Tax Avoidance

The Paradise Papers Are Just the Tip of the Iceberg

We spoke to a tax avoidance expert about what to expect next.

by Simon Childs
Nov 6 2017, 8:04pm

A boat anchored off the Cayman Islands, a tax haven. Photo: Collinsdirk / Pixabay, via

This article originally appeared on VICE UK.

Yesterday, a tax avoidance mega-leak dropped, treating us—so far—to both the sight of the UKs former chairman of the Conservative Party, Lord Ashcroft being chased into a bathroom repeating "dear, dear, dear," and the shocking revelation that the Monarchy is some sort of bastion of privilege.

The so-called Paradise Papers reveal millions of documents from a Bermuda law firm* called Appleby, which helps rich people ghost their money around the world via a network of island tax havens. Most controversially, the Queen was found to have indirectly invested in Brighthouse, a pawn shop chain accused of exploiting the poor.

I called John Christensen, the Director of the Tax Justice Network, and ask him how the Queen ended up in the same position as Jimmy Carr a few years ago, and if this could spur someone to finally deal with tax avoidance.

VICE: Were you surprised when the story came out?
John Christensen: Not really, because I've been involved in it for months. It's going to keep coming out because there are so many angles to it and so many people involved. I expect this to continue for weeks.

So how does the Queen end up investing in a pawn shop?
It's not unusual. The Queen's affairs are handled by a wealth management team through the Duchy of Lancaster [a ministerial office tasked with the goal of providing an independent source of revenue for the Queen]. The Queen falls into the category of ultra-high net wealth individuals. It's not unusual for ultra-high net wealth individuals to invest across different countries and across many different portfolios. What is awkward is one would have expected that the wealth managers acting on the Queen's behalf would have paid particular attention to ethical issues and would have avoided a company like Brighthouse. The fact that they didn't is a major failing because she's now exposed to a very high reputational risk.

The Queen using an offshore investment fund is an exceptional story, but I was wondering if what this really tells us is how extremely commonplace this kind of practice is?
I think that's the key problem. Tax avoidance has become absolutely commonplace among the wealthy elite. They just regard it as normal to use offshore tax havens, and they regard tax avoidance as absolutely normal.

The problem is that we don't know whether tax avoidance is legal or illegal. Judges are the only people who can deem a tax avoidance scheme legal or illegal, so when journalists say it's legal they're technically incorrect.

It seems that tax avoidance in the last 30 years or so has become the norm—regarded as good practice. Of course, tax avoidance is a full-on attack on democracy. So for the Queen to be in any way associated with schemes that are avoiding tax is really bad for her reputation.

So it's normalized?
It's so deeply embedded in contemporary capitalism that they regard this as acceptable behavior. What they then do is they try to distance themselves from this by saying "we use this place because it's tax neutral"—which means nothing at all. "We assume the wealthy people are paying taxes where they're due." That's an assumption that they're not in any position to know. They have no idea whether their clients are paying taxes. In the vast majority of cases, they are not, because in the vast majority of cases ultra-high-net worth individuals use offshore trusts and companies precisely to avoid paying tax.

There's a kind of big game of make believe being played by the fund management industry globally, where they say "it's not our responsibility to ensure our clients are paying tax, but we'll use offshore tax havens anyway and make it easier for them to avoid paying tax."


A lot of the high profile people who get caught up in this kind of scheme seem to try to use plausible deniability as a defense: "Someone was a minority investor in a consortium that did a thing, which did another thing, which ended up investing in a shopping center via an offshore fund, so how could they possibly know?" Should we buy that?
No, we shouldn't buy that. First, ignorance is absolutely no excuse before the law. They should know better. By and large, they should know that any tax avoidance scheme involving offshore structures is likely to be sketchy, and they should steer well clear of this. Because everybody's involved in this, it's become too normal—it's almost the way things are in the world. The fact that inequality is rising and public services are collapsing—they seem to be totally unconcerned and not prepared to accept responsibility for that.

Could the Queen get in any legal trouble?
It's hard to say at this stage, however, I doubt she would. I put up a blog today saying the Queen must accept responsibility for this because she is, after all, head of state of Bermuda, Cayman, and the Channel Islands, which are most of the world's leading small island tax havens. As head of state, she cannot distance herself from responsibility for cleaning up these places.

I wrote to her in 2013 and she did actually reply. [I] said, "Look, can you please put pressure on the Prime Minister, David Cameron, to take affirmative action?" Well, it didn't happen. The Queen has a responsibility as a head of state, and Britain is undoubtedly the world's largest player in offshore financial services. London is not only the capital of global capital, but it's very closely associated with all of these islands. It's long overdue that Britain cleaned up its act. While the Queen might not be personally culpable of tax evasion, I certainly think as head of state, she has been deficient in cleaning up the mess.

Is there any prospect of things getting better?
I'm afraid that, in the case of Britain, things are likely to get worse because of the Brexit. As it precedes, the Brexit is actually undermining Britain's position globally. The Prime Minister gave the game away earlier this year, saying they're likely to go down the tax haven route [making the UK friendlier to corporate tax avoidance] even further than they have already gone. For that reason, I think that things might get worse.

So there'll be a lot of controversy and nothing much will happen?
There'll be a lot of controversy and nothing much will happen, yes. If you follow—as I do—what's happening at the international level, I talk with figures in Brussels, figures at the OECD in Paris and so on. They will say— always off the record—that Britain is among the leading lobbyists to block progress toward better international cooperation—particularly on information sharing, particularly on making company ownership information available on public record.

We had the Panama Papers, now we've got the Paradise Papers. How much more scope is there for this kind of leak to happen?
I think what we've only seen the tip of the iceberg. Mossack Fonseca and Appleby are both at the larger end of the scale of big offshore law firms, but there are many other big offshore law firms. This is a systemic problem and it's a global problem. Most of the global elites have been putting their wealth offshore for decades, evading and avoiding taxes, and perusing other criminal activities as well. Like I said, this is just the tip of the iceberg.

*Correction 11/06/17: An earlier version of this article incorrectly stated that Appleby is a wealth management firm.

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