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  1. Wealth
June 27, 2016

Can Britain follow Norway’s ‘model of openness’?

By Spear's

Ceris Gardner on why the authorities, and not the neighbours, should be the judge on fair play in tax.

Who do we think we are — Norway? No, I am not referring to Brexit, although Norway is an example oft-cited of how the UK could have a different relationship with the EU. No, I am thinking rather of Norway’s unique approach to personal financial information. As has been widely discussed over the last few weeks, Norwegians can look freely at one another’s tax returns. In the wake of the Panama Papers, this has been held up as a model of openness.

The British are, however, known for their reserve, and not for nothing is it said that an Englishman’s home is his castle. We are openly curious about the wealth (and peccadilloes) of others, particularly those in the public eye, but do we really want our own finances exposed to the curiosity of our friends, rivals and strangers? If your mother could see your tax return, would you wish you were richer or poorer? And do you really think the wealthy feel differently about that?

Let’s be clear — the global moves towards transparency are necessary steps to prevent money laundering, tax evasion and the illicit concealment of assets. Few would argue against the need for a co-ordinated international response to criminal activity, organised crime, and terrorism. Most now also accept the fairness of an international approach to preventing tax evasion, and already we are feeling the effects of the introduction of both supranational and national information exchange measures through FATCA, the Common Reporting Standard and the registers of ‘persons with significant control’ of companies (PSC). We will also soon see the introduction of a register of the beneficial ownership of all companies holding land in England and Wales. Unlike the PSC register, which relates to the shareholders (and others) in UK companies, this proposed new register will apply to all companies, wherever incorporated, which own land in England and Wales and it will contain details of the ultimate beneficial owner(s) of the company. Pro-transparency champions feel this is an excellent further step, but it raises questions about whether the legitimate privacy of many is being breached to expose the wrongdoing of a few; and whether it is more proportionate for the government, or the public, to have access to this information.

Even leaks and thefts of data have played an important role in exposing the remaining murky corners of the financial world. But most of those whose private affairs were disclosed through the Panama leak, and most of those whose details will become public once all the new registers are in place, have done nothing legally or morally wrong, and pay all the taxes they owe.

Those people choose ‘offshore’ for its neutrality and discretion. They have nothing to hide from the authorities. They just don’t want the world and his wife to see their tax return or know that they live in a £5m house. Why should they? A footballer, businessman or lottery winner may use corporate owners of residential property for security reasons, wanting (for a variety of legitimate reasons) to ensure that their home addresses or details of their wealth should not be widely known. It is fair for them to feel concerned if their details have become public through the Panama leaks, and (even if they are not on that list) it is reasonable for them to be concerned that the proposed new registers of interests and property ownership will be publicly accessible and not restricted to government agencies.

Some people who have accounts and assets offshore are inevitably going to conclude that bringing their money ‘onshore’ is sensible. Taxes will still be paid, the authorities will still be able to gather and exchange information, but nobody has (as yet) leaked a list of those with bank accounts in Croydon.

And yet, there is still one last hurdle. All this is fine if you’re UK-resident and domiciled, but if you’re here as a non-dom, you’d lose a large slug of your savings to the taxman if you wanted to bring them to the UK. That’s because the UK’s tax rules don’t distinguish between Panama and Paris — for us, the whole world is ‘offshore’. Without major changes to the rules to make it simpler for non-doms to bring funds to the UK, we have to accept that they will be keeping their money in New York, Zurich, or even Panama — anywhere but here. The UK still sends an odd message to the world: ‘Come and live here, but leave your money offshore.’ If we really think offshore is unpleasant, it’s up to us to change the rules, not berate those who abide by them.

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But even if everyone who lived here kept all their money here, I still don’t think we’re ready to be Norway. We want to know that everyone is playing fairly by the same rules, but we should be prepared to let the authorities be the judge of that, rather than our neighbours.

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