By Izzie McIntosh, MSc Migration, Mobility and Development
At the beginning of November outlets around the world, including the BBC and the Guardian, released reports on the ‘Paradise Papers’ on offshore tax havens to which they relate. The papers are comprised of 13.4 million records, leaked to German paper Suddeutsche Zeitung, who shared them with the International Consortium of Investigative Journalists.
The papers details that billionaires have used offshore tax havens and shell companies which has helped them avoid taxing billions of dollars. Included in the reports is the Queen, whose estate – managed by the Duchy of Lancaster – has invested at least £10million in offshore interests.
Another high-profile individual was Lord Ashcroft, who has donated over £10million to the Conservative Party. BBC Panorama estimates that Ashcroft’s tax avoidance amounts to around £200million. Other high profile individuals implicated in the papers are Wilbur Ross, US Secretary of Commerce, and F1 driver Lewis Hamilton.
An important focus of the papers is the legality of the aforementioned activity, most of which is tax avoidance rather than tax evasion. Tax avoidance is the legal usage of the law to reduce the amount of legally payable tax. Tax evasion is the illegal evasion of tax.
Lewis Hamilton, for instance, used complex system of leases between the Caribbean, the Isle of Man, and himself to avoid paying tax on his private jet. While this is not illegal activity, it leads many to question the morality of both the wealthy individuals manipulating the legal systems. British author and journalist Nicholas Shaxson, told BBC Panorama that it could be costing the global economy $300-600billion per year.
The issue of tax evasion has plagued the UK for years. David Cameron, under pressure to show that budget cutting measures were not only targeting the UK’s poorest, announced in 2013 that there would be a public register of all tax-paying UK bodies. This never materialised and Cameron backed down after a meeting with representatives from tax haven authorities like Bermuda and the Isle of Man. Those involved in tax avoidance also blocked the measure through use of the Human Rights Act, Article 8 of which enshrines a person’s right to family and private life. These people and their legal teams argued that their privacy would be violated by a public register.
Liberal Democrat leader, Vince Cable has joined Jeremy Corbyn in calling for a public inquiry into the Paradise Paper revelations. The Labour leader said those involved in offshore investments should apologise to the British taxpaying public. Corbyn stated: “It undermines every one of us… who pays our taxes properly and diligently. Shadow Chancellor John McDonnell echoed these sentiments, adding: “Either the Prime Minister or the Chancellor needs to explain. Every pound avoided in tax by the super-rich is a pound desperately needed by our NHS, our schools, and our caring services.” Ana Caistor Arendar, Head of Inequality Campaigns and Policy at Oxfam GB, also stated: “There’s an often overlooked but very real human cost to tax dodging – it deprives poor countries of billions each year needed for life-saving healthcare and life-changing education.” At time of going to press, Theresa May had yet to call for a public inquiry or any meaningful action.