Panama Papers David Cameron Stax affairs

I have been involved in the field of taxation for many years but I have never known it to be as newsworthy as it appears to be now.

This week’s furore over the leaking of the so-called Panama Papers has brought down the Prime Minister of Iceland and the ongoing fuss appears to be doing some damage to the reputation of David Cameron, too.

Of course there are various political agendas at play in the story of our Prime Minister’s dealings, raising issues which go beyond the topic of taxation.

What I do find intriguing however is the precedent Mr Cameron may now be setting over publishing details of his inheritance, tax returns and so on. Is this now going to be de rigeur for our political leaders, as if to dispel an assumption that they have done something wrong?

Indeed the whole issue raises the question of what is ‘wrong’ and whether justice is determined by public outrage or by legislation.

What appears undeniable is that Mr Cameron and his family’s dealings with offshore investments were entirely within the letter of the law.

In fact, what many of us – some of whom may well have been outraged by the Cameron family’s behaviour – may be surprised to know that most people, privileged or not, who hold managed investments portfolios will have money invested in some offshore investment trust not dissimilar to the Blairmore Holdings fund used by Ian Cameron.

Blairemore Holdings appears to be a genuine investment fund. It was established up with bearer shares – relatively common at the time they were set up, in 1998. Effectively bearer shares meant that the holder was the owner and as such they could be easily passed from one person to another or, as many did, taken to an offshore low tax jurisdiction and handed to trustees.

The holder of such shares was afforded anonymity, which could be desired for many reasons and not just for those avoiding taxes.

Ian Cameron and the Cameron family have a long heritage in stock brokerage so it is not particularly surprising this has come about; although it may be more surprising to people that initially the relatively modest sum of £30,000 has had such a fuss made over it.

Since then, the revelations that Mr Cameron was the recipient of gifts from his mother totalling the more significant amount of £200,000, following the death of his father in 2010, have made further headlines.

But again, a family’s ability to undertake tax planning – in this case mitigating inheritance tax – does not constitute behaviour which is against the law. It will be up to the minds of the nation’s electorate as to whether it is fair and just, or not.

The mere fact that David Cameron – and his wife Samantha – owned shares does not either mean they have avoided or evaded tax and it does not mean his father did or assisted others to.

But certainly some sections of the general public won’t realise that tax probably hasn’t been avoided or evaded, because they are unlikely to know what the tax law states.

Similarly, the general public holding managed investment portfolios will probably be invested in some offshore investment trust not dissimilar to Blairmore often without the holder realising.

For example, the financial adviser who advises a client to invest into a discounted gift trust is likely to end up with a structure in the Isle of Man, although the investor may not actually realise this.

The structure is legitimate but offshore – what is wrong with that? Again, we return to the definitions. If our Prime Minister, or anyone else for that matter, failed to report dealings on their tax return, then that would certainly be an issue worth investigating.

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