[A-List] UK corporate state: tax shelters

[Keaney Michael]

Private Eye

No. 1049, 8-21 March 2002

In the Back: Havens Above

Getting information from the Inland Revenue is always a tough business, but the Eye has had special problems trying to probe the growing links between the Revenue and the big accountants and banks whose main job is to avoid paying taxes and rip off the Revenue.

A request on 11 February for a list of "secondees" from private industry to the Revenue brought an answer on 19 February: a list of 13 secondees, mostly from professional tax avoiders like KPMG, PriceWaterhouseCoopers and Ernst & Young. Further questions extracted the fact that most were members of an advisory group that no longer exists.

So the Eye tried again and at last got a list of real names of six secondees from big business. They are: Susan Wallis from Boots and Earlette Blake from BT, who are now working in the Revenue's human resources section; Lucy Chadwick and Tom Ground from Accenture (once Andersen Consulting) and now part of the Revenue's "quality public services team"; David Evans from KPMG, now working in the Revenue's "business tax" section; and Peter Mainds from Barclays Bank, now in the Revenue's enforcement office.

There are certain oddities in the lists. For instance, the first answer from the Revenue listed only one secondee from Accenture; the second lists two. Nor is there any mention of Anthony Davis, who has just joined the Revenue on a fixed appointment for a year fresh from the most artful of all tax avoiders, Ernst & Young.

Mr Davis now works in the business tax section, whose staff have been instructed to act as "champions for business" and where he will have to keep well clear of the recent warnings to tax inspectors to watch out for at least two schemes for blatant tax avoidance masterminded by, er, Ernst & Young.

Barclays Bank, which nurtured Peter Mainds, is also well known in the Revenue for its tricky avoidance schemes. As for KPMG, which produced David Evans, it was commissioned in 1999 by the government to produce an "independent" report on regulation in British dependencies in the Caribbean. The report drew loud acclaim from government ministers Melanie Johnson (Commons) and Baroness Scotland (Lords). But the warmest tribute came from the chief minister of the British Virgin Islands, the Hon Ralph O'Neal, who proclaimed that his government "welcomes this comprehensive report".

Implementing the (very mild) recommended regulations, he said, was "integral to the BVI's commitment to being in the top echelon of offshore financial services". The same sort of gushing praise was heaped on the KPMG report from the governments of the Cayman Islands, the Turks and Caicos Islands and Montserrat. In all these places there was widespread relief that the British government, thanks to KPMG, would not embark on any of the reckless attacks on tax havens that some Labour enthusiasts had threatened.

A few months later, the confidence of the British government and its supporters in Caribbean tax havens was reinforced by the sale of £1bn of British tax offices to a company whose parent (audited, inevitably, by Arthur Andersen) is registered in the British Virgin Islands (see last Eye).

Despite the sale, however, and the praise from KPMG, the British Virgin Islands are still branded as harmful by the Organisation for Economic Cooperation and Development (OECD), of which Britain is a member. In November 2001 it published a list of 35 tax havens regarded as an international menace. Eleven of these have since made some commitment to make their tax regimes more transparent. The OECD's deadline for such commitments was 28 February. Among territories that have not met the deadline are the British Virgin Islands.


Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney at mbs.fi