Queen’s fortune was invested in tax havens
Can tax avoidance ever be stopped? Last night a huge leak dubbed the “Paradise Papers” exposed the tax haven secrets of the ultra-rich including the Queen and firms such as Apple and Nike.
The 13.4m documents include heads of state and top sports stars, along with the world’s most famous celebrities and its biggest businesses.
These are the Paradise Papers, a gargantuan leak of financial documents which reveal how the rich and famous secretly invest vast amounts of money in offshore tax havens — countries or territories with very low tax rates, and sometimes with no taxes at all.
As with last year’s leak of the Panama Papers, the documents were obtained by the German newspaper Süddeutsche Zeitung, and now over 100 of the paper’s media partners are carefully sifting through them.
So what do they show, and who is implicated?
First off, the Queen. The papers show that about £10m of the Queen's private money was invested in the Cayman Islands and Bermuda by the Duchy of Lancaster, which handles investments for her £500m private estate.
There is no direct suggestion that the investments were made with tax avoidance (which is legal, as opposed to illegal tax evasion) specifically in mind, but nonetheless many will be asking whether the Queen should be making offshore investments. Some of her money also went to a retailer accused of exploiting the poor.
The leak also dredges up the Trump-Russia controversy. Wilbur Ross, the US commerce secretary and a long-term business associate of Trump, invested in a shipping company; it transports oil and gas for a Russian firm whose shareholders include Vladimir Putin's son-in-law and two men subject to US sanctions.
A special counsel is investigating the matter.
Also implicated is Tory donor and peer Lord Ashcroft, who sheltered $450m in a previously unknown offshore trust. Nike and Apple were exposed for vast tax avoidance, while major shareholders in Arsenal and Everton football clubs are there too.
But can any of this behaviour be stopped? After all, many ordinary people would, if presented with the opportunity, pay as little tax as possible.
“Tax avoidance is inevitable,” say some. It is a country’s right to set its own tax laws, and if it wants to attract investment by imposing almost no taxation then it is free to do so. And if, as the Paradise Papers show, governments and politicians are involved themselves, then the problem becomes even harder to solve.
“Enough is enough,” reply others. There are ways to tackle it. Governments could blacklist offending companies. They could charge exit taxes for companies that move abroad. More loopholes could be closed. But the most effective weapon is public shame. If people boycotted and ridiculed offenders more, they would soon stop countenancing tax avoidance as worthwhile.
- How should governments respond to the Paradise Papers?
- Is tax avoidance always immoral?
- Suggest one new law to prevent people from avoiding tax. Write down how you would enforce it.
- Draw a diagram explaining how people and companies use offshore tax havens to avoid paying taxes.
Some People Say...
“The age of secrecy is over.”
What do you think?
Q & A
- What do we know?
- The Paradise Papers leak comprises 13.4m files. The German newspaper Süddeutsche Zeitung obtained them and has shared the material with the International Consortium of Investigative Journalists, a US-based organisation which is overseeing the worldwide investigation. The documents focus on everyone from the Queen to pop star Bono to companies like Facebook.
- What do we not know?
- Whether any major prosecutions will result from this. Following the release of the Panama Papers last year, 22 people were investigated in the UK, but no charges were brought. We also do not know whether the leak will lead to fundamental changes in the way individual countries treat taxation.
- For example, Bono was found to have used a company based in Malta to pay for a share in a shopping centre in a small town in the north-east of Lithuania, a country in which he has never performed. The singer invested £5.1m in the centre in 2007.
- Cayman Islands
- The small British Overseas Territory in the Caribbean is a classic example of a tax haven. No direct taxation is imposed on Cayman residents or companies whatsoever. Instead the government receives its income through sources like sales taxes, and generally benefits from the spending of wealthy people living there.
- Duchy of Lancaster
- Since 1939, the Duchy of Lancaster’s principal purpose is to provide a source of independent income to the monarch. The estate consists of land, properties and assets held in trusts for the monarch.
- Arsenal and Everton football clubs
- Farhad Moshiri sold his Arsenal stake in 2016 to buy nearly 50% of Everton. But the leaks suggest his original Arsenal stake was funded by a "gift" from oligarch Alisher Usmanov, who owns 30.4% of Arsenal, raising the question of whether his money is now in Everton.