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Mr. Peter Snape (West Bromwich, East): We are all following what the right hon. Gentleman has to say with interest. Will he comment on the reports that a donor to the Conservative party based in Hong Kong had an offshore trust in Taiwan? This donor was known as White Powder Ma for some reason about which I am not too sure. He wanted back the £1 million that he had donated to the Conservative party because the previous Government failed to spring his father from gaol. I hope that the right hon. Gentleman will mention that as he goes through.
Mr. Maclean: That is nothing to do with this debate. The one thing that occurs to me is that that donor apparently gave £1 million to the Conservative party and the policy did not change. Bernie Ecclestone gave £1 million to the Labour party and got the policy changed.
Mr. Maclean: The hon. Gentleman is an experienced hand. He has been here slightly longer than I have. He knows that I will not be deflected this early in the debate.
When my right hon. Friend the Member for Hitchin and Harpenden was Financial Secretary, he said that further legislation would be introduced if necessary. Indeed, further legislation was introduced. The most important change in the way in which individuals are taxed on their holdings and offshore trusts was introduced by the Conservative Government in 1991. In his 1991 Budget speech, the then Chancellor, Norman Lamont, argued:
However, the present Government have a long record of commitment to tighten up on offshore trusts. Back in 1993 the Chancellor published a Tribune pamphlet entitled "How to tackle tax abuse". His argument was simple. He argued that £10 billion could be raised by a combination of a windfall tax on the privatised utilities and the closing of tax loopholes. As he wrote at the time:
Just a year later, the then shadow Chancellor returned to the fray, publishing another paper, entitled "Tackling Tax Abuses, Tackling Unemployment". He noted:
The Government's position on offshore trusts is clear. They want to tighten the tax rules, so how embarrassing it must have been when it began to leak out that the Paymaster General had his own offshore tax haven. Although he has been reluctant to give the full facts, which have been extracted from him painfully over the past six weeks, we know at least that he is a discretionary beneficiary of the Orion trust, a Guernsey-based fund which was established by his late Belgian friend and business associate Madame Joska Bourgeois.
Madame Bourgeois was a remarkable woman. She made a £30 million fortune selling Jaguars to the Belgians. How many Belgians were so keen to buy Jaguar cars in the early 1980s that that car dealer made a fortune out of it? I confess that I do not know of any other dealer who made money out of selling Jaguar cars, with their famous reliability in the early 1980s, before Edwardes turned the company around. This is a case for Hercules Poirot to investigate.
I have no objection to any individual benefiting from such a trust, provided that he complies with the law, but most decent people, including many of those who voted for the Labour party at the last election and who apparently are now deserting it in droves, cannot stomach the blatant double standards that this sorry affair has exposed.
The Government clearly oppose offshore trusts, yet the Minister in charge of the policy has such a trust himself. Even worse, his plans for individual savings accounts will cut tax relief for many thousands of savers with more than £50,000 in personal equity plans and tax-exempt special savings accounts, yet he has the benefit from at least £12 million that is stuffed into a secretive tax haven, avoiding tax all together. No wonder he has been accused of hypocrisy and by no less a person than the Deputy Prime Minister, who said on "Breakfast with Frost":
To understand the complex web of dealings in which the Paymaster General has enmeshed himself, we must
first understand the nature of the Orion trust. Gavin Lumsden, writing in The Times on 20 December, described various types of trusts and went on:
"I do not think that it is right for a relatively small number of wealthy people to shift very large assets into offshore trusts simply in order to avoid United Kingdom tax."--[Official Report, 19 March 1991; Vol. 188, c. 174.]
As a consequence of the Conservative legislation in 1991, United Kingdom residents transferring assets to an offshore trust for the benefit of themselves or their family are now liable for capital gains tax. It is notable that in a recent article in Accountancy Age on the possibility of a Labour Government cracking down on offshore tax avoidance via trusts, the chairman of the Jersey Fund Managers Association was quoted as saying:
"The Conservative Government already levelled up the playing field. I don't think a Labour Government holds any particular worries for us."
So while the Chancellor huffs and puffs in the House trying to pretend that the previous Government did not take action on offshore trusts, the view of the operators of the trusts is that the legislation passed by the Conservative Government removed so many tax advantages that they have no fear that Labour can make it much tighter.
"The Chancellor should end the tax abuses which reach to the heart of our public finances by indulging the super rich at the expense of all the rest of us".
On offshore trusts, the Chancellor wrote:
"As the law stands, offshore owners of UK assets, including companies, shares and land, pay no CGT when they trade in these assets. A UK resident can transfer assets to an offshore trust and the trustees can then make payments to beneficiaries in the UK, avoiding much tax liability."
That was in his pamphlet "How to tackle tax abuse." I am sure that the Paymaster General can confirm the accuracy of the Chancellor's account of how one avoids paying tax.
"The abuse of offshore trusts and companies continues",
and added:
"All Governments owe it to their people to take action against the persistent few who, at the expense of everyone else, shelter their wealth overseas whilst seeking to enjoy the benefits financed by those who pay their tax at home".
In his speech to the Labour party conference, he pledged:
"A Labour Chancellor will not permit tax reliefs to millionaires in offshore tax havens."
21 Jan 1998 : Column 951
Therefore, it was no surprise when the Chancellor used last November's pre-Budget report to promise a general anti-avoidance measure on the ground that closing loopholes one by one
That then seems to be the Chancellor's plan--a general anti-avoidance catch-all measure. I shall be interested to find out how the Government go about putting such a provision together, especially as one commentator said:
"is no longer a satisfactory response to the continual inventiveness of tax planners".
"As a matter of principle, we believe that the citizen is entitled to know where he or she stands before the tax law. A catch-all provision that came into play when all else fails, is unacceptable in a fair tax system."
Who is that commentator? Why, it is the Chancellor himself, writing in 1994, but we all understand that much has changed for him since then. At that time, he thought that he would like to be the Prime Minister; now he thinks that he is the Prime Minister.
"You may argue that the politician"--
the Paymaster General--
"has said one thing and perhaps done another. That seems to be the greatest charge against him."
That charge is hypocrisy and how true it is. At least that was the greatest charge against the Paymaster General on 14 December.
"The Orion Trust in Guernsey, of which Mr. Robinson is a potential beneficiary, does not conform to any of the tax rules, not because it is an offshore haven, but because the woman who set it up, Joska Bourgeois, was a non-UK resident and therefore outside the scope of UK tax law. Because she died in 1994, Madame Bourgeois, a Belgian national living in Switzerland, had effectively put Orion beyond the reaches of the UK taxman forever. Because of this, Orion can grow its assets tax-free and distribute the capital to beneficiaries in the UK who have no tax to pay. The implications of this for Mr. Robinson were enormous when last year he was given the right to buy shares in Trans Tec, a company he founded. Mr. Robinson could have subscribed to the shares but would have had to pay tax on any increase on their value whenever he came to sell them. He could also have sold his rights to a third party, but that would have denied him the benefit of growth in the shares' value. Instead, Mr. Robinson sold the right to buy the shares to Stenbell, another company he owned, which sold them on again to Orion. By transferring them to Orion he could be confident that a trust, of which he was a potential beneficiary, could benefit from the growth in the shares free of tax.
That is the view of the experts: it is a classic case study into how to use an offshore trust for tax-avoidance purposes.
According to Mr. Fitzpatrick of Chantrey Vellacot (accountants) it is 'a classic case study in how to use an offshore trust.' The effect of this could be dramatic if the Trans Tec shares continue to perform. In the past two years they have doubled in value. Orion now owns £13 million of the company shares. If they were to double again, the trust will have gained £13 million. Ordinarily, this would produce a £5 million Capital Gains Tax bill--but not for Orion or Mr. Robinson or any other beneficiary of the trust."
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