Mon | Nov 20, 2017

Editorial | Opportunity from Paradise

Published:Wednesday | November 8, 2017 | 12:00 AM

For the people who manage the personal wealth of Queen Elizabeth - who happens also to be Jamaica's head of state - it has been a difficult couple of days. They are having to explain why the Queen, through the Duchy of Lancaster, her private estate, invested huge sums of money in complex funds in an offshore tax haven, although they insist she received no tax benefit from the enterprise.

But it is not only the Queen who faces a public-relations nightmare. Around the world, politicians, giant firms, corporate titans and other wealthy individuals are confronting the fallout from the Paradise Papers - the second big leak of secret documents in 18 months revealing how the rich and powerful can hide their wealth, avoid, and even evade, taxes with the help of smart lawyers and often opaque arrangements in compliant jurisdictions.

When this matter first grabbed the world's imagination in early 2016 with the Panama Papers' revelations about the clients of the law firm Mossack Fonseca, this newspaper, unfortunately, was unsuccessful in encouraging a broad policy debate on the issue, including whether those in political leadership should be allowed to hold assets in tax havens and what obligation, if any, they should have to tell the public if they do. The Paradise Papers, primarily information on the clients of a Bermuda-headquartered law firm, provides an opportunity to revisit the issue.

Indeed, such a discussion would be both relevant and timely. Insofar as this newspaper is aware, no Jamaican has been named among the clients of Appleby, or accused of any wrongful use of offshore international business companies or similar vehicles to hold assets, either to shroud their real ownership or evade taxes. But many Jamaicans, including Prime Minister Andrew Holness, as was raised during the 2016 general election campaign, use these vehicles.

In the case of Mr Holness, his new Beverly Hills mansion was held in a St Lucia-registered company, which he owned with his pre-teen sons, and was done, according to his lawyers, for estate planning. In other words, Mr Holness and his sons, as the beneficial owners, would have little or no tax liability on any income by that St Lucia-based company. It is for the same reason that several Jamaican entrepreneurs/business leaders have registered their companies in St Lucia and similar secretive jurisdictions, such as Bermuda and the Turks and Caicos Islands.

Recent amendments to the Companies Act requiring firms incorporated abroad, but which have operations in Jamaica, to maintain a register of their beneficial owners, as well as prohibit the issuing of share warrants, will help with transparency - if the firm does business here. It doesn't if the foreign firm has no "place of business within Jamaica".

 

Moral and ethical issues

 

But perhaps more important in a low-trust country like Jamaica, where upwards of two-thirds of the population believe public officials to be corrupt, is whether there are moral and ethical issues to be addressed by political leaders with respect to holding assets in tax havens. The question, many will suggest, is whether people who formulate and implement policy, especially with regard to taxation, should be morally bound to adhere to those policies within the domestic environment, rather than seek out the benefits of low- or no-tax jurisdictions, which are often unavailable to ordinary citizens - unless they are wealthy. These were the questions now being asked of the Queen and of former British Prime Minister David Cameron at the time of the Panama Papers, in the face of his offshore earnings.

Furthermore, with Jamaica soon to launch a new integrity law for civil servants and public officials, the Paradise Papers may be a useful backdrop against which it might be reviewed to determine whether it might be in need of minor tweaking ahead of, or soon after, its implementation.