Inside the world of business
High time to tackle City of London's offshore offshoots
THE EMERGENCE of a British Virgin Islands company in the tangled tale of the Irish Bank Resolution Corporation’s (formerly Anglo Irish Bank) ongoing efforts to seize Seán Quinn’s family’s property in Ukraine is another example of the blight that offshore jurisdictions represent.
Readers of sufficient age will no doubt remember the lengths to which the Irish State, by way of the McCracken and Moriarty tribunals, went in their ultimately unsuccessful efforts to get the authorities in the Cayman Islands to co-operate with the work of inquiries appointed under law by the Oireachtas.
Now we have another State body, IBRC, spending public money on legal fees as it tries to get behind the screen that offshore locations provide for their clients.
For all the pomp and legal terminology that such locations present when rebuffing approaches for information from legitimate authorities, there is no getting around their rogue status.
The whole point of the British Virgin Islands and the Cayman Islands is that they are relatively tiny locations to which you can go if you want to avoid the type of scrutiny that has applied to limited liability and other incorporated entities as part of society’s quid pro quo with such legal constructs, since their invention some centuries ago.
It is no coincidence that so many of these piles of sand in the sea are members of the Commonwealth. It is all very well to hide your identity, and your loot, where proper authority can’t go after you, but you want to be sure that some local won’t snatch your assets.
This is where the London connection comes in. Commonwealth offshore islands are, in essence, offshoots of the City, which David Cameron is so anxious to protect. And they have judicial systems that end up, by way of appeal, in the British House of Lords. This means that the beneficiaries of companies located in places such as the British Virgin Islands are able to avoid legitimate scrutiny – and the making of proper contributions towards the workings of society (tax) – but still avail of the property rights that exist in western economies that, to a large extent, owe their success to compliance with the law and the payment of tax.
In other words, these offshore entities are parasitic scourges.
They could be easily closed down. Efforts some years ago by the OECD in this regard faltered for reasons that are unclear. A fresh push would form a useful addition to the international reform agenda.
Salary critics should focus on IBRC
THE SALARIES paid at the National Treasury Management Agency and its various satellites including the National Asset Management Agency are back in the news. John Corrigan and Brendan McDonagh, the head of the NTMA and Nama respectively, have both agreed to 15 per cent pay cuts to try and head off the assault led by Brendan Howlin’s Separtment of Public Expenditure and Reform.
Both men still take home something north of €400,000 and there are serious issues around transparency. But there is something to be said for the NTMA model which enables the agency to pay competitive salaries complete with City-type bonuses. Handy when you are managing a national debt of €120 billion and Nama loans of €36 billion
One would think that Howlin’s attention might be more fruitfully focused on Anglo Irish Bank – or Irish Bank Resolution Corporation as it is now called – where the board led by Alan Dukes trousered €1.49 million in 2010, the lion’s share going to chief executive Mike Aynsley who received €974,000 for among other things dumping €33.9 billion of rubbish property loans on McDonagh to sort out. Aynsley’s 2011 salary has not yet be disclosed, or the size of the pay cut he is taking in 2012.
Pensioners have no beef on tax, just tactics
IF GOVERNMENT was a business, heads would roll over the clumsy way Revenue has addressed the emergence of “unknown” pension payments and subsequent tax liabilities.
It has taken six years since the passing of the Social Welfare Consolidation Act 2005 allowed the transfer of information between the tax authorities and the now renamed Department of Social Protection for the two state entities to share data on State pensions.
Having finally got themselves in alignment, Revenue has then sent clunky official letters out to as many as 150,000 people – all of them old and many already worried about their financial security. Even worse, it has sent those letters to people in receipt of non-contributory pensions who, by virtue of the means test, could not be in the tax net and are therefore being unnecessarily frightened.
All in all, it’s hardly testament to customer-focused public service. Still, before the Government bows again to the “Grey Vote”, it is worth remembering the core issue here – people are being asked to pay tax on their income in precisely the same manner as any other member of society. There is nothing unreasonable or unconscionable about this; it is right. On initial receipt of their State pensions, they were made aware of this issue.
Still, given the State’s miscommunication, there seems little virtue in costly pursuit of a likely paltry return on back payment of tax.
NEXT WEEK:German chancellor Angela Merkel and French president Nicolas Sarkozy will discuss plans for a financial transaction tax during their talks in Berlin on Monday.
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