Terrible Idea – Forcing Transparency On British Overseas Territories

We’re told that the government is going to force transparency over the ownership of assets upon the British Overseas Territories. Also known as the world’s best tax havens. This is a truly terrible idea and it comes from entirely missing why people use them. It ain’t because of the taxation. Or rather, it’s to avoid the unofficial taxation that people would be subjected to at home.

Corrupt Russian oligarchs sheltering dirty money in Britain’s overseas territories will be exposed under laws set to be forced on Theresa May next week.

Tax havens such as the British Virgin Islands and Cayman Islands have so far resisted moves to follow the UK’s lead and reveal to public view the identities of those benefiting from assets held under their jurisdictions.

Campaigners say that the secrecy enables money laundering, which in turn facilitates criminality, corruption and oppression, including in Russia.

The prime minister has promised tougher measures against President Putin’s cronies after the poisoning of the former Russian spy Sergei Skripal and his daughter, Yulia, in Salisbury last month.

Next week a coalition of Tory rebels, Labour, the SNP and other opposition parties will challenge Mrs May to match her rhetoric with action when new sanctions legislation is debated in the Commons.

This is to badly misunderstand how and why Russian – to use the example being used there – use tax havens. It’s not to hide corruption from other Russians. It’s to hide legitimate activities from other Russians – most notably the Russian government. No, not for tax reasons at all – a 13% flat rate income tax doesn’t lead to much tax dodging. Indeed, that’s why they brought that rate in, collections soared as people stopped evading.

We’ve also a guide as to why this is a bad idea:

An amendment requiring the government to force British overseas territories and crown dependencies to bring in the transparency reform by the end of 2020 has been tabled by the Labour MP Dame Margaret Hodge and is being strongly supported by the party’s front bench.

Dame Margaret, Lady Hodge, is for it, a pretty good guide to it being a bad idea. Actually, it goes further than that, we’ve proof perfect it’s a bad idea:

Most of all this matters because it imposes transparency on these tax havens whose deliberate opacity has always had the intention of hiding nefarious activity.

There will be fewer places to hide the proceeds of crime if this amendment is passed.

And fewer places from which to hide attacks on the world’s legitimate tax systems when those attacks impose cost on us all.

The Egregious Professor is in favour meaning we know that it’s a truly terrible idea.

So, if it’s not taxation and it’s not corruption that are being dodged then why are people using these places? And why is it that public registers of ownership are a bad idea? Why, because of taxation and corruption of course. The dodging of them too. But it’s the dodging of the unoffical taxation through corruption which is being dodged. And please do note I speak as someone who lived and worked in Russia for years.

People in our rich and peaceful western countries simply do not understand what it is like in some of those other places. I once opened a bank account for a Russian company in Russia. Put $100 into it just to open that account. Three days later my driver received photos of his daughter through the mail along with a note insisting that he really should persuade us, us westerners, to start paying the local mob otherwise his daughter would get it. The details had, of course, been sold on by people within the bank. And no one at all wants to try and go through the Russian courts system while chasing a business dispute. One guy I know did, over the ownership of a hotel. Lost in hte Russian courts, won in Stockholm in arbitration and….well, I should say I used to know him actually, as he got shot just after that. Assassinated.

This is something that popped up when the Cypriot banks all went bust. Massive amounts of Russian money in them. Why? No, not because anyone was trying to dodge official Russian taxation. But so as to dodge that unofficial – and also to have access to an actual court, rather than patronage, system. They’re not trying to escape the Russian state, they’re trying to escape the Russian gangsters.

So, what does a public register of asset ownership do? Provide the gangsters with a nice address book of people to go extort. Which is why it’s a bad idea.

That tax havens – or secrecy jurisdictions – provide a service people desire is obviously true. They wouldn’t be using them without that desire, would they? But which desire it is being sated is important. And fleeing the lawless gangsterism of home is a just enough desire isn’t it? A service, an ability, we’re happy enough people provide?