No safe haven?

Introduction

 

No matter the level or frequency of our dealings with HMRC, one thing is true: tax is an emotive subject.

 

The idea that big business or wealthy individuals may be able to structure their affairs in a way which mitigates their liabilities is irksome to many people.

 

It is a clash which makes for no little entertainment at times, such as when the House of Commons’ Public Accounts Committee decides to hold the feet of HMRC officials, big business or tax advisors in private practice to the fire.

 

Even though Dame Margaret Hodge has long since moved on from the Committee’s chairwoman, she still becomes incredibly animated at the very notion of tax avoidance (which, with apologies, is legal) and tax evasion (which is definitely not okay or legal).

“Hubs for crime, tax evasion and illicit wealth”

 

In a comment article for The Times, Dame Margaret has renewed her focus on those British Overseas Territories (BOTs) commonly regarded as offshore tax havens – or, as she put it, in her usual un-minced words, “hubs for economic crime, tax evasion and illicit wealth”.

 

There are 14 BOTs in all and although they are not part of the United Kingdom itself, they are among its remaining sovereign territories.

 

Following the light shed on activities in BOTs by the Panama Papers, Parliament in Westminster introduced a law compelling them and the Crown Dependencies  (Jersey, Guernsey and the Isle of Man) to establish the sort of public registers showing the ultimate beneficiaries of companies which the UK has had in place since 2016.

 

Whilst a parliamentary briefing paper in 2022 claimed that “all British Overseas Territories and Crown Dependencies have or will introduce public company beneficial ownership registers”, that optimism has appeared sadly misplaced.

 

A recent report by an organisation named the UK Anti-Corruption Coalition suggested that only Gibraltar has so far complied.

 

Last December, the Crown Dependencies stated that they would “increase accessibility”.  However, a full register, they argued, would clash with their “international obligations”.

 

That last point was a nod to an EU ruling that such anti-money laundering initiatives were “invalid” and “a serious interference with the fundamental rights to respect for private life and to the protection of personal data”  ().

 

It is difficult to imagine that such heel-dragging has gone down well with Dame Margaret.

Panel beatings?

 

Hodge has also just been appointed to a panel set up by Labour as part of its preparations for a possible return to government should it triumph at the next General Election.

 

This is a remarkable rise for someone who was once awarded “Tax Prat of the Year” by Taxation magazine. I am not sure it was ever awarded again. Perhaps the trophy was retired?

 

The panel is part of Keir Starmer’s strategy to close a ‘tax gap’ – the difference between taxes expected by the Treasury and the sum actually received – which stood at £35.8 billion in 2021-22, according to HMRC’s most recent annual accounts.

 

The panel’s brief includes “how to improve tax compliance” which should make for some interesting exchanges, given that Dame Margaret has already crossed swords with two of her new colleagues.

 

Although Bill Dodwell was formerly tax director of the Office for Tax Simplification (God rest its soul), he and Dame Margaret butted heads when he gave evidence to the Public Accounts Committee during his time at Deloitte.

 

Even more intriguing is Keir Starmer’s decision to add Sir Edward Troup, a former Permanent Secretary at HMRC, to his panel of “independent experts”.

 

After all, he is the very same individual who, while he was in private practice with the law firm Simmons and Simmons, penned a newspaper article describing taxation as “legalised extortion”.

 

Both sets of encounters are recalled in Hodge’s book, Called to Account.

 

It is a shame that Labour’s panel does not contain more breadth. The two tax experts undoubtedly cover off international and large business tax.  With the remainder made up of Hodge and Mike Bracken CBE (a digital leader) it does not seem to include a member whose bread and butter work has been around the tax affairs of SME businesses. A significant oversight and an opportunity missed.

 

That said, who would not like to be a fly on the wall when Sir Edward and Bill Dodwell sit down to thrash out Labour’s tax policy with Dame Margaret, a woman once described as being on a “personal crusade” against the tax profession?

Conclusion

 

In her latest opinion-editorial, Dame Margaret has talked of “consensus” being a key element Government efforts to bring the tax havens into line with international standards. However, bearing in mind the EU ruling above, internationally, it is arguable there is an international consensus at all.

 

Regardless, consensus might be something that is in short supply when it comes to Labour’s new, shiny tax panel, if she and her former tax advising adversaries cannot leave their respective personal histories behind.

 

Who wouldn’t want to be a fly on that wall?

 

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