The Panama Papers and Global Shell Games


Held on Wednesday, April 27, 2016

With support from Jersey Finance


Speakers

  • Professor Jason Sharman (Griffith University)

  • Geoff Cook (CEO, Jersey Finance)

  • Ray McCann (partner, New Quadrant Partners)


Agenda

 

“I am shocked, shocked, shocked…”, said Capt. Renault in Casablanca - and that seems to be the reaction to the ‘revelation’ that Panama, the Cayman Islands and the BVIs are home to hundreds of thousands of offshore companies, many of which are (presumably) tax avoidance vehicles.

But are we venting our outrage in the wrong direction?

Over the last few years, Jason Sharman - an American academic, now a professor and deputy director of the Centre for Governance & Public Policy at Griffith University in Queensland - has been assiduously testing the limits of just what one can get away with in tax havens around the world, and what he has come up with is both intriguing and disturbing.

Sharman’s approach is both academic and populist. On the academic side, he published an important article in the Journal of Economic Perspectives in Fall 2010, entitled “Shopping for anonymous shell companies: An audit study of anonymity and crime in the international financial system”. More recently, he, Michael Findley and Daniel Nielson published a paperback on “Global Shell Games: Experiments in Transnational Relations, Crime and Terrorism” (Cambridge University Press 2014).

Both of these adopt the same model: the author(s) pretended to be international consultants interested in setting up anonymous shell companies - and in circumventing existing KYC rules - in various onshore and offshore centres. In the 2014 exercise, the scale was awesome - over 7,000 emails were sent out to firms (like Mossack Fonseca) asking to set up untraceable shell companies.

The results were genuinely surprising:

  • First, only about half of the firms approached followed internationally agreed KYC rules;
  • Second, most firms were as willing to deal with high-risk profile customers as with low risk; and
  • Third, firms in well-known tax havens were actually more likely to follow proper KYC rules than those in the US and some other OECD countries.

That last point is crucial: According to Sharman, states like Wyoming and Delaware offer an easier route to corporate anonymity than many of the much-derided offshore centres that the OECD is always trying to shut down.

We are delighted that we have been able to get Prof. Sharman - who is in London for Jersey Finance’s private wealth conference - to come and talk about his findings. We are also delighted that Geoff Cook, chief executive of Jersey Finance, will (no doubt) back him up.

However (even though Jersey Finance is supporting this round-table), they won’t get things all their own way. I am equally delighted that Ray McCann, partner at New Quadrant Partners, has agreed to join the panel. Until 2006, Ray was a senior HMRC inspector working on cross-border tax avoidance (including, in 2004, leading the introduction of the “DOTAS” rules). Between HMRC and New Quadrant, he led the dispute resolution team for financial services at PwC, before joining McGrigors (now Pinsent Masons) as a tax partner. He is also a Fellow and Council member of the Chartered Institute of Taxation. In other words, he is somebody with genuine experience on both sides of the issue.