Stop press: Election fever has broken out!

The re-hash this morning of a seven year old story by the BBC, conveniently given front page prominence by the Guardian, and with cheerleading by Labour's Margaret Hodge, appears to be an effort to sustain the spectre of wrongdoing on a grand scale supported by hourly promotion of the next Panorama 'expose' on the main BBC news.

 

Swiss Leaks

 

Yes a list was stolen, yes it may have revealed some tax evaders, although precious few prosecutions have taken place in the last seven years, which indicates probably far fewer than is alleged were involved in wrongdoing. An often overlooked fact is that most tax evasion actually takes place onshore via VAT fraud or cash trades. 

Why would a wealthy person have an offshore account if not for tax evasion is the implict message in the storyline. Well there are lots of very sensible reasons, for some in unstable countries protecting your cash from corrupt governments, predatory tax officials, or your family from the risk of extortion or kidnap. Asset protection from the kind of appropriation seen in Argentina or Cyprus will also feature. 

Wealthy individuals with business interests in several countries often operate a single banking hub to manage multi-currency money flows across borders and to maximise returns on their cash pooling. So contrary to the nudge nudge wink wink commentary of some sections of the media there are numerous sensible and legitimate reasons to hold value outside of your own country, which is essentially what offshore means.

So why is all this kicking off now on the back of an old story, where significant remedial action has already been taken by HSBC several years ago.

The answer I think is politics; an attempt by a coalition of interests to try and embarrass the government of the day and promote the view that the Coalition is in the pockets of the wealthy.

Most countries have entered into automatic information exchange agreements under the OECD common reporting standard so all tax authorities will have details of their citizens holdings in other countries going forward, and the UK already has this on bank accounts through the EU Savings Directive.

The policy aspects of making sure people pay the taxes that are due has been solved, but of course naming and attempting to embarrass honest but well known citizens will always grab more attention.

We saw with the Miliband intervention over the weekend that the election gun has been fired, and we will see a lot more huff, puff and hyperbole before its all over. Roll on May 7th.

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