Published on 27 Jan 2011

Hey Davos! What about the tax havens?

In the relatively recent world of online newspaper access, my day begins just before 6am with a rapid fire review of what’s around. The corner stone of this trawl, I don’t mind admitting, is the FT – the only organ for which I have succumbed to paying an annual online sub.

Scanning ‘Fleet Street’ in this way is a fast and rewarding experience. I still haven’t decided what I miss from not getting my fingers covered in ink. I do miss the tactile aspect of newsprint. Of course it also means that one can pick up stuff from such foreign organs as the New York Times, the Washington Post , Haaretz, and the Tehran Times.

The problem for a TV hack centres on how much of the stuff I pick up can quickly be advanced and built upon in a televisual medium.

So it is, in part thanks to a Swedish online fanatic and contact I tumbled upon the IKEA story in the FT this morning.

It’s a fine investigation led by three Swedish journalists and revealed on Swedish television yesterday. The shock of the tale is not the complex structure of the company and the clever mechanism by which it enables IKEA’s founding family to retain ultimate ownership of the world-wide flat pack emporium. No, the shock is that it confirms that in the very heart of the Europe in which we live, there is in the diminutive Principality of Liechtenstein, STILL a thriving offshore tax haven where tax avoidance remains a full time industry.

We have been repeatedly told by Brussels that Liechtenstein and its tax activities have been dealt with. Allegations of tax laundering by high street traders in Britain, let alone foreign owned companies, have been rife for many years. In recent years, successive UK Governments have claimed that these tax loopholes will be closed.

Then, thanks again to the FT, today the spotlight falls on the ultimate hedge fundista’s tax haven of the UK administered Cayman Islands. The British appointed Governor of the Islands has rejected claims by a former Scotland Yard lead investigator that the Caymans’ judiciary was involved in ‘wrongdoing’ in an abortive police corruption probe.

Yet today there remain tens of thousands of companies registered in this tiny British dependency which amount to no more than a nameplate. Those nameplates are for ‘tax purposes’ and locate some of the largest Hedge Funds and Private Equity outfits in the world.

There is no one who intersects with the UK’s current deficit related woes who does not know that if war were declared on these tax havens our financial position could be fast transformed. So why is nothing done? Why is it still permissible for British Citizens to avoid taxes by living, or locating funds in the Caymans, Liechtenstein, or indeed much closer to home in Channel Islands for ‘tax purposes’?

As the World Economic Forum opens in Davos, might it be a relevant question for the great brains assembled there? Don’t hold your breath!

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44 reader comments

  1. Peter Stewert says:

    (Grrrr… sorry if I’m extra spikey in this comment, but I can’t stand unfair play most of the time and… well… grrrr!)

    Given the prevalence of millionaires in the cabinet it is far to say that the government itself doesn’t want to pay its own way, though us PAYE suckers have absolutely no choice, something that millions of us will be aware when the IR&C send their demands for us to repay the few hundred they miscalculated on millions of PAYE tax codes. (And on that note I’d like to state that the VAT rise really was a progressive tax increase in that at least PAYE-prols can “choose” to avoid the tax to an extent).

    Of course we can’t blame government entirely, considering the amount those in the media and sporting spotlight actual pay compared to their headline grabbing pay-days, it’s hardly surprising that no one is bothering to cover the #Ukuncut campaign. Not that I’m advocating a conspiracy, just plain old selfish self-interest.

  2. Akvavitix says:

    Simple. Sort your UK Banana Republic encoomy out and you too can lower taxes and encourage business to be based there. Until then I will keep mine in the Isle of Man thank you very much., There has to be some perk for living in this place.

    Typical spiteful leftwing journalism at its best. Rather see the UK cripple other small countries than sort their own corrupt mess out.

    1. Saltaire Sam says:

      If someone lives and works in a country where the tax rate is ‘better’ than the UK’s that’s one thing.

      The objection is to those who, like Philip Green, make all there money in the UK but by sleight of hand don’t pay their tax here.

      There are many who flit in and out of the country to the (generous) limit of their allowance and contribute nothing to the education, health and infrastructure that help them to make their fortunes.

      And I’d be willing to bet that many of them tut tut over their Daily Mail stories of benefit cheats without any sense of irony.

    2. Oliver says:

      Simple, if you don’t like paying UK taxes, don’t do business in the UK. There are lots of businesses/entrepreneurs waiting to take your place.

      If you avoid UK taxes while doing business in the UK then you are at best a freeloader (and at worst a thief) as you’re getting out of paying for lots of things like the police, staff with basic levels of literacy and numeracy, healthcare for your staff, etc.

      The fact of the matter is that if corporate tax avoidance was tackled fairly and equitably we could reduce business taxes across the board and make it easier for small businesses, who often aren’t allowed to use the same tax exploits as the very rich. We also wouldn’t need such savage cuts.

      Who knows, we might even start turning Britain back from a nation of shelf stackers to a nation of shop keepers.

    3. ColinT says:

      No, not ‘spiteful’ nor necessarily ‘leftwing’. Just highlighting the leech like nature of those who say ‘Until then I will keep mine in the Isle of Man thank you very much.’

    4. anniexf says:

      As a citizen of this “banana republic” I’d like to invite you to leave, but I’m too polite, and anyway I suspect you’re here unwillingly and feeling homesick. However, you could do us all a favour – tell us about your own country & how it deals with glaring inequalities & injustice, not necessarily in its tax system alone but also in its social systems. Would you? I’m sure we could learn so much; after all, this benighted little island – “this place”, as you describe it – needs all the constructive criticism it can get, and you seem ideally placed to offer just that.

  3. Saltaire Sam says:

    A bunch of wealthy politicians in a luxury, millionaires’ playground – not much chance of a fair tax system coming out of these talks.

    As I posted elsewhere, if they had held the conference in Hartlepool or Keighley or some other town that is struggling to survive, not only would all their cash have helped the local economy, they might have had a walk round and seen how real people are facing the result of their economic diktats cast down from ivory towers.

    1. adrian clarke says:

      Saltaire on this we are in complete agreement. Yet the problem is we live in a world economy. Companies can if the loopholes are closed unilaterally just move their whole operation to the likes of India, China and now Brazil.If we wish to operate unilaterally the answer is of course a totally new tax system where the benefits to a company make it decide it is no longer worthwhile using tax havens.I have no idea how you achieve that with fairness.

    2. Mudplugger says:

      We may live in a global economy, but every one of us has the personal opportunity to ‘act local’. If you don’t like Sainsbury’s giving vast amounts of money to the Labour Party, just don’t shop there. If you don’t like Philip Green’s creative tax approach, stay out of BHS and Top Shop. If you fear Rupert Murdoch’s influence, stop buying his papers or subscribing to his TV. If enough of us did that, they’d soon get the message.

      I frequently take cold-calls from companies tempting me with tax-free investments in wines, fine art or other deceits. I tell then that I refuse to invest in anything simply because of its tax-free status – if I make a gain, then it is only right that the standard proportion of that gain should be handed over in tax. The PAYE wage-worker doesn’t get that choice, so why should I ?

      If we all acted deliberately, in both our purchasing and our tax morality, we may then have earned the right to criticise the Greens, the IKEAs and the Murdochs, but how many of us actually do ?

  4. margaret brandreth-jones says:

    I think that you are very clever to understand all those indexes , financial goings on and know which products and comapanies are in and out and who is to be trusted and who just takes off the top of other companies, buying for the sake of bringing competitors down in hard times, it is another language to me.

    I do wish that I could acquire bucketfulls of money though and invest them/store them in the Cayman islands banks, then maybe visit once a month to see how the little digits are managing all by themselves. ah well lunch hour finished.

  5. Philip says:

    If people like Akvavitix gain the benefits of living in the UK, e.g. healthcare, education, police, roads, railways all paid for by the taxes of the rest of us who live here, but don’t have the oodles of dosh to stash it away in a tax haven, they have a moral responsibility to contribute. If they don’t like it here, why don’t they go and live in the cayman isles, isle of Man, etc. These people are like the bankers – they have an ehtically distorted view of the world: essentially it amounts to “I take out as much as I can, I give back as little as possibly can – and I complain about the place.” If people like that paid their proper share of taxes, tax rates could come down & we’d also have a better infrastructure. The arrogant greed of these people makes me sick

    1. Akvavitix says:

      I don’t live in the UK. Read my posts. I already stated I moved my company out of the UK because of Nu-Labour’s increasing bureaucracy and taxes. The problem is I don’t see Blu-Labour doing anything to reverse it.

      We live in a global economy and you have to expect companies and individuals to migrate to wherever is most efficient to live and operate. The UK has long since ceased to be an efficient place to base your company (for quite some time now) and as you witness screaming unemployment over the months to come you will see what it means to be an uncompetitive country in a global market.

    2. anniexf says:

      Seems like you’re gloating, Akvavitix; not a pleasant sight, & I’m sure UK plc won’t miss your unedifying presence. I just feel sorry for your employees; I suspect you’re not much loved there…

  6. Meg Howarth says:

    Gratuitously nasty empty comment. Why don’t you return to your home-country since you clearly find it so unpleasant to live here? Do you think anyone would miss you?

    Meantime, for those interested to follow up the Cayman Islands affair, here’s a useful link:

    http://www.guardian.co.uk/business/2009/feb/13/tax-gap-cayman-islands

    1. Meg Howarth says:

      This was obviously intended as a reply to the self-regarding Akvavitix above.

  7. jonathan says:

    I am sure Marshall McLuhan speaks for many like me.
    I cannot emulate the thinking but would aspire to.

    http://www1.marshallmcluhanspeaks.com/?video=SAY_011

  8. Saltaire Sam says:

    Interesting that Ikea use the same excuse as most of the other tax dodgers – we are not doing anything illegal.

    That puts the onus back on the politicians to reframe the law

    1. anniexf says:

      You mean the legally-tax-avoiding millionaires who “govern” us? Not in their interests, surely, to do that? “We’re all in this together” only ever meant that most of us are more “in it” (i.e. the s***)than they are.

  9. Akvavtix says:

    You Trots on here just don’t get it do you. You can’t grasp the fact that while the UK tax burden is so high and the bureacracy crippling people will look to base their companies (And themselves) elsewhere. Leaving Brits out of work.

    You single out Tax Havens for your vitriol but that is the usual jealousy of the left. Look further afield, companies are deserting the UK for cheaper labour markets and lower bureaucracy in BRIC countries. There are plenty of countries willing to greet industrials with open arms and incentivise them to move. What are you doing in the UK?

    Labour’s legacy to the UK will be a millstone around the country’s neck for at least the next decade.

    1. anniexf says:

      So you’d recommend that we let our children be chained to machinery 24/7? Heavens above, you’d think we were asking for fair play, justice and a living wage, the way you go on!

    2. adrian clarke says:

      Akavtix , i believe your earlier comments were way out of order and insulting, however, on this point you are exactly right.As i said earlier we can not attack tax havens unilaterally or for that matter bankers unless we have an alternative in place .Or we will drive more businesses abroad.We need a better fairer business tax system and yes we have to battle against the cheap labour ares.
      That should be the job of a respondible government.The mess we are in is Labours legacy ,but i have yet to see the Tories addressing it.Perhaps the mess is even greater than we know.

    3. Meg Howarth says:

      More arrogant political and economic ignorance.

      What on the political earth does exposing tax havens and their gross immorality have to do with being pro-Labour, let alone being a Trot? Do us a favour and go home. You’re clearly maladapted to this climate.

    4. Saltaire Sam says:

      On what basis do you object to one person paying the same percentage of his/her income as another simply just because (s)he has more?

      In fact, the tax system is already less fair to the lower paid because they pay a much greater percentage of their income in taxes like VAT.

      You may well say that the rich are the job creators on which the economy (and the riff raff) depend but as we ‘Trots’ would point out, they would not have most of their wealth without those they employ.

      Take for example, the postal service. Richard Branson, Bill Gates and Philip Green could be joint mds and come up with the greatest schemes known to man, but without the postie tramping the streets and putting letters through letter boxes, they would achieve nothing.

      I don’t want to make the likes of Philip Green poor – even if he paid his tax he would still earn in a year more than I in many years. That’s fine, he’s probably more talented. I just want him to contribute to the health, infrastructure, police, education schemes that produce and look after the people who work in his shops and make his money for him.

    5. Paul Begley says:

      I can’t help noticing that the BRIC countries rely on us, with our high taxes and high costs, to provide a market for their goods. Presumably because their too few of their own populations are paid enough to be able to afford “branded” clothing, consumer electronics, cars, etc, etc. Ultimately, this is the fallacy behind the “cut costs, cut wages, cut taxes, cut prices” model – someone, somewhere has to be rich enough to buy the product.

    6. margaret brandreth-jones says:

      I feel the same way as Annie. It is in my blood to fight for my own and fairness, however Avakavtix may have half a point here , but the way he/ she expresses themselves is insulting , hence Annies emotional response. Greenish snakes of jealousy do pop out now and then : when we work hard , strive for the best for everybody and not just a few and some smart r’s comes along with an antiquated remark. Trotskys indeed .. just come out of uni mate?

    7. adrian clarke says:

      More arrogant political and economic ignorance.

      Meg unfortunately you are wrong,on both counts.I do not like Akvavtik’s tone or the ignorant way he,puts his argument.The far left does have a jealousy of business and businessmen.Hence the high taxed bureaucratic mess we are in.There is nothing immoral about a tax haven.The immorality is that businesses and people can escape their legitimate tax in their country of origin.I wonder how many businesses and how much revenue would flood here were we to be a tax haven ?
      Unless we reduce the burden of taxation and bureaucracy,more and more businesses WILL move abroad.It will affect jobs,and yes it is the fault of the Labour party with their high deficit culture

  10. adz says:

    I will not hold my breath because i ran out of lung space long ago and that has nothing to do with my smoke habit slowly becoming history.
    The majority of people at davos will have most of their money sealed up in tax free havens, so they will no want shed light on something that will have repercussions on their own financial wrong doings.
    adzmundo Greenpeace & TVP

  11. Philip Edwards says:

    Jon,

    I can just see the gang of Davos spivs……”Tax havens? What tax havens?”

    Meantime, attendant naifs will make well-meaning but useless platitudes.

    Afterwards, it will be back to the same old global capitalist scam.

  12. Meg Howarth says:

    Great piece about Davos from FT’s excellent Gillian Tett: ‘Lonely CEOs flee hostile world for self-help group’ –

    http://www.ft.com/cms/s/0/6a77486c-271a-11e0-80d7-00144feab49a.html#axzz1CKMLsn4W

  13. JB says:

    Dear Jon,

    Please keep on raising the scandalous issue of tax havens and offshore banking leading to massive tax avoidance and tax evasion.
    The UK treasury looses between £40 billion and £70 billion each year because of tax cheating.
    Between US$ 10 to 15 Trillion are hidden away worldwide in tax havens (Switzerland and the Cayman Islands are amongst the biggest of these
    havens for financial pirates). Keep up the good work Jon and don’t let the big money men intimidate you!
    More detailed information concerning tax havens can be found here:
    http://globalinsights.wordpress.com/

  14. Saltaire Sam says:

    Off topic, fellow bloggers. Jon on Desert Island Discs on Sunday. Any guesses about his choice of book and luxury?

    Book is tricky – maybe poetry.

    Luxury, perhaps a musical instrument to learn while marooned.

    1. anniexf says:

      Luxury: a limitless supply of watercolour paint, paper and brushes.
      Book: a History of the English-speaking Peoples.

    2. adrian clarke says:

      I hope i am up to hear it.I imagine his music will be a touch of the classics with a little jazz,and a rousing 60’s beetles.
      His book a DIY on build your own cycle or the life of Nelson Mandela.
      His luxury item a velodrome.

    3. Saltaire Sam says:

      Waddya mean ‘hope I’m up?’ It’s 11.15. Typical idle tory, lounging around no thought for the fact that many of us will be working – even on Sunday.

      By the way it’s repeated at 9am on Fridays but I guess there’s no chance of you being up that early!

      I guess you’ll have to listen on iplayer as your butler brings you the freshly ironed copy of the FT to check your shares and some other lackey polishes your shoes ready for you to go to the club for a dry sherry and a little light luncheon :-)

  15. Saltaire Sam says:

    Err, George Osborne said on C4News he’s not in the business of speculation but in the business of forecasts.

    Given how often forecasts are wrong, there seems to be but a cigarette paper between them and speculation.

  16. Tina Golden says:

    I watched the Channel 4 news tonight. I was appalled at the ignorance of the questions re what is going on in Egypt and the choice of questioning by the news presenter. Is it possible to have a dialogue which doesn’t include shock horror speculations about the Muslim Brotherhood or any other terrorist dubbed or fundamentalist organisations? Is any body listening to the people who are on the streets in Tunisia or Egypt? May I suggest you read the following article on Al Jazeera. Channel 4, your news is sinking to the same sensationalist level as the Fleet Street tabloids. Please do not underestimate your audience.
    http://english.aljazeera.net/indepth/opinion/2011/01/201111413424337867.html

  17. Saltaire Sam says:

    ‘Banks are holding out against efforts to curb telephone-number-sized bonuses. Goldman Sachs revealed late on Friday that its chief executive, Lloyd Blankfein, had received a $600,000 pay rise, taking his remuneration to $13.2m (£8.3m) for 2010 – still far short of the record $68m he scooped in 2007 but an indication that “restraint” is beginning to wane…

    George Osborne ‘urged patience today: “When you’ve faced the biggest banking crisis for 80 years, fixing the system was never going to take place overnight.”

    We are supposed to take the cuts and wage freezes on the chin and be understanding, yet as this quote from the Guardian website shows, the banks are thumbing their noses and Osborne is happy race through anti working class measures but wants to time to rein in the people who caused the problems.

    The man is a clown

  18. Saltaire Sam says:

    Off topic.

    While I support the campaign to stop the sale of our forests, I find it interesting that this campaign is gaining the support of the influential classes in a way that job cuts are not.

    And lo and behold, the government is showing signs of reigning back the legislation while at the same time warning unions of new laws to prevent them trying to protect workers’ jobs.

    The infant classless society is indeed dead.

  19. Saltaire Sam says:

    Another excellent programme from the Beeb on the widening social gap in this country, a legacy of Margaret Thatcher, as they point out.

    Worth watching

    http://www.bbc.co.uk/iplayer/episode/b00yb5kv/Who_Gets_the_Best_Jobs/

    1. anniexf says:

      We watched it. Bilton’s an intelligent & likeable journalist who started in my present neck of the woods. Interesting to see the law firm chief who came from a comprehensive taking a pro-active approach, but few others.
      While I agree that Thatcherism put the kybosh on real social mobility and the odious Tebbit’s “Get on your bike” bad joke just confirmed Tory contempt for the likes of me, I can’t help wondering whether Old Labour’s education ideology didn’t contribute a fair bit – comprehensive schools don’t serve the needs of the children they were meant to help. There was an excellent programme last week by Andrew Neill on this subject.

    2. Saltaire Sam says:

      Annie, I saw the Andrew Neil and thought it too was excellent. As someone who benefitted from a grammar school education that certainly opened up a world for me that was completely unknown to my family before – publishing, television and journalism – I think they played a big part in the social mobility of the 60s.

      But as Bilton pointed out, they left three out of four behind at the age of 11 having ‘failed’ their 11+. When I passed there was another boy every bit as bright as I was but who for some reason didn’t get a place. I often wonder what happened to him.

      Comprehensives were a fine ideal but don’t appear to have been as successful as the old grammar schools were. Surely it can’t be beyond the wit of man to create a system that helps academic youngsters as grammars used to, while also serving those whose interests and talents are elsewhere?

    3. anniexf says:

      There’s one more striking difference – children who didn’t get into grammar schools nonetheless rarely left school illiterate and/or innumerate. Could the same could be said today?
      There are “streaming” systems in comprehensives, which ostensibly teach groups of roughly the same ability, but streaming is merely a pale imitation of the old selection system. Children are moved up and down these streams according to their progress, apparently, but that doesn’t seem to work successfully either: chopping and changing is hardly conducive to a settled environment.
      Frankly, the old system, while appearing elitist, did allow for more social mobility than we have now.

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