The Queen, Lewis Hamilton, the stars of Mrs Brown’s Boys, and the Indian aviation minister may seem, on the face of it, to have little in common with each other. However, all of them have been named in the latest leak of online information, called The Paradise Papers, as having invested in offshore tax havens.
These are, in fact, amongst the first names to appear, in what promises to be an ongoing expose of how multinationals, celebrities, politicians and high net-worth individuals have used complex offshore financial structures to protect their cash and other assets from higher taxes.
The ripples have already started to spread, with questions being raised about who owns Everton football club, the activities of former Conservative Party donor Lord Ashcroft, and politicians in Canada, India, the US and Russia all coming under scrutiny.
The Paradise Papers contain 13.4 million documents, many coming from offshore legal service provider Appleby and its former sister company Estera. There are also millions of documents compiled from corporate registers in some 19 jurisdictions, many of them located in the Caribbean, as well files obtained from the Singapore-based Asiaciti Trust.
Like last year’s Panama papers, the original material for the leaks was obtained by the German newspaper Suddeutsche Zeitung, which passed them on to a global network of investigative journalists, the International Consortium of Investigative Journalists, which includes the BBC Panorama programme, The Guardian and The New York Times, to work on them further.
Whilst the number of files released this time round is fewer, in number, than the Panama Papers, this leak has the potential to cause more damage because it focuses on well-known high net-worth individuals and celebrities, many with links to the UK.
Investing in offshore tax havens is not illegal – there are many offshore tax schemes and arrangements that are wholly legal and above board. However, there are many who question whether it is ethical to actively take measures to avoid tax.
Moreover, at a time when national governments and international authorities have been promoting a series of initiatives and measures to force individuals and companies to be more open and transparent with their tax affairs – with initiatives like BEPS, the Common Reporting Standard, and new CFC and transfer pricing rules – these latest revelations will come as a huge embarrassment for some, and lead to legal sanctions for others. Expect a series of high profile resignations, mea culpas, and public apologies in the next few days.
At the same time this will highlight, for some, the continued inequality of the tax system.
In September, a report co-authored by economist Gabriel Zucman estimated that 10% of all global GDP – about £6 trillion – is held offshore. The report also stated that 80% of all offshore cash is owned by 0.1% of the richest households, with 50% held by the top 0.01%.
Yet again, it seems that there is one rule for the overwhelming majority of us, and another for the super-rich.