Debate is good. Balanced arguments are woven into the foundation of democracy. They enable those with conflicting perspectives to argue rationally. So I was delighted when Alison Taylor described my post as being provocative before taking me to task on a number of the issues I raised.
First, and having stressed this in my original post, we are in fact debating two distinctly different issues. Ms. Taylor is arguing on behalf of those who wish to see a change in the social mores and expectations of the 99% versus the 1%. Conversely, I focused (I thought) upon the hardcore, cross-border illegal activity of those who would evade their tax obligations or commit other crimes by means of offshore corporate structures.
It should be remembered that at the time of writing, the media’s approach to reporting on the Paradise Papers has been almost entirely focused upon those who apparently avoided paying taxes legally. It is arguably a non-story until such time as criminality is disclosed. Ms. Taylor disagrees.
For example, she states that “…..ordinary people in the vast majority of countries should have to pay their assessed taxes while Big Business is exempt.” I did not suggest that Big Business is exempt from paying taxes. This must be a personal belief of Ms. Taylor.
Apple is the largest tax payer in the world, having handed over $35 billion in the last three years — what part of that is an exemption? I readily accepted there may well be an ethical argument for Apple to pay more given their success and profitability. But if so, then onshore states need to change their laws. There is an obvious reticence to do so. People should not attack Apple or other corporations for conducting their business and paying taxes in keeping with the prevailing law.
If Ms. Taylor and those like-minded wish to see these laws amended, then it is their democratic right to engage the political process and canvass for change. They and those who believe Big Business is wrong to limit their tax obligations need to cast their vote for a government that will bring tougher tax laws to the statute book. If they do and they are successful, then Apple will have to pay the increased taxes accordingly. But it is no one’s right to sling mud and insinuate a wrongdoing, in instances where everything is lawful.
Despite the best intentions of some commentators, there is no chance of a unified, all-encompassing world tax law, covering all companies in all countries. That is what would be required to make Ms. Taylor’s suggestions viable. She describes my support of job-creation by the productive use of capital in the hands of Big Business as being doubtful, referring to automation and AI among other things.
Are we suggesting that we can now chase Big Business from country to country with higher taxes without fear of job losses, as advances in technology mean that many people are going to lose their jobs anyway?
Owning and operating an offshore company is a lawful activity. It is also a legitimate means of minimizing your tax liabilities. Ms. Taylor conjectures that my perspective indicates that as operating offshore companies is perfectly legitimate, it thereby requires no intervention. Reading between the lines this infers that I do not support regulation. This is incorrect.
Strong regulation is essential to frustrate those who would administer offshore companies for a criminal purpose. What I do not agree with is her rationale for a public UBO register for the reasons I outlined. Ms. Taylor then likens my viewpoint to the NRA gun control argument. This is a slightly disturbing non sequitur in that one is linked to a debate about social responsibility and taxation, while the other to murderous rampages.
Further, I do not “falsely equate” the disclosure of beneficial ownership information with privacy. Privacy is closely linked to human dignity. It is a fundamental human right. We do not want the State to be in our bedrooms or bank accounts without good reason. There should be an expectation of privacy for all, unless you are suspected of wrongdoing. If so, the means to address the lifting of this “veil of privacy” under the rule of law is already in place.
As for a public Ultimate Beneficial Owner (UBO) register making ownership investigation easier as Ms. Taylor suggests, my experience of 30+ years of investigating international fraud and corruption suggests that the contrary is true.
As I explained, regulated offshore company administrators are required to collect and hold UBO identification documents. This represents an incredibly valuable pool of investigative material. Judges offshore regularly compel the disclosure of this material on an ex parte basis and under ancillary sealing and gagging orders. This is done where there exists a demonstrated risk of asset flight or of destruction of evidence.
Based on my experience in pursuing complex cross-border fraud and money laundering inquiries, I hold firmly to the conviction that we will drive criminals further underground and complicate investigations if we expose all this valuable UBO investigative material (e.g. there are about two million offshore companies in the world today) into the open.
The cost of being able to regularly “out” the likes of Apple for lawfully using offshore tax planning structures by means of public UBO registers, is to visit harm on the facility to investigate global economic crime effectively.
Ms. Taylor concludes with a quote which may provide some insight into her views (emphasis added): “…….the cat is already out of the bag. Attempts to maintain the current structures of corporate confidentiality and legal protection are under sustained attack from professional, well-funded activists who are driven by ethical-transparency goals.”
I said that we should not confuse ethical arguments with legal conclusions. The intersection between law and morality is traditionally reserved for the most heinous of crimes. Lawful tax avoidance is neither immoral nor unlawful. It does not come close to that intersection. In Duke of Westminster v Commissioners of Inland Revenue  AC 1 (House of Lords), Lord Tomlin held that:
Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow tax-payers may be of his ingenuity, he cannot be compelled to pay an increased tax.
Martin Kenney, pictured above, is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI and focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com |@MKSolicitors. He was selected as one of the Top 40 Thought Leaders of the Legal Profession in 2017 by Who’s Who Legal International and selected as the number one offshore lawyer for asset recovery.