All in It Together

Glen Newey · The Panama Papers

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Plutarch describes Anacharsis' mockery of the Athenian lawgiver Solon, whose laws, 'like cobwebs, snag the frail and puny; but the rich and mighty punch through them.' As in sixth-century BC Athens, so now in the global sport of tax avoidance. The 'Panama Papers' disclosed this week by the Süddeutsche Zeitung, Guardian and others contain some 2.6 terabytes of data leaked by a whistleblower in the Panamanian law firm Mossack Fonseca. In their files, the usual telly faces, Tory party donors, oligarchs, sportspeople and surplus royals wash up; they're all in it together. So was David Cameron's late father, via the still-trading investment fund Blairmore Holdings Inc., which avoided UK tax entirely for a thirty year stretch.

From Cameron's viewpoint the doomsday scenario would be revelations like those that felled Iceland's premier Sigmundur Davíð Gunnlaugsson when it emerged he'd set up a cash-sock company in the British Virgin Islands (BVI) for personal gain. For his part, Cameron's handling of the issue has been remarkably inept. He's met questions arising from the drip-feed of revelations this week withstudied evasion and half-answers that have only fuelled suspicion. After first saying it was all private, and then carefully dodging when asked if he's benefited from offshore vehicles in the past, he's finally spilled that he had Blairmore shares between 1997 and 2010, which converts his earlier shiftiness into something more like outright duplicity.

Blairmore is incorporated in Panama but ostensibly run in the Caribbean. A reserve army of Bahamians, including a bishop, retained by Blairmore via the private bank Coutts, signed off on paperwork,though day-to-day business seems to have been done – making it fiscally liable – in the UK. Richard Brooks, a former tax inspector now working for Private Eye, said: 'It is hard to see howthe company was not managed and controlled, and therefore tax resident, in the UK at the time.'

But even leaving aside the Camerons' personal stake, the stench of failure, through its velleity on tax-dodging, hangs about the government. Last year's communiqué from the Joint Ministerial Council for the British Overseas Territories (BOTs), including the Virgin Islands, expressed satisfaction with the steps 'taken by the BOTs to meet global standards in a range of areas,noting for example … the BVI’s rating of "largely compliant" on information exchange for tax purposes by the OECD Global Forum this year.' In a poll before the Panama revelations, 80 per cent of Conservative voters agreed that Cameron 'has a moral responsibility to ensure that the UK’s Overseas Territories are as transparent as possible'. In 2013, the prime minister blocked an EU initiative to open offshore trusts to the same public scrutiny as companies.

You might think that austeritarian politics, fixated on the structural deficit, should be as worried about revenue as spending, and so bear down on big-ticket tax dodges. But as everyone knows, it doesn't work like that. Smaller revenues mean a shrunken state and more money in private pockets. HMRC cut 'sweetheart' deals with Google for a risible return in revenue, while the government strips public assets like RBS and the Royal Mail at a markdown. In fairness to the government, this rests on distributive principle as well as self-interest; the principle roughly being: from each according to his docility, to each according to his greed. Revenue inspectorates are docile as well as governments, though lax andfiscally minimalist regimes, such as those of some US states, make avoidance easy: Jason Sharman, a political economist at Australia's Griffith University, told Reuters: 'Somalia has slightly higher standards than Wyoming and Nevada.' Capital finds welcominghavens in BOTs like Bermuda.

All of which leaves Cameron's flank perilously exposed in the Brexit referendum. Discontent can be channelled into backing Leave, just as voters often use by-elections to whack the government. Thisweek's big Dutch 'No' to the Ukraine treaty sounds the tocsin, as does Gunnlaugsson'sejection. The good news for Cameron, if no one else, is that the exposed flank is his left, which the neoliberals and City boys fronting the Leave campaign have no wish to attack: Arron Banks, the leader of Leave.EU and previously a Tory donor, has holdings in a BVI company run from Gibraltar. Even so, the risk for Cameron is that Leave becomes a rallying point for the downtrodden but restive. It's surprising that Leave strategists havefailed so far to see this angle – or, on reflection, maybe not so much.

Read more in the London Review of Books

David Runciman: Offshore · 14 April 2011

Richard Murphy: What is a tax haven? · 14 April 2011

Susan Watkins: The European Impasse · 29 August 2013

Peter Pomerantsev: Murder in Mayfair · 31 March 2016


  • 8 April 2016 at 2:53pm
    Mat Snow says:
    On the last point, why would Leave strategists send a message saying 'Stick it to Dave — vote Leave' when that would expose them to the charge of trivialising the referendum to an ad hominem absurdity?

  • 9 April 2016 at 11:09am
    davidnoelgardner says:
    The dark hole at the core of offshore tax havens is that funds deposited and invested there are subjected to dubious or nonexistent due diligence or need for proof of provenance for the funds invested therein.
    The money and proceeds from criminal activities that tear our societies apart and rot like a cancer from this dark core within are stashed in these offshore tax havens.
    Britain invites in with a legally provided red carpet to launder those funds, no questions asked. British law legally provides a wide open door for these offshore funds to purchase British homes and property, no questions asked on their tax history or the provenance of their source.
    The icing on the cake for the offshore funds is that offshore companies are provided a wide berth exemptions from Inheritance tax.
    And the capital gains from the sale of property in Britain by the offshore company is exempt from Capital Gains tax.
    Millions and millions of British are disenfranchised, treated as second class or worse and also are required to pay and carry the load of Inheritance Tax and Capital Gains tax on any property owned in Britain.
    Entire generations have been disenfranchised and remain so,
    Entire communities across Britain have been wiped out.
    The essential basic of governance is to provide for affordable and stable housing and communities by legislation and tenancy and ownership laws that address the needs of a civil society.
    Instead in Britain homes and property are made into an investment playground field for any and all unexamined offshore funds, too often criminally sourced, black secret untaxed money from around the world.
    Off shore tax havens are far from benign.
    They lack moral, ethical, democratic, enlightened, fair and just foundations that pass the test of conscience and honorable governance.
    That British voters allow themselves to be robbed of the fabric of their lives which is thus undeniably and legally trashed wholesale by the British Parliament by legislative decree is a terrifying fact of the tragic failure of British civil society, of the democratic process in Britain and the wiped out democratic participation by the majority.

  • 9 April 2016 at 12:24pm
    streetsj says:
    The level of ignorance when it comes to discussing investment funds and tax is truly astounding - not among ordinary people (why should they know or care) but among the commentariat.
    The Cameron Panama fund is nothing to do with tax avoidance whatsoever. Blairmore pays no tax. Wow! Nor do any bog standard onshore Unit Trusts (or OEICS as they are now called). Unit Trusts are exempt from CGT and do not have to pay tax on dividends. The only likely taxable income is from foreign investments (where the tax will have been witheld at source and it never receives it) and from interest income which will be offset by normal fund expenses.
    Tax is paid by the individual (capital gains and income) not by the investment vehicle. That is how collective investment schemes work int his country and most other financial centres.
    Since Cameron's investments are nothing to do with tax avoidance there is no issue of hypocrisy. There was no case to answer. It must have come as a surprise to the Cameron camp to discover that all the media was going to ignore the facts and pretend that he had done something wrong.
    Repeat it's nothing to do with tax avoidance, it's nothing to do with legal v moral approach to paying taxes, it is a complete non-issue.
    I find it very deeply depressing that our privileged press should be so cavalier with the facts. You might expect it form the red tops or the Daily Mail but this has been across the board.

    • 9 April 2016 at 7:06pm
      Glen Newey says: @ streetsj
      No effort expended in writing an article that elicits deep depression on your part can be said to have been wholly wasted. You go on about 'hypocrisy', though I didn't use the word or level that charge at Cameron personally. I do think that it makes using the deficit as a justification for austeritarianism hard to swallow that the government fails to bear down on tax dodges, as I explicitly said and still say.

      From your point of view the events of the past few days must be deeply puzzling. Cameron has squirmed as journalists have dragged from him revelations about his business affairs that he could have been wholly open about on day 1, thus incurring quite unnecessary and lasting political damage.

      A couple of puzzles remain about Blairmore and Cameron's stake in it.

      1. Cameron has said that the reason for setting up Blairmore in Panama was to facilitate non-sterling denominated investment in the face of exchange controls. Those were abolished by Thatcher in 1979. Why did Blairmore not then repatriate itself to the UK some time during the subsequent 37 years given that this rationale no longer applied?

      2. As the BBC reported, in 2010 Cameron sold holdings in Blairmore, bought in 1997, at a profit of £19,003. That year the personal pre-tax allowance per person was £10,100. Cameron said: 'I paid income tax on the dividends, but there was a profit on it, but that was less than the capital gains tax allowance, so I didn't pay capital gains tax'.

      For you this response must be surprising, in that the allowance business is quite irrelevant: he could just have pointed out that Open Ended Investment Companies aren't CGT-liable and put the matter to bed.

      There seem to be two possibilities. Either (a) Cameron, along with the global media and commentariat, but unlike you, is unaware that there was no CGT liability, and so produced a fallacious and pointless self-justification in terms of tax allowances, sustaining unnecessary political damage in the process, and allowing the whole witch-hunt to drag on. Or (b) You have got it wrong.

      Might you be getting confused between the tax status of the OEICs themselves, and that of those who invest in them? See the simple worked example here, which should help you.

      It would be easy to succumb to deep depression at your comments, but I like to keep optimistic.

    • 9 April 2016 at 11:09pm
      JonathanDawid says: @ Glen Newey
      I'm no supporter of Cameron, and am not really familiar with the taxation of OEIC's, but the answer to your question is quite obvious.

      streetsj was saying that Unit Trusts/OEICs are exempt from CGT. If that is right, Blairmore itself would not have paid any tax on capital gains anyway. Since the media keep on saying that Blairmore never paid any UK tax as if this was something wrong, then (assuming streetsj is right on this point) that seems a valid point for him to make. That has nothing to do with the point you then go on to make, which is that Cameron said he paid no tax on the gain he made.

      As to that, you point out that Cameron made a profit of £19000 at a time the personal allowance was £10,000 so how come he didn't pay tax. I don't know the answer - he might have had a capital loss from an earlier year to set against it, for example - but one obvious answer is indexation allowance, under which gains resulting over a long period of time were indexed down to take account of inflation. (As it happens, one of the first things Cameron's government did in 2010 was abolish indexation allowance - which means that if you hold an asset that only grows in line with inflation - or, worse, grows but more slowly than inflation, meaning in real terms you make a loss), you'll still have to pay CGT on the nominal profit. Which most people would probably think is unfair.)

    • 10 April 2016 at 6:37am
      Joe Morison says: @ Glen Newey
      To misquote Donne, any man's deep depression diminishes me.

    • 10 April 2016 at 10:15am
      Dominic Rice says: @ Joe Morison
      Have a look at what he claims to be deeply depressed by; then assess whether you feel in any way diminished by his 'depression'.

    • 10 April 2016 at 12:10pm
      streetsj says: @ Glen Newey
      Why didn't Blairmore repatriate? Well it moved to Ireland. I don't think you can turn a company into an OEIC so if it moved to the UK it would have to pay Corporation tax.

      Cameron not paying CGT? The fund/company is exempt from CGT, not the investors in it. That is the whole point and why this is nothing to do with tax avoidance by David Cameron. He didn't pay CGT because it was jointly held with his wife so they had £20k of allowances. It seems to me that it is you who is confused between the corporation and the individual.

    • 21 April 2016 at 7:17pm
      GeorgeBlot says: @ streetsj
      What about Mr Newey's point that:

      day-to-day business seems to have been done – making it fiscally liable – in the UK. Richard Brooks, a former tax inspector now working for Private Eye, said: ‘It is hard to see how the company was not managed and controlled, and therefore tax resident, in the UK at the time.’

      In which case, the company not paying corporation tax is the problem?

  • 9 April 2016 at 12:27pm
    streetsj says:
    Here's a link to a very simple pamphlet put out by the UK government in 2015 about taxation and investment funds.

    The first six words are "Most UK funds pay no tax..."

  • 9 April 2016 at 1:20pm
    manchegauche says:
    It's refreshing to read somebody who thinks Cameron is innocent in all this and that everybody else has been duped by the press into believing that this is an issue when in reality it isn't. For this relief, much thanks.

    So we can heave a sigh of relief and hope Cameron continues to profit from these investments at the expense of the rest of us. Perhpas we should all write letters of apology for believing ill of him in the first place, flail ourselves for indulging in the politics of envy, tighten our belts and doff our caps.

    It upsets me that streetsj is very deeply depressed that the rest of the world is indignant about this non issue but this is mitigated by the proffering of his very simple pamphlet to us to put right our silly little heads.

    Really, thank you.

    • 9 April 2016 at 2:08pm
      streetsj says: @ manchegauche
      Well I'm glad somebody is persuaded. Though I don't think Cameron can continue to profit from these investments as he sold them all on becoming Prime Minister; not that facts are either important or relevant.

    • 9 April 2016 at 3:52pm
      Joshua K says: @ streetsj
      What about the fact he tried to hide the truth about it all week? Is that fact neither important nor relevant?

    • 9 April 2016 at 5:30pm
      streetsj says: @ Joshua K
      Personally I believe he's entitled to some privacy over his financial affairs. I accept that it's perfectly reasonable to have a different view on this.
      I also wouldn't be at all surprised if he knew very little about it - his father was a stockbroker, he didn't go into that business and quite probably just followed his father's advice on investments. Why would he know anything about the details of a boring fund set up thirty odd years ago by his father's firm?
      So, in answer to your question, no I think it is neither important nor relevant.

    • 10 April 2016 at 10:18am
      Dominic Rice says: @ streetsj
      Errm, the whole issue is Cameron's series of disingenuous statements and efforts to cover up the truth. You feel that's neither important nor relevant? You initially claimed to be deeply depressed that the press hasn't been scrupulously truthful, no?

    • 10 April 2016 at 11:17am
      streetsj says: @ Dominic Rice
      Cameron was trying (horrendously unsuccessfully) to retain some legitimate privacy. Of course, if by the end of the week you have published all your tax affairs, you would have been better off doing it at once.
      The media's motives and behaviour has been entirely different, and, yes, I think depressing. Do you not believe that the immense power of the free press should be used responsibly?

    • 20 April 2016 at 2:07pm
      PhilipA says: @ streetsj
      Your argument would make Cameron and his income seem a perfect illustration of Pope's point that a little learning is a dangerous thing. You assert that he was trying to retain some legitimate privacy, but concede he did so horrendously unsuccessfully; what strikes me more on that point is that he chose as his sticking post, according to you, a perfectly legitimate aspect of his affairs, but he didn't know it. Doesn't he have any economic experts close at hand who might advise him? Well, no, he doesn't, now I come to think about it. Perhaps Ozzy was responsible for this cock-up or was too busy to help, biting the heads off those damn people who are poor or disabled. At any rate, I can't find much good to say about a prime minister who plainly doesn't even have a grasp of his own finances, let alone the state's; who manifestly lacks reliable advisers close to home, though that's long been apparent; and who in consequence is revealed as a rather jejune prevaricator on his own behalf -- hardly the idea person to be sent "to lie abroad for his country"

  • 10 April 2016 at 7:34am
    cufflink says:
    The fact is that Cameron has shown by his public behaviour in this matter to be unreliable despite the fact that he has at his command the best advice to be given from his financial advisors.
    There is an important public overriding issue at play in this and that is, at a time of severe relative austerity the issue of 'Tax Havens' is crying out for clarification. The general feeling is that it does not serve necessarily to accumulate further investment but is a harbour for unmitigated greed.
    There has to be a thorough world-wide search into this abomination of oligarchic financial protection.
    Its time has come to an end, and Cameron should bestir himself to see that it does. Streetsjay has surprised me in this by his view.

    • 10 April 2016 at 9:55am
      streetsj says: @ cufflink
      It seems to me that two completely separate issues have been mixed up. There is the issue of illegitimately acquired assets being squirrelled away from authorities and there is the issue of legitimate assets using tax neutral venues for legitimate investments. As far as I am aware very few legitimate funds would be set up in Panama these days but Blairmore was done thirty years ago in the pioneering period.
      On the first issue, I am all in favour of rounding up as many criminals as possible; on the second I think it is quite appalling to portray the PM as doing something equivalently egregious when he would appear to have done nothing of the sort.

  • 10 April 2016 at 9:15am
    mototom says:
    If this isn't about the fund avoiding tax that might otherwise be payable, can someone explain why you'd go to the trouble of incorporating it in the "tax neutral" Panama, and run it with the help of glove puppets in the Bahamas?

    • 10 April 2016 at 9:47am
      streetsj says: @ mototom
      You have to remember that this fund was set up in 1982, just after exchange controls had been lifted. Offshore funds were new then and the industry was learning how to make them work. The Blairmore fund left Panama some years ago and is now incorporated in offshore Ireland.
      I guess, but don't know, that back in 1982 there was no guarantee that exchange controls would be removed permanently so there was probably some contingency planning in case they were reimposed.
      The management of the fund also has to be seen to be offshore. They probably chose the Bahamas because there was financial expertise there that could (just about) credibly manage the money. In reality many of these funds are actually managed from onshore locations like London but go through elaborate charades of "advising" the "managers" what investments to buy/sell.

    • 11 April 2016 at 11:43am
      mototom says: @ streetsj
      Above you say that if it was incorporated in the UK it might be liable for Corporation Tax, so avoiding tax or anticipating tax changes was a motive?

    • 11 April 2016 at 1:03pm
      streetsj says: @ mototom
      Yes it would be as a straightforward company but it wouldn't if it was an equivalent onshore fund. As an offshore fund it has close to identical treatment to onshore funds (see link to leaflet above).
      The reasons for setting up an offshore fund in the 1980s were very different than they are now. Today you have offshore funds so that they can appeal to investors around the world. When an onshore fund pays a dividend it has basic rate tax deducted. As an offshore investor you may not be able to claim that tax back; as a UK investor it makes no difference as you will get a tax credit.
      These things are complicated (and boring) if you're not used to dealing with them. And difficult to explain tapping out responses on an iPad.

  • 10 April 2016 at 1:51pm
    Graucho says:
    In life there are people who work and people who work the system. Maybe the people who really work are getting a little tired of the ones who enrich themselves by finessing rules all too often created by themselves for themselves.

  • 11 April 2016 at 1:12pm
    streetsj says:
    I had no intention of boring on like this when I wrote my first comment but I am so surprised that people who wouldn't hesitate to correct another writer over an arcane fact are so indifferent to the facts on something that could potentially have serious ramifications.

  • 12 April 2016 at 12:43pm
    Graucho says:
    No doubt a lot of the furore is politically motivated and of course the media have space to fill, never the less it is worth considering why Mr. Cameron and Mr. Osborne, men with acutely tuned political attenae, have found this issue to be so toxic. It is something that resonates with the still not quite dead national sense of fair play. So gamesmanship is quite legal, but as we Brits would say "It's not cricket". Likewise taxmanship.

  • 14 April 2016 at 10:55am
    David Ganz says:
    No one deserves an income of more than £100,000. Ever. And if you do not believe this, then I challenge you to explain why a carer for an incontinent dementia sufferer deserves less than the Vice Chancellor of Oxford, the head of the Royal Bank of Scotland, or Boris Johnson. Mantras about market forces and 'the real world' show moral bankruptcy.

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