22 Nov 2011

Can capitalism survive without tax avoidance?

I am indebted to the Sunday Times for their introduction, last Sunday, to the contents of Number One Hyde Park – London’s most expensive and unoccupied address.

The paper concludes that in effect the apartments inside are either unsold or sold to people who don’t live there. In other words the paper reckons that building is, in effect, unoccupied.

But what gripped my attention was not its emptiness – it is a truly vast blob of an address at the top of Sloane Street in London’s Knightsbridge – but the registered addresses of those who have actually bought one of the £25m plus apiece pads.

According to the UK land registry, four owners are registered in Guernsey; four in the Isle of Man; 19 in the British Virgin Islands (BVI); two in Liechtenstein; two in the Cayman Islands; One each in St Vincent’s, and Monaco.

What do all these locations have in common? Yes, you guessed it – in one way and another, they are tax havens. What else? Twenty eight of these addresses are in locations over which the British have some sort of governing involvement.

Read more: Should the government target tax havens?

Yesterday’s FT led with an extraordinary report detailing the ‘jumbo directors’ who are piling up directorships in the Cayman Islands. Each of these directorships is worth up to £19,000 a year, the FT tells us. It is all part of the demand for independent directors for companies seeking to lodge their doings in the Cayman Islands. One man now holds 567 of these directorships in companies almost all of which are hedge funds. Four people hold over a hundred of these things. Fourteen people have over seventy of them.

Yesterday’s Snowblog questioned whether “socially useless” financial transactions should be banned rather than taxed.

Today I find myself asking what is being done in our globalised world to sort the parking of vast quantities of cash off-shore in tax havens over which the British, in particular, have so much influence? Is it a coincidence that Britain also hosts one of the three biggest financial trading centres in the world?

Can capitalism survive without opaque, sometimes criminal, activity? Can it survive without allowing the very richest to avoid tax in such a way that the gulf with the poor grows ever wider?

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