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Wednesday, 28 November 2012

The Wrong End of the Stick ...

A couple of days ago I was sent a link to an article in Guardian which fulminates at some length against  offshore companies and nominee directors. One has to read the whole article to spot the fact they are collaborating with a group perhaps infamous for its cover-up of their own activities in phone tapping and mobile phone eavesdropping, while making a huge fuss about the activities of the News of the World. What I missed in reading this, I suspect because the Guardian's own journalists don't understand it either, is that the vast majority of these 'front' companies and 'sham directors' are perfectly legitimate. 

They are established to manage a variety of perfectly legal trust funds and family investments under laws that are well established and properly constituted. They also fail, at every step, to mention that they company that owns the Guardian itself, is one of these "tax-dodging, 'front' organisations." If there is fault here, it must surely lie at the door of the politicians in the UK and eslewhere who have created a tax system that is punitive for beneficiaries of such trusts, and so complex one needs a legal team sat alongside the accountant to work out what is and is not legal. 

In fact the CEO of an organisation that specialises in Trust law is publically decrying the Guardian's series of articles on tax. Another person on the same team wrote to me saying - 

When I read through this article, I could see that the journalists don’t understand company law, let alone trust law, or corporate services. They should be attacking the politicians who made the tax system complicated in order to serve their friends’ interests, not the people who supply directorships (which the journalists automatically assume is to hide something and therefore must be up to no good). 

My mouth actually fell open in shock when I realised that these journos think that a company that is being used to hold assets for a family must reveal all. Would those journos want their own personal bank statements in the public domain? Can’t they see that that’s what they’re demanding? Why can’t they see that you need to fix the legislation in order to close loopholes, not attack people who are operating within the law, just because you happen to disagree with what’s allowed under these laws. The legislation should be the first port of call if you want to change behaviour.

There are several very good points in there. I wonder how any of them would feel - and some are certainly beneficiaries of family trusts according to some sources - if required to have the assets made public? How do the owners of this newspaper feel about having their activities questioned by their own staff?

Many such trusts are set up to protect assets for minors, others are there to protect assets that have been in a family for generations, but often the ideologues who write this sort of article think that inheritiances of any form should be prohibited, if possible the tax should be so punitive that any wealth or property is confiscated to be "redistributed" to some "greater good" they espouse. What most fail to acknowledge is that they are themselves the beneficiaries of some form of "inherited" wealth - simply by virtue of the education they have received or the home they grew up in.

Yes, there are those who are fortunate enough to be born into a family or circumstances that confer upon them wealth most of us find unimaginable, but that also brings enormous responsibility. That is often why these trusts were established in the first place. It also protects organisations and even public bodies. A close look at some of these will undoubtedly reveal that many Oxford Colleges, more than a few at Cambridge and other "blue brick" universities, several of our major cities, including the Corporation of London, make use of similar trusts and offshore 'nominees.'

As my informant suggested, it is an incredibly complex legal area, one the journalists patently do not understand. If there is a problem with it, and there are certainly those who will abuse it, then the problem is not the user, it is the law. If you want that changed, tackle the politicians, not the users. 

As my correspondent says, do the journalists really want their personal bank details published? That is, after all, what they are demanding.

Several of the commentators on this article make that point, and one or two make another interesting observation - quite often the beneficiaries of this legalistic tangle are also subscribers to the Europhobic campaigning. One commentator says this - 

"Part of the Europhobe agenda seems to be that the UK can become another Switzerland ..."
Right. But the Europhobes conveniently overlook a whole lot of very important points. Just a few examples:
1) Switzerland sits at the very heart of Europe. Any goods that need to be transported from Germany to Italy or France to Austria have to pass through Switzerland. The EU can hardly ignore the country. Britain is an outlying island with no geographical significance and, if it leaves the EU, can be ignored.
2) Switzerland has a very, very efficient transport system, state railways that famously run on time and relatively uncluttered motorways (because they insist much of the goods traffic goes by rail)
3) As well as being a (notorious?) financial centre - which is what the Europhobes are eyeing - Switzerland also invests very heavily in research and development and is a world-leader in the field. It also has excellent apprenticeship schemes. Britain, for one reason or another, has all but wrecked its research and manufacturing base. And British apprenticeship schemes ...?
Britain has a very long way to go before becoming another Switzerland

 That certainly makes one pause to think. However, I would hasten to add that Switzerland is, on the whole, a much more prosperous society ...

1 comment:

  1. On asking my MP to question the government about 'legal' tax avoidance, the reply from David Gauke MP, Exchequer Secretary, HM Treasury, says:

    "The government cannot comment on the tax affairs of individual companies, as doing so would be a breach of taxpayer confidentiality rules"

    You point out individuals taxes, I'd certainly never ask to see an individuals, but companies.....different ball game altogether.

    "The government is committed to ensuring the right amount of tax is paid on all profits generated in the UK"

    "The UK raxes cross border trading activities in accordance with internationally agrees OECD guidelines."

    Cross border? Is a physical High Street shop "cross border"?

    "I would like to reassure you that the Government is committed to tackling tax avoidance."

    Yeah, good one. The laws need changing. Something that includes a line saying "All monies taken by businesses with a presence in the UK from the British taxpayer who pays UK VAT are to be UK taxed."

    There are many extreme arguments surrounding this situation, and I will admit I've carried out actions which are under the umbrella of UK Uncut, although round here I don't cross the 'threshold' of businesses and advise all working with me the same. Dissemination of information to the general public followed by pressure from the public to MP's to get things down in parliament. It's a situation that will not be resolved in a few years, but a decade or more.