Sunday, 30 November 2008

Taxing reputation

Readers from the investment banking industry might already have noted that my views on tax arbitrage are at the extreme end of ones commonly found within financial services. Most banks seem to take the view that helping their clients pay less tax is a good thing, especially if they can get paid to do it. I take the view that paying less tax is a crime against society, and facilitating it is one of the things that lowers the public opinion of our industry. (For more on the latter, see the coverage of UBS's US tax evasion woes here or here.)

Today, in a notable shift in the tenor of the discussion in the industry, the FT has an article on the coming crack down on tax havens (many of which, remember, are British protectorates or overseas territories). It ends:
The tiny states and protectorates that thrived in the free-wheeling second half of the 20th century are left struggling to shore up their defences against the coming storm. But as big countries try to block the leakage of much-needed tax revenues and stanch the flow of dirty money, sympathy for the tax havens is in short supply.
I really hope that this is true, and that the political will exists to stop these practices. It defies the principal of natural justice that the wealthy pay less tax than the poor. The existence of tax havens which permit individuals and corporations to evade their share of the burden of the nations which allowed them to thrive is an affront to all of us who do pay our dues.

Update. The U.S. Justice Department has expanded its probe to include Credit Suisse and HSBC according to the NYT. It seems that the reputational risk of facilitating tax evasion may be about to bite.

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