After all the hype, what really was agreed by the G8 regarding tax and transparency?
David Cameron went to the summit all fired up to crack down on tax cheats, and made the creation of public registers of beneficial ownership one of his cornerstone aims. The rhetoric in the British press on the subject of tax avoidance has become so toxic (not to mention inaccurate - of which more later) that only a few brave souls dare mutter anything in opposition to the ever more strident calls for "something to be done" - no matter how bonkers the proposals or how inaccurate the information on which they are based.
So it might have come as something of a surprise to the PM to find that not all of the G8 members were on the same page as him at all.
Russia, Canada and the US all opposed the idea of public registries of beneficial ownership. And quite right too. Having a register which is available to tax authorities or government agencies is one thing, but what on earth is the justification for giving every Tom, Dick and Harry who is nosey enough to look, details of people's private affairs? What business is it of my next door neighbour what assets I own? Since when did the UK become a country which decided that a legitimate right to privacy was not something we cared about? This surely is a step too far and one which I am pleased did not get rail-roaded through the G8.
You might think that Obama stood up to David Cameron on the issue in order to safeguard the right to privacy for his citizens. But then of course he isn't exactly a champion of an individual's right to confidentiality - he has his own tricky situation to deal with back at home regarding the huge scale covert tracking of private communications which has recently come to light courtesy of a whistle-blower. No, the reality is that the US is one of the worst offenders when it comes to facilitating tax avoidance and lack of transparency - Delaware has a tax avoidance business the size of which would make most people's eyes boggle, something with Obama often seems to forget when in finger-wagging mode talking about such dens of iniquity as Cayman and the BVI. I suspect that protecting Delaware's competitive position had much more to do with Obama's stance at the G8 than the idea of standing up against a huge erosion of the rights on individuals to legitimate privacy. But whatever his reasoning, at least it has helped prevent the David Cameron juggernaut from making such ill-thought-out changes.
So what did the G8 actually agree then? The final communique offered little more than support for an existing review being carried out by the Financial Action Task Force (FATF), which is certainly not wedded to the idea of a central register of beneficial ownership, and a statement that each G8 nation would commit to their own "action plans" on this issue. The UK is leading the charge and has said it will set up a central registry of beneficial owners, and will consult on whether this should be made publicly accessible. The US, on the other hand, is to leave the decision on how to proceed to individual states - so don't expect Delaware to be making changes any time soon.
So the reality is that, despite the less than rapturous reception from the G8 members to the proposals, the UK is going to plough ahead and has brow-beaten the British overseas territories into publicly supporting it. Surely that therefore means that big changes are afoot for them and that their businesses? Far from it. Because in fact what the press tend not to report is that many of the offshore centres are far more proactive in this area than the onshore countries which like to preach on the subject. For example, Jersey already holds a central register of beneficial ownership of companies. The UK does not. In addition Jersey regulates those who form and administer companies and trusts, and requires them by statute to maintain up-to-date and accurate information on the ownership of those for whom they act. The UK does not. In fact, all the information held in the Island is available to tax authorities and law enforcement agencies on request - something which the UK cannot claim. The truth is that the move towards central records of beneficial ownership will be much more burdensome for the UK than for the majority of the British overseas territories.
There is a legitimate and mature debate to be had about tax avoidance and transparency but at the moment it is not being had. Instead we are getting knee jerk reactions and government policy being formed in response to tabloid headlines. The quality of reporting is woeful - for a great example see http://www.jerseyfinance.je/ceo-blog/yes--we-have-no-bananas#.UcG_rue1x8E and the main protagonists are on the one hand moralising about tax avoidance and on the other hand promoting their own versions of it. These are complex issues which need a much more informed and thoughtful debate than is currently being permitted.
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