Monthly Archives: April 2016

A world of hidden wealth: why we [The Guardian] are shining a light offshore

Though there is nothing unlawful about using offshore companies, the files raise fundamental questions about the ethics of such tax havens.

Since the 2008 crash, there has been a clamour for everyone to pay a fair share of the tax burden.

Unsurprisingly, the public is questioning – perhaps more than ever – whether a system that provides advantages only to the wealthy is immoral. And the political climate that once tolerated this inequality has changed decisively.

A vast leak of documents that allegedly open up the world of offshore tax havens is getting lots of attention. Although 107 news organisations were handed the material the BBC links specifically to the Guardian on the Today programme and on the website. The BBC and the Guardian are of course interested in framing this as a debate about fairness and equality…the rich getting richer whilst the poor get poorer.  And yet offshoring is legal.  There are criminals involved as in any industry or sphere of life, that doesn’t make offshore banking immoral anymore than the BBC as an institution is immoral for having had so many paedophiles within its ranks.  It is entirely down to the politicians who make the rules to produce some that reflect what they think are the appropriate considerations.  The Guardian even admits that offshoring has legitimate purposes….

Are all people who use offshore structures crooks?

No. Using offshore structures is entirely legal. There are many legitimate reasons for doing so. Business people in countries such as Russia and Ukraine typically put their assets offshore to defend them from “raids” by criminals, and to get around hard currency restrictions. Others use offshore for reasons of inheritance and estate planning.

What have we learnt so far?  That the world’s rich use offshore tax havens. Blimey. The Today programme was trying to sensationalise it by intimating that it wasn’t just the usual suspects but that worryingly it stretched into democratic societies as well….though the Telegraph’s list of suspects didn’t raise any eyebrows here…

Sigmundur Davíð Gunnlaugsson

prime minister of Iceland

Mauricio Macri

president of Argentina

Petro Poroshenko

president of Ukraine

Salman bin Abdulaziz bin Abdulrahman Al Saud

king of Saudi Arabia

Ayad Allawi

former prime minister of Iraq

Bidzina Ivanishvili

former prime minister of Georgia

Ali Abu al-Ragab

former prime minister of Jordan

Hamad bin Jassim bin Jaber Al Thani

former prime minister of Qatar

Sheikh Hamad bin Khalifa Al Thani

former emir of Qatar

Ahmad Ali al-Mirghani

former president of Sudan

Sheikh Khalifa bin Zayed bin Sultan Al Nahyan

president of UAE

Pavlo Lazarenko

former prime minister of Ukraine

There is a lot of attention on Putin as $1 billion looks to have been sent offshore by friends and associates…but what’s the problem…this is a man who stole the Crimea, who is trying to annex Ukraine and who hijacked the Syrian war to support his friend and ally Assad.  Not only that but he stole Russia itself and has taken it as his own personal fiefdom, locking up or killing off opponents and critics……and the BBC is worried about a few dollars that  may or may not be avoiding the tax rules in Russia.

The BBC is also going large on the Icelandic PM suggesting he used his position to protect his, or his wife’s, offshore investments by fixing how Iceland reacted to the banking crisis…saving Iceland’s banks to save his wife’s investments….

Court records show that Wintris had significant investments in the bonds of three major Icelandic banks that collapsed during the financial crisis which began in 2008. Wintris is listed as a creditor with millions of dollars in claims in the banks’ bankruptcies.

Mr Gunnlaugsson became prime minister in 2013 and has been involved in negotiations about the banks which could affect the value of the bonds held by Wintris.

He resisted pressure from foreign creditors – including many UK customers – to repay their deposits in full.

If foreign investors had been repaid, it may have adversely affected both the Icelandic banks and the value of the bonds held by Wintris.

But Mr Gunnlaugsson kept his wife’s interest in the outcome a secret.

However the Guardian has a completely different take.…..his wife’s company, foreign based as it was, would actually lose much of its investments due to Iceland refusing to pay foreign creditors….

The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.

While Wintris was shielded from some of this turmoil, it had invested in bonds issued by three Icelandic banks and was owed more than 500m Icelandic króna (£2.8m) when they all collapsed. Only a small fraction of that sum is likely to be recovered.

Revelations from the Panama Papers about Gunnlaugsson and Pálsdóttir’s offshore activities are awkward for Iceland’s prime minister……He has dismissed suggestions that his wife’s ownership of Wintris compromised him as prime minister. On the contrary, he suggested, his consistently tough approach to foreign creditors, including Wintris, demonstrated that his wife’s financial interests had never affected his decision-making.

The BBC looks to be jumping the gun and making loud accusations when so far the evidence doesn’t stack up and it looks like the BBC is slinging mud hoping it will stick and is stirring up a controversy where there may not be a genuine one…nothing like inventing news to generate a sensationalist ‘scoop’.

Interestingly the Guardian tells us that:

While much of the leaked material will remain private, there are compelling reasons for publishing some of the data.

So presumably the vast amount of the information relates to legal transactions and the ones the Guardian and the BBC will investigate are those that reflect their own political interests and narratives about ethics and immorality….all of which is highly subjective and relies upon your own ideology….and never mind the legality.

The Guardian tells us…note only the ‘Conservatives’ get a specific mention though I’m certain many Labor donoors and politicians could be caught as well if they cared to  look…..

Six members of the House of Lords, three former Conservative MPs and dozens of donors to UK political parties have had offshore assets.

What the Guardian doesn’t tell us is that the Guardian itself has used offshore holdings….as Guido revealed:

Perhaps that’s why they are a bit more circumspect when coming to condemn those who use them and makes sure we know that offshore tax havens are in fact legal…if ‘immoral’.

The ICIJ isn’t a purely disinterested party in all this…it often works closely with the Guardian and the BBC and has taken a moral stand over offshore banking…as this previous revelation in 2014 shows…

ICIJ director, Gerard Ryle, said: “We make this information available not because what we found is illegal but because we think most people would think it unfair. Tax havens allow some people to play by different rules.”

Different rules?  They’re actually the same rules we all live under….just that we don’t have the resources to need  to use them….just as most of us can’t afford a Lamborghini….does the buyer of one of those ‘play by different rules’ or is he just happen to be rich enough to buy a Lamborghini?  You or I can buy a Lamborghini, or put our money in offshore accounts…if only we had the money….not different rules, just different sized bank accounts.  Life’s so unfair.

The BBC always wondered out loud, mainly in the context of the Coalition government must be failing appallingly and yet unemployment keeps falling!!???!!, about the apparent puzzles of ever rising employment and the apparent lack of productivity.

The BBC never bothered to go out and just ask the businesses why they were employing people, that would be too easy.  The BBC preferred to speculate and tell us that these weren’t real jobs, they were low paid, part-time, zero hours contracts that didn’t contribute to the economy.

The reality was that the open border meant that an endless supply of workers could be imported and employed on low wages. This is why employment kept rising and the low wages gives the clue as to why productivity was apparently so low…..it wasn’t low at all, it was just that the BBC used, knowingly, the wrong measure to judge productivity by comparing the number of workers with output when in reality they should have been measuring pay against output…the employers got the same level of output from more people but for less money meaning there was no fall in productivity in terms of cash….the companies did not have to invest in machinery and skills to drive up productivity.

On wednesday the Resolution Foundation confirmed that on 5Live (11 mins) and following that we had the BBC’s Rob Young (12 mins) talking about job losses due to the introduction of the national living wage…..what he had to say was interesting in light of the furore about the claims of job losses if we vote for Brexit and also in light of Port Talbot.

Fraser Nelson in the Telegraph says this about the potential job losses due to the Living Wage…

The Living Wage could make Port Talbot look like a drop in the ocean

David Cameron is mulling direct intervention to save Tata’s giant plant. Some 1,000 jobs are at stake, most in a part of Wales unlikely to recover easily from such setbacks. To hear Tories even discussing nationalisation gives an idea of scale of the panic.

It raises an interesting question: how would the Prime Minister react if another event were to cause at least 60,000 job losses among the low-paid? Because this is precisely what his new Living Wage is expected to do….. it risks dumping tens, perhaps hundreds of thousands of Britons on the new scrap heap of globalisation.

The BBC’s Rob Young says this…

‘Remember 60,000 jobs would be awful for those individuals but in the grand scheme of things it’s not a huge number given we’ve seen a pretty big and rapid fall in unemployment in Britain that many economists call a jobs miracle….’

Remarkable isn’t it how suddenly 60,000 job losses isn’t much to worry about and that we’ve had a jobs miracle.  There was a time on the BBC when every little job loss was railed against and the government hung out to dry and the rise in employment was all smoke and mirrors hiding the real, dreadful, state of the economy.

I’m guessing the BBC likes the living wage or rather it’s been reconvinced of its value.  When Miliband proposed it, first as the ridiculous ‘predistribution’, and then as the living wage, the BBC were all ears and cheered him on uncritically.  When the Tories stole Labour’s thunder suddenly it was the worst idea out there and the criticisms never stopped…however it seems the BBC is swinging into line as its urge to undermine the Tories looks to be losing out to its liking of the living wage especially as groups like the Resolution Foundation back it, though with a few reservations.

Funny how the BBC seems to have overlooked the crucial role played by their former darling Ed Miliband in hiking UK energy costs to the point where making Steel here is fundamentally uneconomic. Still, they love making the hapless Conservatives look as bad as possible. Anyway, it’s Friday and time for a new one of these…