This summer at a G8 meeting the British Prime Minister stated his intention to introduce a register of beneficial ownership of companies, in order to crack down on tax evasion. This was a big step towards transparency and it was clear from the outset that the British offshore Islands would be expected to follow suit. In fact, many of the offshore Islands were already well ahead of the UK in this regard - Jersey, for example, has had a central register of beneficial owners for many years - and so the impact of the initiative was not expected to be significant.
However, in a surprise move David Cameron announced that Britain would make the UK's register of beneficial ownership public. This is a wholly more controversial move.
It is difficult to argue against a central register of beneficial owners per se - there is a clear benefit to governments and tax authorities being able to identify who owns and controls companies in order to minimise the risks of crime and tax evasion. There is also a need for information to be shared between jurisdictions in an increasingly globalised world, and we have seen a plethora of Tax Information Exchange Agreements signed and commitments made to automatic exchange of information.
What is less clear, is what the benefit is of making the information available to the general public, and how these outweigh the inherent right of an individual to privacy.
Prime Minister Cameron did touch on this issue during his announcement:
"Some people will question whether it’s right to make this register public.
Surely we could get the same effect just by compiling the information and using it within government?
Now, of course we in government will use this data to pursue those who break the rules. And we’re going to do it relentlessly. But there are so many wider benefits to making this information available to everyone.
It’s better for businesses here – who will be able to better identify who really owns the companies they’re trading with.
It’s better for developing countries – who will have easy access to all this data, without submitting endless requests for each line of enquiry.
And it’s better for us all to have an open system which everyone has access to – the more eyes that look at this information, the more accurate it will be."
But just saying that it is better does not make it so. Companies who have a commercial need to know who they are trading with are free not to trade with an entity that refuses freely to give them the information. And are there really that many examples of companies doing business with entities that they would not have traded with had they known who was behind the company? Are there a sufficient number to outweigh the rights of the huge number of entirely innocent individuals (because of course the crooks will simply give false information) who will will have their privacy invaded by such a register?
Of course some wealthy people flaunt their wealth and so for them the impact of publication of a register of beneficial ownership is likely to be minimal. But many don't. Some simply are not flashy people and don't want complete strangers to know that they are rich. If I am a young man who has just inherited a business from my father, am I not entitled to keep this confidential from anyone other than those who have a legitimate need to know, for fear of being targeted by gold diggers, or inundated with begging letters from charities? What possible public good does it serve to give that information to any Tom, Dick or Harry who wants to know?
And why is there a public interest in knowing who owns companies (by and large the preserve of the wealthy, or those who aspire to be so), but not, for example, in knowing who gets welfare benefits? Would publishing the details of welfare recipients not do a great public service in helping to stamp out claims abuse? If I can see my next door neighbour is claiming disability allowance but I know he is regularly running half marathons, I could shop him to the police and save the tax payer money. But we wouldn't really contemplate making that type of information public. There would rightly be an outcry. We would be invading the privacy of the benefits recipients, and even if the aim is to prevent fraud it wouldn't outweigh their right to privacy. So why are the well off not entitled to the same privacy - not from the government, not from the tax authorities, but from the general public? Perhaps it is because in these straitened times it has become something of a social stigma to be wealthy.
And why is there a public interest in knowing who owns companies (by and large the preserve of the wealthy, or those who aspire to be so), but not, for example, in knowing who gets welfare benefits? Would publishing the details of welfare recipients not do a great public service in helping to stamp out claims abuse? If I can see my next door neighbour is claiming disability allowance but I know he is regularly running half marathons, I could shop him to the police and save the tax payer money. But we wouldn't really contemplate making that type of information public. There would rightly be an outcry. We would be invading the privacy of the benefits recipients, and even if the aim is to prevent fraud it wouldn't outweigh their right to privacy. So why are the well off not entitled to the same privacy - not from the government, not from the tax authorities, but from the general public? Perhaps it is because in these straitened times it has become something of a social stigma to be wealthy.
In my view, the decision to make the register public is not one founded in a genuine desire to reduce tax evasion (that was already achieved by having the register available to the government and HMRC) but a political gesture designed to play well in the newspapers. Because of course in practice it is the press who will be one of the big beneficiaries of this move. Once the information is made public it will doubtless be trawled through by the gutter press in order to write inflammatory stories about wealthy individuals. You only have to read the newspaper coverage of the strike at Grangemouth last week to see how wealthy people have become hate figures in the popular press. The Mirror's headline, for example, was "Grangemouth billionaire boss relaxes on his £130m super-yacht after freezing pay" not "Grangemouth boss pleads with Union to take the steps necessary to secure the future of the Company". I would be prepared to place a large wager that publication of a register of beneficial ownership will lead to a flood of stories "exposing" the wealth of individuals who had previously avoided drawing attention to themselves.
There may well be a public interest, in the sense of curiosity, in the information, but not in the sense of a real public good.
Despite the lack of an obvious and real benefit to the publication of the information, it is likely that the British overseas territories will come under enormous pressure to follow suit. Any such move is bound to be considerably more controversial than the original proposal, which was simply to set up a register accessible to governments and tax authorities. I hope that we will see a mature and considered dialogue around the issue rather than simply bully-boy tactics that we have seen in the past, given the many legitimate concerns that are bound to be expressed. But whether or not David Cameron manages to brow-beat the offshore Islands into following his initiative, he is likely to find it an impossible task on a global basis. In a world where in many countries there is a real threat of kidnapping or extortion against wealthy individuals, or where jurisdictions simply prize their citizen's privacy more highly than in the UK, he is likely to run into a brick wall.
