The Paradise Papers

Another leak of financial documents has revealed how the powerful and ultra-wealthy, including the Queen's private estate, secretly invest vast amounts of cash in offshore tax havens. The leak, dubbed the Paradise Papers, contains 13.4m documents, mostly from one leading firm in offshore finance. At the centre of the leak is Appleby, a law firm with outposts in Bermuda, the Cayman Islands, the British Virgin Islands, the Isle of Man, Jersey and Guernsey.  The lack of transparency and advantageous tax regimes make them the investment place of choice for the rich.

The Paradise Papers show that about £10m ($13m) of the Queen's private money was invested offshore. It was put into funds in the Cayman Islands and Bermuda by the Duchy of Lancaster, which provides the Queen with an income and handles investments for her £500m private estate.  The Queen, through the Duchy of Lancaster, has held and still holds investments via funds that have put money into an array of businesses, including the off-licence chain Threshers, and the retailer BrightHouse, which has been criticised for exploiting thousands of poor families and vulnerable people.

'Philanthropist' Bono and U2 invested in a company based in Malta where foreign investors pay 5% tax on profits to buy a share in a shopping centre in Lithuania. Bono makes no apologies for his tax affairs. In 2015, he said U2 “paid a fortune in tax”. 

Tax havens (or offshore financial centres) are secretive and vary on how rigorously they carry out checks on wrongdoing. Multinational companies are shifting a growing share of profits offshore – €600 billion in the last year alone. 300 economists, including the Nobel prize winner Sir Angus Deaton, signed a letter to world leaders that argued: “The existence of tax havens does not add to overall global wealth or wellbeing; they serve no useful economic purpose.”

The UK is a big player here, not simply because so many of its overseas territories and Crown dependencies are OFCs, but many of the lawyers, accountants and bankers working in the offshore industry are in the City of London.

It's also about the mega-rich. Brooke Harrington, author of Capital Without Borders: Wealth Managers and the One Percent, says offshore finance is not for the 1% but the .001%. Assets of around $500,000 (£380,000) would just not meet the offshore fees the schemes would need, she says. Brooke Harrington says if the rich are avoiding tax, the poor pick up the bill: "There's a minimal amount the governments need to function and they recoup what they lose from the rich and from corporations by taking it out of our hides."

A leading economist Gabriel Zucman explained, “Tax havens are one of the key engines of the rise in global inequality. As inequality rises, offshore tax evasion is becoming an elite sport.”  He suggests that the global elite have parked an estimated 7.9 trillion euros ($9.1 trillion) in offshore tax havens.

Oxfam GB’s head of inequality, Ana Caistor Arendar, said the Paradise Papers showed why such a measure was necessary. “This is yet another stark reminder that, when it comes to tax, too many big companies and wealthy individuals play by different rules to the rest of us,” Arendar said. “There’s an often overlooked but very real human cost to tax dodging – it deprives poor countries of billions each year needed for life-saving healthcare and life-changing education.”