that it is UK territories doing this, where UK banks and firms with familiar UK names will be found there. I am not saying any of them are doing anything illegal, but you can't have an office in the BVI (for example) and hold your head up high. It has to be said that as a matter of fact that is true. The aspects used for criminality are those used for commercial purposes. There is no honour in being in such a place and the fact is that it is time for the UK authorities to first take action on places like the BVI itself and second on the UK based financial service institutions with links to it. Any such link has to be subject to the utmost scrutiny and licences have to be reconsidered for those who persist in linking their activities to offshore. The price of operating offshore has to become too high to bear for those mainstream banks, lawyers and accountants who still think this is good for business. It isn't.
Then we will make progress on this issue.
Note: I will be discussing these issues on the Today programme on radio 4 at 8.50 this morning unless schedules change (which they do).
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I hope you’re right: I hope that we will make progress on this issue, and tght your work to get it on the front pages works.
However, I fear that we have learned nothing new – we knew that this was happening, somewhere, and knowing exactly where and whom adds little to our next discovery: we are about to ‘learn’ that the authorities will do nothing, again, and the media will choose not to hold them to account, again.
My thoughts exactly, it doesn’t feel like there’s anything truely revelatory here, just more details of what was already known or suspected.
As far as the UK goes, the friends and supporters of the current government will not want them to make any meaningful changes to their tax dodging wheezes, just enough to claim they’ve done something. What’s the tax transparency term equivalent to ‘greenwash’?
Might I suggest a slogan: We pay taxes so that Vladimir Putin doesn’t have to”?
Unsophistcated, I know. Rude, even: but sometimes impact is the most important thing. I hardly need remind you that the impact of the Swiss accounts scandal, and the authorities’ inaction, was media indifference and a collective ‘meh’.
The Guardian’s line of going after the law hanging fruit and continuing it’s fixation with the usual suspect bogeymen seems to be having at least some effect. As with the debate on benefit fraud and tax evasion the sanctions busting fiddles which represent a small percentage of the overall total will get the bulk of the column inches and TV time whilst the big stuff will get three lines on page 87 if we are lucky.
A more accurate slogan,given the over concentration on minnows and the free ride given to the big players, would be “We pay taxes for Google/Amazon/Vodaphone* because they’re worth it.”
* Take your pick.
Sorry – this one is not credible
I do not think the Giardian will hold back
After the hatchet jobs they have done over recent times on people like Chomskey, Assange, and Snowden, not to mention legions of their own, now former, readers deleting comments that don’t fit or challenge the neo con line they have adopted whilst allowing those readers to be abused by trolls they agree with, I suspect I am not alone in not holding my breath on that point.
Today’s article by the paranoid Luke Harding is like something out of the Beano, except nowhere near as sophisticated. Repeatadly stating that Putin is not named in the documents under pictures of Putin with arrows pointing to him trying once again to paint a totally distorted picture whilst saying little or nothing about others who are named in the documents.
It really is sad and pathetic this fixation they have in presenting simplistic cardboard cut out villan’s of choice and twisting everything to fit a pre determined narrative. I have to conceed I do sometimes have some sympathy for the view that most politicians should be stuck in jail as soon as they are elected to save time and it would not be credible to think corruption does not exist in Russia. However, like so much else, the mote is highlighted to the nth degree whilst the beam is largely swept under the carpet by a once decent newspaper.
Dave
This has ceased to be useful comment or a contribution to debate
You have contributed a lot here but please don’t waste my time or readers with this type of comment
Richard
The Guardian is now having a crack at Cameron’s family business interests.
Seems very smelly to me!
“After reviewing the files, Richard Brooks, a Private Eye journalist and former HMRC tax inspector, said: “If HMRC had seen the papers they would have had some very serious questions. The clear intention for Blairmore was to avoid becoming UK tax resident and the test for this, even in 2006, is the location of the central management and control.
“This means where the key business decisions are taken. The evidence here suggests in this period they weren’t taken outside the UK, in which case it is hard to see how the company was not managed and controlled, and therefore tax resident, in the UK at the time.”
http://www.theguardian.com/news/2016/apr/04/panama-papers-david-cameron-father-tax-bahamas
I agree with Richard
Prima facie the company has a case to answer
Where in the actual papers released by the The International Consortium of Investigative Journalists (ICIJ): https://panamapapers.icij.org/, does it mention Putin specifically? Also, why has the UK mass-media made no mention of David Cameron’s Father, who is mentioned specifically? On initially on reading some of the articles about the Panama Papers, I came across with the impression of a very USA bias. Though, it does mention will be forthcoming. Is this, because they do not want to harm the chances of some of those standing for selection as candidates for USA President?
It does not mention Putin
You are not reding the media if you think it has ignored the Cameron issue – it is everywhere
Sorry Richard, I am a day behind. But on Monday, the Guardian and BBC were headlining Putin, even though it was 3 people who may have close ties with him. I got onto the story yesterday through the Portuguese paper http://www.cmjornal, which led about Australia, investigating their citizens involved. Today, they are concentrating on Portuguese citizens. And I have just been alerted to the Independent story about Iceland’s Prime Minister calling for Parliament to be dissolved.
“First, let’s be clear that offshore secrecy is about corruption of normal process and accountability even when its use is apparently legal. This is, in itself, a direct assault on the requirement for full disclosure that is necessary for the effective functioning of politics, government, business and markets.”
But we don’t have the need for full disclosure nor would we want it, peoples tax returns and bank accounts open to all?………You yourself have stated that this would be too far, that privacy is necessary in balance with disclosure.
So where is the line drawn? The right to privacy, whether that is used for immoral or even illegal reasons must still exist. Otherwise we would have a state camera in every house just in case unwanted activity was taking place…….why do you have the front door closed and the curtains drawn?……You must be up to no good, the Outrageous State demands explanation!
I have made clear I do not want private tax returns on public record
But whenver an artifcial structure enabled by law – a company, foundation, charity or trust – is used then cards qre required face up on the table
No one need use these
If they do the price is transparency
It really is very simple
And to pretend otherwise is itself a form of corruption
The problem of keeping an eye on what those in political power may be doing with their money is an old one. Plato proposed that the dwelling houses and storehouses of members of the guardian class should be open to inspection (Republic 416d). A modern variant would be for the detail of all of the financial arrangements of politicians (or at least of ministers and not long retired ex-ministers) to be on public view.
Have you a link to that?
Not the original edition, of course….
The html version of the Gutenberg edition (which is the Jowett translation) is here:
http://www.gutenberg.org/files/1497/1497-h/1497-h.htm
Sadly this version does not include Stephanus numbers (like the 416d) – the standard way to give references to Plato. But the passage is right at the end of book III, so if you click through to the start of book IV and look at the pararaph just before that heading, you will find it. Alternatively you can search for the phrase: a private house
True
Like Redcar
And Port Talbot
And Barnslet before
But at least they had done something useful
Meanwhile the Royal Family does not even have to go offshore they are tax exempt! Until this happens its just grand standing. If anything comes from this it will be the comparatively small fish taking the hit and the super rich will probably know ahead of time which jurisdiction is the place to be.
Many people saying that all of this may be legal, immoral but legal.
Avoidance / evasion generally requires a number of people / bodies to conspire in the formulation of schemes /arrangements to avoid / evade tax. This is not the taxpayer arranging his affairs in his best interests, it is the taxpayer conspiring with others under a veil of secrecy, to thwart the intentions of parliament. This conspiracy element needs more scrutiny.
Never could understand why FRS5 did not flush this out. The substance of these transactions is plain – to pay little or no tax and to reduce the tax teceipts anticipated by a democratically elected parliament. The form, if the multiplicity of ownership arrangements can be uncovered to reveal a form,is obviously diversionary.
How do auditors sign these deals off?
Where are the auditors?
The auditors are all up to their necks in the stinky stuff, together with the accountants, lawyers and tax advisers. Any hope in self-regulation by Chinese Walls between a highly incestuous group of individuals and their firms is bound to fail.
Break all the big global players up into smaller groups of professional firms, just like the banks who provide much of their income should be broken up. Regulate the accountants and their clients thoroughly by a “police force” of public auditors accountable via HMRC direct to Parliament (not the Treasury which is clearly the City of London’s puppet on a string – until such time as the Treasury and Bank of England can be fully reformed to support democracy not financial capital)
Quite so Richard. However, our obedient media has gone straight for the low hanging fruit – Putin, Assad and associated foreign pariahs while the news is fresh.
Maybe I’m being just a touch over cynical, but I’m not holding my breath for them or the ‘International Consortium of Investigative Journalists’ to start searching the documents for the names of the hands that feed them. A quick look at some of the long list of foundations and charitable trusts that fund the ICIJ (and the associated ‘Centre for Public Integrity’) gives a list of names that I’d love to see put in the search box on their database.
I think you may be getting over cynical here
I probably am being over cynical, but the fact that the list of countries by which you can search the ‘Power Players’ on the ICIJ’s website does not include the USA is, to say the least, a little perplexing.
https://panamapapers.icij.org/the_power_players/
Why?
At least the independent media have found at least one big fat donkey story in the Panama files – David Cameron’s father!
http://www.thecanary.co/2016/04/04/greatest-tax-scandal-history-exposes-david-camerons-millionaire-father/
Meanwhile the Mirror leaks the UK Lords names, however “The names of the Tory MPs have not been revealed.” What a surprise – perhaps they’re going to save that for another day when they’ve all had chance to get their stories agreed with their accountants and lawyers.
http://www.mirror.co.uk/news/uk-news/david-camerons-dad-top-tories-7684150
Why?
It would seem a reasonable position given that the USA and it’s Corporations represent the largest concentration of capital amongst the capitalist economies.
I’mk not so sure Adrian D is being overly cynical. For another viewpoint, see here http://off-guardian.org/2016/04/04/panama-papers-revealing-details-live-in-the-gaps-between-the-lines/.
I can’t say or know that this view is reasonable or if I’m just being naive but this is one of several similar comments today.
Sorry, I don’t buy it
And yes, I could be the insufficiently cynical one
I’ll put my money on your premise Adrian.
As Dave Hansell has pointed out, with so many of the worlds ‘Power Players’ residing in the US I just can’t believe that none are implicated in any of the documents.
Possibly they’ve not got round to checking them all out, but they’ve identified representatives from dozens of other countries (dead parents and all) – and yet none from the USA so far?
The US is a major tax haven in its own right now
That is why they are being quiet
……..and convieniently firing dud bullets at those the American Administration and corporate elite disapprove of.
Quelle supreme.
“The price of operating offshore has to become too high to bear for those mainstream banks, lawyers and accountants who still think this is good for business. It isn’t.”
I think your last sentence is the key to closing down this “dirty little secret” of the rich and powerful. After all if you dangle a carrot in front of a donkey we all know what is supposed to happen.
So the tax evasion carrot must be removed, and the wealthy donkeys must be shown the error of their ways. Publicity is a very good vehicle to start this process, but I’m not sure which government has really got the teeth to take away the carrots, as they are all themselves made up of a large number of donkeys and supported by their donkey friends.
So as turkeys won’t vote for Christmas and donkeys won’t vote for taking away their carrots, it looks like its time to change the menu altogether with a new breed of political leaders who are “above and beyond” the corruption that is miring every country that allows this practice to continue through its legal and financial systems.
“New breed of political leaders who are above and beyond corruption”
OK..I think you’ll find that politics and corruption are so closely coupled that, once a politician, even the most moral in society become “one with the force”.
I consider the only solution, although an impossibility, is to remove all political parties from the landscape. Given the scale of corruption and immorality in politics it would be preferable to impose capital punishment for attempting to form one!
Nothing’s going to happen. Panama will become memory, the one/s who publicised the documents will “become one with a six foot hole in the ground” and things will carry-on as normal.
In the normal course of events, a match of 6 billion versus 60 million would have one outcome.
Removing all political parties could only work in a world of perfect direct democracy – perhaps an ideal state of affairs but a long way up the ladder from where we are now.
Corruption is endemic in politics because we don’t even have the essential foundations of political and economic democracy yet, in any country although some are further down the tracks.
Our politics and economics are overwhelmed by wealth and power protecting their “vested interests”. As much of their vested interests are tucked away offshore, out of sight and away from public scrutiny, shedding a big ray of sunshine on those who participate in this form of modern day piracy is a good start to breaking down the barriers to a more democratic future.
Otherwise we should expect nothing less than a return to the Dark Ages, when power, wealth and religion became the sticks to beat the populace into submission to do what the “elite” wanted.
Removing political parties would be a disaster: look at Jersey
We need to have exploding carrots. (metaphorically of course!)
It looks like the Panamanian carrot is exploding quite nicely at the moment!
Finger crossed for a few more whistleblowers and we should be able to make a nice carrot soup out of the remaining tax havens.
And did I hear that the Italian authorities said they will begin investigating 300-odd individuals whose identities are revealed in this leak…and that HMRC have said they would like ‘to see the files’??! What ‘files’, and who do they think might send them?
Does this go to the heart of the matter? The taxman sits at a desk and processes the files that arrive in the ‘IN’ tray. If there’s no file there then there’s no work to do/nothing to investigate. The concept of pro-active investigation (getting off one’s shiny backside and going digging) seems to be missing.
I note your other post this morning in respect of HMRC resources. When I was a young man I worked for Her Majesty’s Customs as then were. A day came when our numbers were slashed (Mrs Thatcher of course!) because we weren’t ‘seizing’ anything…we were producing no evidence of what we were doing all day; there were no beans to count. The fact that every ship, boat, yacht, aircraft was visited at least once on every watch (three times a day – backed up by roving ‘black gangs’ who would add further impromptu visits) meant that the wily smuggler knew he had a damned good chance of being caught and was therefore ‘deterred’ from indulging in criminal activity was lost on the bean counters. Cuts needed to be made. And of course the fact that fewer numbers produced more seizures was heralded as a success-evidence of the value of greater efficiency…rather than evidence that the amount of drugs, guns, smuggled tobacco coming into the country had just increased exponentially because criminals were now playing the greatly improved odds of ‘getting away with it’!
I think in those days the evidence was that every pound collected cost about 3p to collect. It probably follows that the more staff you get to ‘go digging’ the more they will unearth. It would certainly be worth a try! (…and when/if they eventually cease to unearth anything new that might just mean that the criminal activity has been deterred)
Thanks
Richard, a very powerful post from you. Fingers crossed that this is the beginning of the end.
The question has to be asked – Did young David Cameron benefit, and if so, how much? What does this teach the progeny of citizens who behave so?
Is this something deeply hypocritical at the heart of British culture? Is this different from slavery or colonisation? Do people know what authenticity and integrity really means?
Excellent questions Atul
Seems like a pretty good summary of what needs to happen from Richard Brooks:
“To tackle the cancer of corruption at the heart of the global financial system, tax havens need not just to reform but to end. Companies, trusts and other structures constituted in this shadow world must be refused access to the real one, so they can no longer steal money and wash it back in. No bank accounts, no property ownership, no access to legal systems. The anti-corruption summit being hosted by David Cameron in May is an opportunity to start the international team effort that this would require. The world has been entertained by tax havens long enough.”
http://www.theguardian.com/news/commentisfree/2016/apr/04/tax-havens-reformed-outlawed-panama-papers
@richard – after all these years and given the stuff you’ve had to put up from the far right, I imagine you are enjoying a well deserved sense of vindication.
My problem with these revelations is – where do world government leaders go from here? How is any action going to be trusted (sic) by the ordinary person who will not understand the intricacies involved and yet must at the same time feel betrayed? It is easy to say that the obvious answers are A, B or C but what we are seeing is systemic global corruption. That surely makes the prospect of concerted action almost impossible to imagine as viable without the equivalent of revolutionary change. If you accep tthat then things could get very ugly.
I also fear that mainstream media is going to be largely challenged to come up with a tone that people will find credible yet their ‘voice’ cannot be ignored as a factor playing into populist politics. I see that in the US (I currently live in San Diego) in the egregious attention given to the Trump campaign in the name of ratings and ad dollars.
Dennis
Good to hear from you – especially as this blog is to some extent all your fault. You cannot imagine the impact you had on my life
I hear what you say too, and share your concern. I am no revolutionary. The mixed economy, built on trust and mutual respect did not come from the barricades. Rather it came from long term relationships and a sense of shared concern. That, as you say is undermined by this
So, I need to address the issue. Do you mind if I do that in a blog to share more widely?
Richard