The 2009 Westminster expenses scandal just got eclipsed, and by some way. 11.5 million files have been leaked to Mossack Fonseca, a law firm operating in the tax havens of Switzerland, Cyprus and the British Virgin Islands, and in British dependencies Guernsey, Jersey and the Isle of Man.
It is the world’s fourth biggest provider of offshore services, favoured by the rich and famous who want to find creative and inventive ways of hiding their wealth: or put another way avoiding (evasion is largely a domestic office for the poor, the bewildered and the desperate) tax liabilities.
It’s a properly global scoop from the Guardian and is likely to be creating headlines right across the world for weeks ahead. Mr Putin already has a $2bn figure lodged against his name. Intriguingly, it no only tells how much he has but how he’s been spreading it around.
Others in the frame are David Cameron’s late father Ian, Lord Ashcroft, Baroness Pamela Sharples and former Tory MP Michael Mates.
The data covers nearly 40 years, from 1977 to the end of 2015, and lists nearly 15,600 paper companies set up for clients who wanted to keep their financial affairs secret. An awful lot of material, we may be hearing only of the tip of a very large iceberg.
It looks like the Irish Times have been given a piece of the action, with Colm Keena chasing down former Fine Gael strategist Frank Flannery over the involvement of a BVI company called International Funding Promotions Ltd in a London house purchase…
The leaked Panama Papers include two signed letters from Joe Holden of Bank of Ireland Private Banking, London, to Frank Flannery and his wife, dated April 29th, 1996. The first is a letter of offer which says the bank will give the couple a term loan of up to £625,000 to be used to purchase a house in London for £615,000, with the £10,000 excess being for legal and other fees.
The terms and security, set out in the letter, include a charge over the property, life cover of £400,000 for each of the borrowers for the term of the loan, and other issues. The letter cites an eight-year term, and refers to 96 monthly payments of £4,036.45 per month, variable, ie depending on how interest rates change.
That number of monthly repayments of that amount would total £387,499.20. Mr Flannery and his wife signed the letter on May 1st, and 2nd, respectively, the leaked files show. A second letter signed by Mr Holden referred to the first one of the same date and concerned additional security he said the bank would rely on.
This involved an account of an unnamed offshore company (“domiciled in Jersey”) holding £250,000. The letter said the agreement will secure for the bank any interest on the £250,000 for the duration of the loan, save an amount in the region of £2,000 to £3,000 per annum for running the trust structure behind the offshore company.
Hmmmm. Poor Frank. But for clarity (and proportion), in the UK’s relatively well (in comparison to Ireland) resourced HMRC has only prosecuted 11 offshore tax evaders in the last eleven years. As Jolyon Maugham points out their attitude towards the wealthy is, erm, interesting:
For scale, we know that the HSBC disclosures led to HMRC becoming aware of the names of 3,600 potential evaders – and in consequence HMRC “encouraged” 500 people to take advantage of the Liechtenstein Amnesty. Offshore tax evasion really has been, as Margaret Hodge put it, “a risk worth taking” (see Question 102 here).
This is a well established, well resourced and wholly internationalised culture, so: don’t hold your breath…