The Olive Press – May 2016
Ian le Breton
I imagine most people will by now have heard of the so-called “The Panama Papers” – some 11.5 million confidential documents that were “hacked” from the database of a Panamanian law firm and transmitted to the worldwide press. No one yet seems certain – or at least they haven’t said – how this has happened, nor what the consequences will be for the law firm, Panama’s finance centre or the individuals and companies named in the files.
I have been following the story with some dismay: not out of sympathy for any alleged tax evaders; still less for any advisers, Panama-based or elsewhere, who may have facilitated such activities. As a director responsible for business development of a regulated firm in Gibraltar, I know only too well how difficult it can be to attract good, clean business whilst turning a reasonable profit. After all, customer identification and due diligence procedures can be time consuming and costly, for both parties.
So any high-profile event that will ultimately serve as a warning to criminals and tax dodgers that they will be exposed is to be welcomed. It will also serve as a warning to any advisers who make a living by pursuing such a misguided career path. In other words, it should help to level the playing field for the rest of us.
So why am I so cross about the leaking of the Panama Papers? Mainly I think because the industry – rightly – has made giant leaps in recent years to comply with ever more stringent regulation. I have written recently about the OECD’s Common Reporting Standard or CRS. By the end of next year almost 100 jurisdictions worldwide will introduce automatic information exchange. It will no longer be possible for people in those countries to evade tax by failing to declare taxable income. Tax planning that involves any element of “non-reporting” when such returns are legally required is not tax planning at all. It is fraud.
The press and politicians, however, make no attempt to differentiate between those jurisdictions, such as Gibraltar and Britain’s Crown Dependencies, whose levels of regulation match or exceed OECD member states and those, such as Panama, who do not. We are all tarred with the same brush and, when a story such as the “Panama Papers” breaks, that tar suddenly becomes thicker and more difficult to remove.
It doesn’t stop there. The argument seem to have moved on to whether it is acceptable for any taxpayer to seek to reduce the amount of tax they pay. For example, the UK press is now crying foul because David Cameron’s mother gifted him a sum of money that will, if she survives for seven years, be free of inheritance tax. Why? This is a totally legal option, clearly set out in UK legislation, which is open to every UK taxpayer.
So yes, I am annoyed. The unbalanced reporting following the release of these papers means that we are all – jurisdictions and professionals alike – being implicated as somehow morally reprehensible. But there is a much more positive story to be told and I will continue to promote it far and wide. I am sure that the rest of the Gibraltar finance industry will do likewise.