Panama Panto

Just when the headlines were bleak (terrorism), boring (the referendum) or banal (Trump), along comes the ‘Panama Panic’ pantomime to add to the gaiety of nations. We have the spectacle of politicians, big-shot businessmen, ex-Presidents of tropical hell-holes, crooks, gangsters and money launderers running around in  ever decreasing circles with the inevitable eventual result.

Panama may be a leading player, but there are many others across the globe, from Nevada to Macao.

There is one closer to home which  is one of the biggest tax-havens.

 

At the last count, 340 leading companies launder hundreds of billions through it, paying a derisory  amount of tax on profits, about 1%. Tax on non-dividend income is 0.25%. It is favoured by PepsiCO which moved $750 million to minimise its tax liability on a $1.5 billion purchase of a Russian company, en route to Bermuda. IKEA has a holding company and a finance company to massage its tax liability.

 

There are other familiar names. FIAT and Amazon are amongst the most prominent. There’s Glaxo Smith Klein, the Pearson Group (FT and Economist), Northern and Shell (Daily Express). Fedex launders millions to its eventual destination in Hong Kong. It paid 0.25% tax on its non-dividend earnings. American companies paid 1.1% tax on profits of $95 billion.

 

Key players include Accenture, Abbott Laboratories, American International Group (AIG), Amazon, Blackstone, Deutsche Bank, H.J. Heinz, JP Morgan Chase, Burberry, Procter & Gamble, the Carlyle Group and the Abu Dhabi Investment Authority.

 

One of the most intriguing is that bastion of public morality the Guardian Media Group.

 

US and UK companies lead the pack. $95 billion of American corporations’ profits  flowed through in 2012. The tax paid was 1.1%. Direct investment from the US  in 2013 was $416 billion, most of which was in ‘tax-efficient vehicles’.

 

$3.7 billion is held in managed assets, second only to the US. PWC advises hundreds of companies in how to use the system, employing 2.300 staff for the task. Complex accounting and legal structures are used to move money in and out, giving a tax rate of less than 1%. The Government issues hundreds of private tax rulings – ‘comfort letters’ – giving favourable tax treatment.

 

Tax revenues from this huge market are 5% of GDP, higher than British agriculture’s share of GDP in the UK.

 

The country raking in  all this funny money has a population of about 500,000. It covers only about 1000 square miles.

 

You will have guessed by now that the country is Luxembourg.

 

And who was the Prime Minister who presided over this gargantuan tax scam for more than 15 years?

 

Step forward Jean-Claude Juncker.

 

And who is head of the EU which has vowed to crack down on tax dodgers?

 

That’s right!