If it takes a Labour Government to sort out a problem after more than 200 years, we will sort out the problem.
On paper, this idea seems to be reasonable and sensible —in fact, even progressive—until, metaphorically speaking, someone starts to scratch away at the very thin veneer. In reality, the Government have purposefully and deliberately exempted offshore trusts, thereby undermining their own reforms, even though offshore trusts have been identified by the OECD, the European Parliament and the International Monetary Fund as among the main vehicles for tax avoidance across the globe.
1.30 pm
The Panama papers and now the Bermuda leak have brought offshore trusts to the forefront of debate on international tax avoidance. The Panama papers provided us with an abundance of evidence showing that offshore trusts have been used for tax avoidance over the years. Many well-known people have set up offshore trusts to ensure that paying inheritance tax, for example, is a mug’s game. It is not unknown that high-level politicians and business leaders are embroiled in the Panama papers scandal. The Government of one European country were brought down when it emerged that their then Prime Minister’s family had hidden millions offshore.
The use of offshore trusts is not restricted only to inheritance tax; it is also relevant to income tax, as was shown by a recent case involving one of the Scottish football teams. We have also seen in Spain the rising problem of tax avoidance relating to football image rights, with a number of high-profile players convicted for shifting profits from image rights offshore, as has been raised by Opposition Front Benchers and the hon. Member for Dover (Charlie Elphicke).
There are also reports of the banks in the City of London using offshore trusts. In 2011, for example, following advice from Deloitte, Deutsche Bank set up trusts to enable bankers to dodge income tax on their bonuses. HMRC successfully managed to defeat that scheme, but others are still in use today. The truth is that HMRC, the staffing levels of which have reduced by 17% since 2010, is woefully understaffed and under-resourced to tackle such schemes. HMRC insiders believe that as much as £1 billion a year is lost to wealthy individuals hiding money in offshore trusts.
The House should be clear that offshore trusts continue to operate outside the law and with impunity. They remain one of the last bastions for international tax dodgers. The value of the assets hidden in these trusts remains unknown, and they continue to operate under a veil of secrecy. None the less, a conservative estimate made by the economist Gabriel Zucman suggests that at least 8% of the world’s wealth is illegally unreported, although other estimates actually put the figure higher. In short, it is impossible to know how much money the UK Treasury is forgoing in tax, as this Government continue to stonewall any attempt by the Opposition to introduce a public register for offshore trusts.