Trouble in Paradise: Avoidance, Evasion and Offshore Accounts

Trouble in Paradise: Avoidance, Evasion and Offshore Accounts

The Gryphon shines a light on the latest leak of British celebrities hiding their wealth in offshore funds and exposing the most vulnerable in society.

On the 5th November 2017, millions of documents were made public relating to offshore investments. Named ‘The Paradise Papers’, these leaks revealed the private financial affairs of the world’s elite. The documents showed that millions of pounds from the Queen’s private estate have been invested in offshore funds and in companies like BrightHouse that have been accused of exploiting poor families. High-ranking political figures in the US, Canada and elsewhere have been found to be dealing extensively offshore, and prominent celebrities like Lewis Hamilton and Gary Lineker, as well as major companies such as Apple and Facebook, have been named in the leaks. 

However, despite the vast sums of wealth involved, these leaks are far from the first. ‘The Panama Papers’ leak in 2016 and the UBS tax evasion controversy in 2008 were not the first to bring to light the immense scale of tax evasion and avoidance, and the lengths to which the extremely wealthy will go  in order to hide and hoard their wealth to the detriment of the majority. These revelations are nothing new, but at a time when wealth inequality is rising significantly, it exposes the rottenness in our political and economic system and the failure to address crippling issues or build the fair and egalitarian society so often spoken about by political leaders.

The majority of those involved in the leaks depend on the general public for their wealth; whether that’s from the public directly purchasing their goods or by entertainment consumption. Therefore, it seems bizarre as to why they would want to take measures to prevent their wealth from developing society and contributing back towards it through tax; the very societies and people that enable them to build their huge fortunes. It is difficult to fathom the scale of this travesty, which consequently makes it even more difficult for the public and policy-makers to provide adequate solutions. 

But one thing is for certain: a collective mass of money in the region of billions of dollars has been lining some very deep and secret pockets. This amount of money has the ability to transform society in extraordinary ways for the better. The Financial Secretary to the Treasury, Jane Ellison, says that “every penny of tax that people evade deprives our public services of essential funding”. 

A conservative estimate by HM Revenue and Customs calculates that tax fraud costs the treasury £16 billion every year. This is considerably higher than the £12 billion the government sought to cut from the welfare budget which has mainly hurt the most struggling in society. 

The government has taken some measures to tackle tax evasion, such as sanctions on offshore tax evaders and making large businesses publish their tax strategies, but many campaigners argue that these measures are superficial and haven’t effectively dealt with the issue. Research done by accountancy group UHY Hacker Young showed that the government’s measures have mainly hit small and medium-sized businesses because they are considered “an easier target than many larger businesses”. Therefore, government measures don’t tackle the greater issue of tax evasion among the financial elite and multinational corporations.

“…the ever-growing inequality and separation between the richest and poorest in society and, so far, it has been getting worse. To be apathetic at a time when these problems are growing will only strengthen the position and arrogance of those that participate in these practices”

We must question why the elite engage in these practices when most will not spend even a small fraction of their total wealth and refuse to take future generations into account. It leads many to conclude that we live in a society and system that rewards greed for the sake of greed and thrives off of the continuous distrust and resentment between different groups. Despite a survey by YouGov showing that the general consensus from the public is that tax evasion is wrong, the reaction towards the leaks has been lukewarm at best. There is clearly increasing apathy towards these behaviours and it has become the norm and even expected for the richest 1% to hide vast amounts of money at the expense of the rest in society. 

However, this kind of apathy is dangerous. In Britain, the richest 1% own as much as the poorest 55% of the population, around 30% of Britain’s children are now classified as poor – of whom two-thirds are from working families – and the number of rough sleepers in the UK has risen for six years in a row. Shockingly, according to the Food Standards Agency, one in four low-income households do not eat regularly or healthily because of a lack of money. We additionally see individuals that commit a few thousand pounds of benefit fraud prosecuted and publicly vilified as ‘scroungers’ while people that evade tax to the tune of millions of pounds get away with it. 

These disturbing statistics highlight the ever-growing inequality and separation between the richest and poorest in society and, so far, it has been getting worse. To be apathetic at a time when these problems are growing will only strengthen the position and arrogance of those that participate in these practices. The problem is global, and it can be easy to assume that as individuals, we can’t do anything about it. But there are ways in which we can all ensure that this issue becomes a major political one so that everyone plays their role in building a fairer society.

Firstly, it is important that we educate ourselves about tax evasion; once we do our research, we will realise the immense scale of the problem and recognise why it is an important issue to tackle for the betterment of society. In addition, when political parties, politicians and major influencers like the Director General of Enforcement and Compliance for HMRC, Jennie Granger, say “we are determinedly tackling this [tax evasion]. We will find those who think they can dodge paying tax in this country”, we must genuinely hold them to account in TV debates, petitions, letters, elections and any situation where we can apply pressure.

 

Inaya Folarin

 

[Image: Shuttershock/ CNN Money, National Geographic]