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  • Johnathan, in the wake of the Panama Papers, we've had a lot of revelations about

  • well to do people sending their money off to faraway places in order to avoid tax liabilities.

  • Is this kind of behavior ever acceptable?

  • Well, I think we should start by making a distinction between various different sorts of activity.

  • Clearly, running off with assets from a country, looting it as a political leader and salting them away in some foreign place.

  • It's straightforwardly illegal as it is.

  • It is totally indefensible, and I would put into the same category.

  • Tax evasion, where you take your money, put it into a foreign place and hope that the tax man never finds out what you've done in your country of origin.

  • But I think that there is a third sort of activity which involves rooting finance through jurisdictions.

  • Such as the Virgin Islands or Panama, which is not necessarily in anyway illegitimate.

  • So, give me an example.

  • Ok. A classic example would be an investment fund.

  • An investment fund containing investors from various different countries,

  • which who gather together to put their money into a third country.

  • Let's say it's an emerging market with a somewhat shaky legal system.

  • So therefore, they want to find a place where they can gather together with their cash

  • where they enjoy certain protections between each other and with the end-investor or the investee.

  • Right.

  • So, at the same time, the profits that come back are not then taxed heavily in the point at which they've gathered,

  • but are likely taxed and then the profits from that return to those investors in their countries of origin.

  • And then, they declare their tax to their own local authorities.

  • I see no particular issue with that.

  • Let's say I've made my money in London or in Birmingham or in Edinburgh, and I wanna leave it to my children.

  • Say or and I develop a trust.

  • If I am putting that trust abroad, let's say, it seems like I'm making an effort to do a kind of arbitrage.

  • I like living here, I like the tax system over there even if I don't want to live there, and I'm trying to have both.

  • Look, trusts have very clear rules. Each jurisdiction, Britain, America, draw very tight rules about how trusts can be set up.

  • On the question of where the money is located and the use of foreign jurisdictions like the Virgin Islands.

  • The point I would make is this, which is we do live in a world where essentially citizens are free to move their capital around the place.

  • I can invest in China if I choose, I think.

  • Where I can get it passed the Central Bank or I can invest in America.

  • It seems to be rather odd to draw a distinction than to say that the British Virgin Islands is somehow off limits.

  • Then we put this question to you. Are people and companies different in this respect?

  • Are the responsibilities of the two different?

  • I personally am very sympathetic to the idea that companies should be obliged to be very open about what they do.

  • Anything which enjoys limited liability should do so in plain sight in my view.

  • And I think shell companies should not be allowed to exist in offshore jurisdictions in the way they do.

  • If somebody is doing a legitimate business, a company is making a legitimate investment through the British Virgin Islands,

  • it should do so publicly.

  • And it should be possible for you and me to see what's going on.

  • But peopleyou think should get a bit more privacy?

  • I think individuals, well, I actually think this more broadly. I think it should be the case onshore as well as offshore.

  • I think we should be, I think a company's tax affairs should be much more public than they are in the UK.

  • But I think in the case of individuals, I think it is reasonable with natural persons to allow them a degree of confidentiality in their tax affairs.

  • So, if you and I are put in charge of the UK or indeed the world's tax regime, where do the reforms need to happen?

  • Very simple, lift secrecy on corporate transactions, shell companies,

  • undisclosed shell companies should be a thing of the past.

  • Thanks, Johnathan.

Johnathan, in the wake of the Panama Papers, we've had a lot of revelations about

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B1 FinancialTimes tax virgin shell investment panama

Tax havens: for and against | FT Comment

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    Kristi Yang posted on 2016/04/08
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