Tax Needn’t Be Taxing

 

You would have done extremely well to avoid the hullabaloo surrounding a huge leak of documents that has lifted the lid on how the rich and powerful use tax havens to hide their wealth. The files were leaked from one of the world's most secretive companies……a Panamanian law firm called Mossack Fonseca. The files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax.

 

Where the story got the attention of many was those who appeared to be implicated:

 

§  There are links to 12 current or former heads of state and government in the data.

 

§  More than 60 relatives and associates of heads of state and other politicians are also implicated.

 

§  The files also reveal a suspected billion-dollar money laundering ring involving close associates of Russia's President, Vladimir Putin.

 

However, the biggest scrutiny of all fell at the door of Number 10 and that of David Cameron. He invested in his father’s company (Blairmore Holdings) until 2010 when he became Prime Minister, which happens to be registered in Panama and used Mossack Fonseca. Let me put that another way……David Cameron invested in his father’s company that was deliberately registered elsewhere for tax avoidance purposes.  

 

I’ll leave the moral / political argument to the press, media and opposing political parties simply trying to outdo each other. For me though, there is a far bigger issue…..

 

The leaks identify 32,682 offshore companies relating to active clients in the UK. The UK was third behind Hong Kong and Switzerland. That’s frightening on every level. That’s 32,682 companies avoiding paying UK tax currently.

 

The deliberate confusion between ‘evasion’ and ‘avoidance’ is often made by people trying to make a political point. However, the 'evasion illegal, avoidance legal' distinction is used to confuse people. Illegal acts hide behind secrecy to masquerade as legal. At the end of the day, moving money offshore, creating structures and artificial transactions is (to me) tax evasion and avoidance.

 

Perhaps even more frightening is that this leak of documents is from just one law firm in one country……I fear this will only be the tip of the iceberg.

 

But as HMRC says……Tax Needn’t Be Taxing.