The Guardian reports: In June 2013, two Swiss lawyers held a private telephone chat. They were annoyed. In London, David Cameron had just given a speech. The prime minister had promised to sweep away decades of offshore “tax secrecy” by introducing a central register. Anybody who owned an offshore company would have to declare it to the authorities.
The G8 summit, to be hosted by Cameron on the shores of Lough Erne, in Northern Ireland, was looming. Top of the agenda: how to stop aggressive tax avoidance.
For much of the 20th century hiding your money was simple. You got a lawyer, filled in a form and set up a Swiss bank account or offshore “shell company”.
Nobody asked questions. For a couple of thousand dollars a year, it was possible to hide away profits where governments could never find them.
But in the UK crown dependencies and overseas territories where financial services were the main source of jobs and income times were changing. In tropical tax havens such as the British Virgin Islands a chill wind – or at least the threat of one – was blowing.
One of the Swiss lawyers was Sandro Hangartner, the Zurich boss of the Panamanian law firm Mossack Fonseca.
The other man, his disgruntled caller, was Sascha Züger. Züger’s company looked after the assets of some very wealthy South Americans.
In an email to his head office in Panama, Hangartner wrote: “Sascha is not very pleased about the development in BVI [British Virgin Islands].”
He was now looking for “alternatives”, Hangartner added – in other words other secret jurisdictions where a client might park their money.
For the network of international lawyers and accountants who serviced the offshore industry, these were troubled times.
Cameron’s speech was merely the latest piece of unwelcome attention. Since 2008, and the global financial crisis, cash-strapped exchequers had been trying to get their hands on billions in potential tax revenue hidden offshore.
How serious these attempts were was a matter for debate.
What wasn’t in doubt were the vast sums involved. According to the US economist Gabriel Zucman, 8% of the world’s wealth – a vast $7.6tn (£5.3tn) – was stashed in tax havens.
Zucman estimates the loss in global tax revenues at $200bn per year. That includes $35bn in the US and $78bn in Europe.
Previous attempts to bring about transparency had flopped. But now the world’s leading economies – the G20, G8 and Organisation for Economic Cooperation and Development – were apparently pursuing the theme with zeal.
If Cameron got his way, British overseas territories such as the BVI and Gibraltar would soon have to draw up a register of beneficial owners – the real owners of a company, even though their name may not appear on the shareholder register. The crown dependencies Jersey, Guernsey and the Isle of Man would fall into line, too. [Continue reading…]