Joe Public's view on Offshore Banking

I found this recent article which discusses "the rich"s use of offshore companies and thought I'd include it for the sake of balance. It's interesting to note the persistent media view that offshore banking is somehow 'immoral', and that such arrangements are the exclusive preserve of the ultra elite. I'm not sure how typical $USD2000 IBC establishment costs limit this to all but the ultra rich? This hack also claims, in her poorly researched 'expose', that "none of it has come to the attention of the taxman with whom the rest of us are on such intimate terms." - this is just outrageous nonsense, a five minute phone call to the taxman would dispel this - but it would also take the sensationalist edge off the article :-) IMHO the journalist concerned probably also uses words like 'profiteering', and has a very frail grasp on the basic concepts of capitalism :-) Jeremy.

Another mess, yet the men at the top still make a fat profit
Ruth Wishart

April 11 2005

Those of us destined to be no more than footsoldiers in the commercial army run by industry's
captains may lack the high-flying qualities to take us to the head of the boardroom table. But we do
have a reasonable hand-hold on the more basic employment realities.

For instance, the small business man or woman knows that real life is performance-driven. Knows that
if there is no profit there is no pay rise and certainly no bonus. The self-employed – that group Mr
Alan Milburn curiously believes to be strangers to paying national insurance – know that if they
don't show up for work, they don't earn.

A single parent on income support understands that the local shoe shop will only part with new
trainers in exchange for the recommended retail price of same. These basics seem to have been rather
lost on the four directors of Phoenix, the men who bought MG Rover for £10 four years ago. Estimates
vary about the amount of money they awarded themselves via pay and pensions in that period, but by
general agreement it may have been more than £30m and possibly nearer £40m; an astonishing amount
considering that the 6000 workforce, now staring redundancy in the face, have a collective stake in
a company pension fund which is alleged to have a £67m hole, tending to suggest inadequate
structuring.

Just how that quartet became extremely rich extremely swiftly in the face of mounting losses for the
company and after hiving off the more profitable land and intellectual property, will now form part
of a treasury inquiry into the whole MG Rover debacle.

It may be that the company they acquired from BMW, complete with a massive loan (unpaid), was
incapable of competing in the fierce marketplace of contemporary car manufacture. It may be that the
overweening desire to keep a British-owned car presence dulled common commercial sense. But the fact
remains that Messrs Towers, Beale, Edwards and Stephenson, for an initial personal stake of £60,000
apiece, set about a restructuring process which left all share voting rights in their sole control.
Shares distributed to employees related to the non-profit making car making while the directors'
portfolio included areas like financial services and land sales.

The MG Rover Four – five if you count the chief executive they hired – presided over the latest in a
series of high-profile business implosions where the people at the centre of strategic
decision-making didn't just emerge unscathed, but handsomely rewarded.

These days the captains don't go down with their ship – they strip out the fittings and swim to
safer shores and the whole principle of sharing the bad times as well as the good seems to have gone
well out of executive fashion.

This newspaper recently reported on the life and times of those running Standard Life, a company
facing some difficulties, but whose salary and pension arrangements for the most senior managers can
only make the average wage slave's eyes water in disbelief.

Equally, in those areas where companies have been hugely successful at playing at mergers and
monopolies, the rewards heaped on the dealmakers have reached quite ludicrous proportions.

The new business virility symbols are no longer just the cars, houses, and planes, but exquisitely
constructed packages which ensure that win, lose or draw the executives in question are assured a
platinum goodbye to dwarf their golden hello.

Paying good money for serious talent is entirely defensible. Paying sums where the gap between the
chief executive and the junior manager is of Grand Canyon proportions merely legitimises greed.
There is a very unsavoury underbelly to many aspects of contemporary business, and to grasp the
scale of it you need only read the report just published by the Tax Justice Network (TJN), a group
of economists and accountants who have been wading through the murky waters of tax avoidance. The
figures they have produced would truly boggle the average mind.

Thanks to the dedicated efforts of the tax specialists top earners deploy, over a third of the
world's GDP, at least 11 trillion (that's 11 million, million, million, in case you wondered) is
salted away by wealthy individuals in places which are tax free or subject to minimal liability.

That's just people mind you; they haven't begun to count the corporate earnings which somehow never
require to come to the attention of their operating country's exchequer.
Only the little people pay taxes, said Leone Helmsley at her fraud trial in New York. And so it
would seem. While the party vote chasers intone their mantra about "cracking down" on benefit fraud,
there seems an eerie silence surrounding the billions the most privileged find ways of squirreling
away where Gordon Brown's writ does not run.

We do not, of course have a tax equivalent of Interpol; there is no global inland revenue to chase
the cheats and the chancers. But it might help if we pulled away the red carpet from some
high-profile high-rollers who are laughing all the way to the safe deposit box. There is the
interesting case of industrial megastar Lakshmi Mittal who, at an estimated personal wealth of £13bn
according to Forbes Magazine's rich list, could certainly afford to pop the cheque he did into New
Labour's fund raising appeal. Mr Mittal is the chap who paid £57m for a multi-bedroomed pied-a-terre
next to Kensington Palace yet is exempt from paying much in the way of UK tax because his "primary
residence" is abroad. That's just one of many wheezes.

The very rich can and do register their companies in countries where they don't do business, file
their home address in low tax regimes, or register their holdings in the name of the missus.
According to the TJN report, the 25 favourite tax havens of 30 years ago now number 63 or more, and
offshore companies to move the funds around are being formed at the rate of 150,000 a year. None of
this is illegal. None of it is moral either. And none of it has to come to the attention of the
taxman with whom the rest of us are on such intimate terms.
Yet the estimated losses in Britain from tax avoidance are put at "between £25bn and £85bn a year".
It is a topsy-turvy world where those who earn the most contrive to pay the least; where the poor
fill in triplicate forms for an extra fiver and the rich move their assets out of harm's way at the
click of computer button. And an unfathomable one where 6000 share the pain of failure, while those
who presided over the likely demise of their employment pocket the gain.

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