On Brexit, Luxembourg and Swiss justice

What have the UK government, the Grand Duchy of Luxembourg and the Swiss justice system got in common? From the evidence it would appear that, despite protestations to the contrary, they remain quite content to shield the proceeds of money-laundering or tax evasion, provided such proceeds flow into their own treasuries. In last month's UK referendum, a majority of voters opted to leave the European Union, swayed by ideas of "taking back control" of the UK's political and economic landscape from what was perceived as an increasingly arrogant, bureaucratic and unaccountable European Union. This author suspects that perception was reinforced, at least among some UK voters, by the EU's muscular treatment of Greece as that country continued to reel from the after effects of the 2008 global financial crisis. According to former Greek finance minister Yanis Varoufakis, Europe decided to "[put] the bailing out of French and German banks exposed to Greek public debt above Greece's socioeconomic viability." (https://www.theguardian.com/commentisfree/2015/jul/10/germany-greek-pain-debt-relief-grexit) And in effect, European leaders gave Greece the middle finger following the Greek referendum of 2015, when voters overwhelmingly rejected the harsh austerity terms proposed by in return for continued financial support, by making those terms even harsher as a punishment for Greek insubordination. It gave credence to those voices claiming the EU's leaders were now trying to impose political control across the EU, and nowhere were those voices louder than in the UK. But whether or not Britain is in the EU, it does not change the fact that a growing chunk of the country is owned by offshore money which is accountable to no-one.

Bringing on Brexit Much of the Brexit vote was mobilised on fears that uncontrolled immigration had depressed wages and placed increasing pressure on limited housing stocks, forcing up prices and rents. It is a fact that many UK residents now spend well over a third of their net income on renting ever-more-cramped living quarters or, despite historically low interest rates, paying off their mortgage. It is also true that the real wages fell 10 percent between the 2008 financial crisis and early 2015. (http://blogs.lse.ac.uk/politicsandpolicy/real-wages-and-living-standards-the-latest-uk-evidence/) But if people thought voting to leave the European Union would alleviate some of the pressure on housing, they may be in for a rude awakening. As UK satirical magazine Private Eye has diligently detailed, between 1999 and December 2014, some $250 billion worth of UK land has been sold to offshore companies, many of them traced to oligarchs located around the world who spend little or no time in the UK, and certainly pay no income or property tax there. Brexit doesn't change that. Just to give an idea of the entity of this sum, it would amount to almost a million houses in the UK, where the average family home costs £288,000, according to government figures released in February. Successive UK governments have dragged their feet on dealing with the issue of offshore property owners, for fear of frightening off a variety of billionaires whom they insist on calling "wealth creators". (As a quick aside, one of these so-called "wealth creators", Philip Green, recently faced questions from a parliamentary committee into the collapse of retailer BHS, leading to 11,000 job losses. Green, who had sold BHS last year for just £1 to a group headed by three-times bankrupt Dominic Chappell, had taken more than £400 million in dividends from the company, plus a significant amount in rental fees from BHS to companies also owned by Green, while the company's pension fund deficit ballooned to £571 million. The UK taxpayer looks set to be lumbered with the bill. So much for wealth creation.) The Eye had painstakingly collected this data via numerous freedom of information requests from the publicly-owned UK Land Registry. But its ability to continue doing so may be scuppered by the UK government's plans to sell off the body, with estimates that the sale, advised by investment bank NM Rothschild, could raise over £1 billion. That is the same NM Rothschild who, via a number of offshore subsidiaries, have set up numerous offshore shell companies to help clients buy British properties while hiding their identity behind those companies. After the sale of the Land Registry it will likely be even more difficult and expensive for journalists or transparency campaigners to trace ownership of UK properties to offshore buyers. In the meantime, an anti-corruption summit held in London in May signed up to a series of principles, declarations and commitments to tackle global corruption, but produced little in terms of co-ordinated international policy. (http://www.transparency.org/news/feature/anti_corruption_summit_now_the_hard_work_begins)

No place for whistle-blowers Meanwhile Luxembourg - where European Commission president Jean Claude Juncker served as prime minister for the 18 years to 2013 - is facing up to its own role in international tax avoidance. The Grand Duchy has helped corporate giants like Google, Vodafone, Fiat and HSBC avoid billions of pounds in tax by allowing them to channel huge chunks of profit through Luxembourg subsidiaries, allowing them to pay little or no tax while depriving countries around the world of tax receipts on the profits generated there. So what is Luxembourg doing about it? On June 29, it sentenced a former PricewaterhouseCoopers auditor and a former manager at the same firm to suspended jail terms and fines, while acquitting a television journalist who had helped to expose what has become known as the LuxLeaks project. Prosecutors had asked for jail terms of 18 months for the whistle-blowers. None of those who schemed to set up this massive tax avoidance scheme or those who benefitted from the billions stolen from taxpayers around Europe and the globe face similar legal dangers. Juncker himself said late last year that "the fight against tax avoidance and evasion is one of the Commission's top 10 priorities" (https://www.theparliamentmagazine.eu/articles/news/juncker-addresses-eu-parliament-corporate-tax-avoidance). Apparently, when the vast majority of multinationals set up their Luxembourg subsidiaries in order to avoid tax during Juncker's Prime Ministership, he was either of a different opinion or blithely unaware of what was happening under his own nose.

Meanwhile back in Switzerland Since being put under the spotlight for past misdeeds including aiding and abetting tax-dodgers and money launderers, Switzerland has sought to take the moral high ground, dismantling banking secrecy laws, striking a number of information exchange agreements and handing over swathes of client information to U.S. tax authorities, while its banks have paid hefty fines, mainly to the U.S. for helping clients evade taxes. To show the country was getting serious about dealing with corruption, money laundering and tax evasion, Swiss prosecutors embarked on a lengthy investigation into the sale of a Czech mine to several external investors, who made hundreds of millions when they eventually sold the mine, depositing the proceeds in Switzerland. Although the Czech government initially made no complaint about the transaction, Swiss authorities proactively froze the accounts where the money was held, and in 2013 condemned the six defendants to hefty fines and up to four years in prison. Most bizarrely of all, when the Czechs asked for the return of the money which, according to the verdict had been stolen from the Swiss state, they were told that it was too late, since they hadn't participated in the original complaint or made any attempt to cooperate with the investigation. As previously mentioned, the Czech government originally said no crime had been committed, and its attempts earlier this year to stake a claim to the money that had been seized was enigmatically refused as "too late". The verdict allowed the Swiss justice system to seemingly take the high ground against international corruption while at the same time profiting from it. Or as the British might say, having their cake and eating it. Which puts them in pretty much the same position as whistle-blower-averse Luxembourg and Britain's "wealth creators" and oligarch property-owners.