A lot has been said and written since the exposé of certain files of Mossack Fonseca in Panama. Whilst the detail is being scrutinised by the world’s revenue authorities, news outlets have taken the opportunity to descend to new lows of populist, unsupported, and often irrelevant reporting. The recent furore over David Cameron’s historic investments and publishing of his tax returns are a perfect example of this nonsense journalism.
We have to fundamentally question the thinking behind the idea that Mr Cameron has done something immoral. We should do this because two of the fundamental principles of liberal democracies are the rule of law and equality before that law.
Firstly, let’s look at the rule of law. If the man in the street has money to invest, however modest, and he asks for the advice of an IFA, does he first have to consider the domicile and tax position of the company he is investing in? Is this his responsibility, or should he be able to rely on the advice he has paid for, the regulators in place, and the auditors of his service provider to offer comfort that he is compliant with the law? Similarly, if the man in the street is fortunate enough to have enough money, either in a pension fund or otherwise, and engages with a discretionary investment management firm to manage his portfolio, does he again have to police the decisions of his regulated and highly qualified investment managers? If an entrepreneur seeks the services of a tax advisor to assist with the establishment of his business should he not rely on the advice as being legal and in his best interests to secure the future success of his business enterprise?
In short, do we believe in the rule of law, including the morality and legitimacy of our democratically written statutes and the efficacy of our democratically instituted regulators? If the answer is yes, then we must say that everyone – from the man in the street to the wealthy entrepreneur – should be able, within reason, to rely on the financial advice they are given to be within the law and for the law to deliver a moral outcome. If, on the other hand, we suggest that people who are given lawful advice within the bounds set by our regulators are somehow acting immorally by following that advice, then we are fundamentally questioning the rule of law. Assuming we don’t wish to tear down this particular pillar of our society, then David Cameron’s historic offshore investments are something we need to accept as moral behaviour.
Perhaps we could argue, though, that politicians need to be held to a higher account than the average man in the street. In many ways this may be true, but can we go so far as to strip them of their privacy in order to scrutinise behaviour which, if we accept my argument above, is entirely moral anyway? This then touches on the debate over the publishing of tax returns and equality before the law.
David Cameron and Jeremy Corbyn have now shared with us their personal tax returns and both have been pulled up on details within them by the press. Corbyn’s attempts to push for all Labour MPs to do so saw such a backlash from the Shadow Cabinet that they have been abandoned, and now the argument is that only the two most senior politicians within the Government and the Opposition should publish their affairs. This raises another fundamental question: if it is OK to take away the right to privacy from some people, then where should we draw the line? What about civil servants? I am sure there are many very well paid HMRC staff whose tax returns would make for interesting reading, but is it necessary, is it fair, and is it morally right to see such information? No, of course not, because privacy is a right we treasure and so is equality before the law. There is no line to be drawn because drawing such a line undermines this principle of equality. We do not wish politicians to be given favourable treatment compared to the rest of us, but this means the opposite must also be true – we cannot reasonably wish for them to be treated any worse either.
We are fortunate enough to live in a democratic society. Now I do not wish to labour the point that we live in a democratic and, whilst some may not like it, a capitalist society – but we do. It is also a very well-functioning democracy: in my many years of wealth management I have never met anyone who is out to break the law. I know these people exist, I am not naive, but I have not personally ever dealt with them. I have, however, met people who are concerned about personal threats to their family because they are wealthy. I have met International families that want to ensure future generations have capital to support their needs. I have met many, many individuals that wish to invest in a diverse way with structured control over the management of the assets, all with professional advice from lawyers and accountants to ensure their dealings are lawful. Like politicians, these people need to be treated based on the rule of law, in an equal fashion to everyone else. The current ‘offshore’ witch hunt by the press does not hold up these democratic principles, it undermines them.
If we don’t recognise this and return to the democratic principles that have made the UK – and the offshore jurisdictions within its sphere of influence – such a leader in the world of finance, then we will lose out to other jurisdictions with other things to offer. Governments in the Far East – such as in Singapore and Hong Kong, for example – have provided fantastic infrastructure, substantial incentives to relocate talent, and highly effective (albeit some may say too light touch) regulatory regimes. These have helped them to grow their economies and provide opportunities for their people, both local and expats alike. If we give up the big thing we have over these jurisdictions, namely the proud British legal tradition that rests on the principles outlined above, then we will fail to remain competitive.
Truth be told, western governments have been trying for some time to deal with capital flight by writing laws which could be seen as harmful to those countries that could not offer such incentives. Now we see a strange turning point in so far as Governments keep these laws to ensure the Country remains ‘attractive’ but at the same time asks the question of companies and individuals, “Just because our Laws allow you to do something, should you?” This is an absurd position to place people in.
Is being ‘lawful’ no longer good enough? If so, and we cannot trust the law to provide a guide, then how should professionals set their moral compass? Uncertainty in such things is dangerous to business and as a result to our wellbeing as a society. As such, I certainly hope that we are not entering a time in which morality is decided by what the newspapers choose to be outraged by.