The failure of UK Prime Minister David Cameron to fulfill his pledge to curtail widescale tax avoidance has been thrust into the spotlight by the trove of leaked legal documents known as the Panama Papers, which includes revelations concerning his father's offshore financial dealings.
The documents show how Ian Cameron employed dozens of people in the Bahamas to sign off on matters relating to his company Blairmore Holdings Inc., which managed tens of millions of pounds of assets. The company is based in the Bahamas but was incorporated in Panama, where it has been a longstanding client of the law firm at the center of the controversy, Mossack Fonseca.
The German newspaper Süddeutsche Zeitung received almost 40 years' worth of leaked internal records from the firm nearly a year ago, and collaborated with the International Consortium of Investigative Journalists in order to process the voluminous material. More than 100 affiliated media outlets were involved ahead of the public disclosure on Sunday.
As well as David Cameron's father, other senior members of his ruling Conservative Party were named in the documents, such as former major party donor Lord Ashcroft and former MP and cabinet minister Michael Mates. Lord Ashcroft has since denied ever doing business with Mossack Fonseca.
The Guardian has confirmed that Blairmore Holdings has never paid any tax on its profits in Britain, despite a UK customs official saying that the activity of the business suggests it was managed and controlled from the UK, and therefore subject to UK taxes.
Ian Cameron died in 2010, leaving 2.75 million pounds ($3.9 million) in UK-based assets and an unknown amount of overseas assets to his four children. Under the terms of his father's will, David Cameron inherited 300,000 pounds ($430,000), an amount just shy of the upper limit for incurring inheritance tax. A spokesperson for the prime minister told the Guardian that the question of whether Blairmore Holdings still held family assets is a "private matter."
While details of Ian Cameron's offshore financial activity have been known for a number of years, the leak has exposed many of the intricacies of exactly how he avoided tax. Those include the use of bearer shares to control Blairmore Holdings, which do not carry the name of the owner and belong to whomever holds them in their hand. Though bearer shares are legal, they have been criticized for facilitating money laundering by organized crime groups and tax evaders.
Ian Cameron's financial activity and David Cameron's refusal to acknowledge whether family assets are still held by the company are particularly damaging in the context of the prime minister's insistence that he has acted effectively to combat tax evasion and avoidance, which costs the UK around 32 billion pounds ($45.5 billion) per year. The UK government has stated that it has closed the gap by 7 billion pounds ($10 billion) between 2010 and 2015.
UK crown dependencies such as Jersey and Guernsey, along with overseas territories such as the Cayman Islands and Bahamas, are at the heart of that avoidance. In 2014, David Cameron wrote a letter to the governments of the tax havens it oversees, asking them to establish a transparent register of firms and individuals whose assets they were holding. He described such a register as "vital to meeting the urgent challenges of illicit finance and tax evasion."
Since then, only Montserrat and Gibraltar have made any notable moves towards a register, while Bermuda has refused to even hold a consultation on such a move. In a statement released in December 2015, the UK government appeared to temper its demand for transparency, saying the various territories had agreed to central registers or "similarly effective systems."
The documents have also highlighted how Britain has more companies based in tax havens than almost every jurisdiction other than Hong Kong — itself a former overseas territory — while the most widely used tax haven is another overseas territory, the British Virgin Islands.
The unflattering scrutiny Cameron's family finances are receiving will also ramp up attention surrounding an Anti-Corruption Summit the government is hosting in London next month — almost a year after the prime minister gave a landmark speech denouncing corruption and demanding business ownership transparency during a visit to Singapore.
In that speech, Cameron called corruption the "cancer at the heart of so many of the world's problems." Responding to claims that corrupt rulers and criminals have parked assets in Britain using property purchased through shell companies, he declared himself "determined that the UK must not become a safe haven for corrupt money from around the world."
But in a statement released in January, global corruption watchdog Transparency International (TI) drew attention to the "contradictory signs" being given off by the UK government regarding corruption, such as the dropping of proposals to place personal responsibility on bankers for money laundering failings, and ongoing close relations with leaders of states known to suffer deep problems with corruption, such as China and Saudi Arabia.
In that statement, TI published a list of "five achievable things the Prime Minister could do before the Summit to defuse criticism and show he is serious", which included addressing the "Achilles Heel" in his anti-corruption plans – the overseas territories.
"It's not just their role as centres of global money laundering: it's the cronyism and corruption that has allowed this to happen," said the statement.
On Monday, TI-UK Executive Director Robert Barrington said he hoped the spotlight that is now shining on Cameron would bring meaningful action ahead of the summit.
"These revelations will increase the scrutiny on the PM and whether he is willing to move to close the loopholes in the global financial system," he said.