The old distinction between the 'haves' and 'have-nots' is now basically a distinction between those who have off shore accounts, companies, trusts, and those who haven’t, said Geoffrey Robertson, a prominent British lawyer in an interview with RFE/RL.
“That’s why everyone is getting angry, and of course, the law has not caught up with people who hide their wealth from the taxman off shore,” he continued.
Robertson added that “Britain is the main supporter of tax dodging in the world because of these old empire islands that it controls, and it just allows to develop secrecy jurisdictions in relationship to the money.”
He has had a distinguished career as a trial and appellate counsel, an international judge, and author of leading textbooks. He has argued many landmark cases in media, constitutional and criminal law, in the European Court of Justice; the European Court of Human Rights; the Supreme Court (House of Lords and Privy Council); the UN War Crimes courts; the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) and in the highest courts of many commonwealth countries.
RFE/RL: We have been all these years aware of illegal activities in off shores zones, but we could just guess rather than getting deep into specifics of these operation. However, in the “Panama papers”, all of sudden, it has been revealed.
Robertson: "There was nothing really surprising in this material (eds: the massive leak of financial and legal documents known as the Panama Papers). We have known for 50 years that Panama and Switzerland, and more recently the British islands like the Caymans, and the British Virgin Islands have been tax havens. They are places where the wealthy people in the world through the use of the intermediaries - by which I mean lawyers and accountants who specialize in tax avoidance - have set up trusts and corporations to avoid paying tax where their money was earned.
You have the situation where this is mainly legal; what it does is it helps people avoid taxes. Less money going on schools, armies and so forth that governments have to pay for.I think, why there is such a fuss being made about it is that we are in an era where the wealthy have proliferated and got much wealthier, and the rest of us, particularly the thinking middle class, can’t keep up.
We haven't even caught up with transfer pricing -- which is the system in which big companies like Amazon and Google put there... pretend that their head office is in Ireland and make all their money in Britain and Europe and so they are avoiding paying tax on it.
This was something that [U.S.] President [Barack] Obama picked up [in his April 5 speech] and gave a very good lecture about misbehaviour of American companies who go to the Caribbean Islands to put there headquarters of their business whereas they make all their money in America and avoid paying taxes. People who loose out is a middle class, people who earn money, who pay 40 percent tax or whatever but don't quite enough money to go to the trouble of setting up an offshore company to avoid tax.
RFE/RL: Let’s take Amazon and Google as examples. What President Obama said that they are doing – setting companies in the Caymans or elsewhere – is it a legal or illegal way of operating an off shore?
Robertson: Well, that’s a matter for the United States’ law. For years, these companies have been doing what is called transfer pricing. That means they have their headquarters - they pretend their headquarters - are in a low-tax jurisdiction like Ireland, as low-tax Ireland aids and abets this nefarious practice. The Starbucks, the Amazon and so on, they send their bills from Ireland, that’s where their headquarters they claim are, but of course, they make all their sales and make their money in the United Kingdom and Europe, and they don’t pay tax there. In the case of the American companies, it’s interesting I was involved in many cases implicating alcohol companies that sell your favorite liquor, and they do most of their business in America, but they don’t have their headquarters in America because that’s where they would have to pay tax. They have their headquarters in the Caribbean Islands, like Anguilla or the British Virgin Islands or the Cayman, many of them British.
RFE/RL: Just to finish with this example of Google or Amazon and other big American companies, it means that they are setting up their businesses legally, formally at least, on remote islands, and while operating in the United States, they are not paying taxes in the United States, though they are earning their money in the United States.
Robertson: That is right. That is for the United States to act against them and you can’t blame them if they, in a sense, they may be morally guilty for avoiding tax, but if it’s legal, they can’t be criticized too much. So, it’s really a moral and ethical question the lawyers and accountants have to face.
RFE/RL: Speaking about moral issues, so it practically means that, while it is legal, it is deeply illegitimate or immoral?
Robertson: It may be legal, but it is questionably immoral because it means that the poor in the countries where the money is being made, where profits are being made, do not get the right amount of tax assistance – assistance as a result of taxation. It is up to government to devise good laws that will stop them. The message of the Panama Papers is that governments have been slow and they’re being defeated by clever lawyers and accountants, and they need to act to have more forceful and onerous laws against tax avoidance. We have to have an international investigative body of the like of IAEA which investigates nuclear potential that would come and inspect records. But the first step is to make sure that every country has transparency rules that require the real owners - what we call the beneficial owners - of companies and trusts to be declared on a public register... The second is to ensure that there are international criminal laws, that there are international investigation agencies that can punish those who are hoping to sanctions bust.
RFE/RL: Does the problem lie in the slow reaction of governments or in legal procedures themselves? The simple question is, ‘why do governments all around the world allow this activity‘? Even speaking of the legal aspect of offshore companies’ activities in which rich people, entrepreneurs could avoid or pay less in taxes, while, as you mentioned, a middle class is struggling by shouldering the brunt of the huge burden.
Robertson: Governments are being very slow, and the governments of lot of small countries, they don’t want to give it up, they don’t want to agree. They make money helping tax avoiders, and they don’t agree to having international conventions. British Prime Minister Mr. Cameron has been trying for five years to get agreement on an international convention to enable more transparency, but he hasn’t got very far. Russia blows hot and cold. Mr. Putin has wanted international support to attack some of his oligarchs, who moved money outside Russia and moved it from one company to another, but of course, he doesn’t like it when people point to the fact that his cronies are doing the same thing.
RFE/RL: Speaking about remote small islands, many say that the City of London is itself a huge offshore zone, that some territories in the United States are…
Robertson: Oh, absolutely. That’s another problem. The City of London is probably the most prolific supporter of tax avoidance.
RFE/RL: You mentioned Mr. Cameron. So, how can he not tackle the issue of the City of London itself?
Robertson: It is a matter that is very close to the heart of many of his supporters, donors, and all these donors have the offshore trusts, his family does, and his conservative MPs have offshore trusts. So, it is very difficult for governments to do anything, to do very much about ways of tax avoidance that are used by wealthy and powerful.
RFE/RL: Do you think it is possible, then, as a matter of principle, that it would be better for the world economy and a more just outcome were all offshore operations to be closed down or abolished?
Robertson: Well, not abolished, but I do think it is obviously good for the principle of tax justice that offshore operations should be transparent.
RFE/RL: Just right now you mentioned there are a lot of vested interests, including donors and MPs in Britain, or for example, in this report it is mentioned that big banks like the Swiss Bank, HSBC and Wall Street itself are all involved in offshore activity. Is it possible that the offshore zones are actually just an extended hand of these banks, which are thought to be wielding clout from behind the scenes?
Robertson: That’s absolutely right thinking and that’s one reason why tax justice has been a rather feeble cry over the last ten years. But it’s been known, as I say, for 50 years that jurisdictions like Panama and Switzerland in those days - it’s improved a lot because of international pressure. But there are other countries: the Cook Islands, Luxembourg. I mean this wretched fellow who’s Head of the European Commission, (Jean Clod) Juncker. He turned Luxembourg into a tax haven and that was one of the reasons why Britain objected to him becoming the Head of the European Commission. But, you know, wherever you look, there are people who are involved in tax avoidance. It does require a good deal of effort and intelligence, because it is [a] very complicated issue, in order to work out how we can tackle this problem, which is the cause of so much inequality in the world.
RFE/RL: Is it an exaggerated notion that the illegal or murky part of the offshore operations are the main reason for the major global economic crisis breaking out in 2008?
Robertson: Well, it certainly contributed, but the global picture is that this is vital because of the 2008 economic crisis, it nonetheless resulted in 2016 in the rich being richer and the middle class, the middle income people, being a lot poorer along with the poor. So, in advanced countries in the world - in the US, in Britain and in Europe - the middle class in particular is not earning nearly as much as they did compared to the wealthy classes, and they have to take two or three jobs to earn their living. They can’t retire because they can’t afford to retire, and this is having an effect. Many Donald Trump supporters and Bernie Sanders supporters are in that category, many of the people who support Jeremy Corbyn in Britain and other countries, there is a hostility, understandably, to the wealthy elite that has had their own way.
I think that the Panama Papers really epitomize the 'haves' these days, i.e. people who have the offshore accounts, and 'have-nots', the people who don’t.
RFE/RL: What will be the outcome, if established politics, wealthy people, these oligarchs or whichever way you label them, continue being greedy and ignoring this growing people’s dissatisfaction? Could it lead to a kind of revolution or unrest?
Robertson: I think that people like Donald Trump, Bernie Sanders, and so forth… and their solutions will be more appealing to the public and democracies, than candidates from the classic center who always worked with the powerful and the wealthy. I think that there will be a great split and the people who don’t have these facilities will become angry and the ease with which the wealthy can simply siphon off and increase their wealth in ways which are not subject to taxation.
RFE/RL: Will it lead to a change of politics?
Robertson: I think it will have political fallout and it will require politicians in the future to come up with some honest and doable plan to curb tax avoidance and evasion because there is precious little difference.