Panama Papers: Northern Ireland diplomat backs transparency call over 'tax haven' overseas territory
A retired Northern Ireland-born diplomat who was the governor of a British overseas territory where 113,000 offshore firms are registered, has said more transparency is needed in the tax affairs of the businesses in the wake of the Panama Papers scandal.
Boyd McCleary, a former senior civil servant in the Department of Agriculture, spoke as controversy grew over revelations from 11.5 million financial documents leaked from the database of the world's fourth biggest offshore law firm, Mossack Fonseca, based in Panama.
Twelve national leaders were among 143 politicians named as having used a series of tax havens. Associates of Russian President Vladimir Putin have also been linked to secret offshore companies.
Closer to home, Labour leader Jeremy Corbyn said yesterday that Prime Minister David Cameron had not answered key questions about an offshore fund that was run by his late father and which avoided paying tax in Britain by getting Bahamas residents to sign vital paperwork.
Mr Corbyn also called on Mr Cameron to impose direct rule on British overseas territories including the British Virgin Islands in the Caribbean (BVI), where one in every two of the companies that appear in the Panama Papers are registered.
Three years ago, Mr Cameron made greater transparency from offshore tax havens like the BVI, and the Cayman Islands a priority. He wrote to the overseas territories and told them to get their houses in order.
Mr McCleary (67) was the Governor of the BVI at the time, serving between 2010 and 2014. In an interview on Radio 5 Live, the former Belfast Inst pupil agreed with commentators who said direct rule was a "nuclear operation".
Asked why the BVI was the most popular location for registering offshore companies, the Queen's University graduate said: "Individuals looking to find a way of registering a company in another jurisdiction will look to see which one provides a solution for them.
"One reason is tax efficiency, and it's clear a number of overseas territories are very competitive in tax terms. Another reason is that the overseas territories provide a good legal system."
In response to a question about firms "squirrelling away money" while citizens pay tax, Mr McCleary said: "That is a moral argument, and I fully understand that argument, but what is happening is not illegal as such.
"Every jurisdiction has its own system of taxation. The Government has been trying to reduce taxes to attract corporations. The BVI have done the same, but they have gone a bit further than the UK."
Mr McCleary accepted what was happening was more about tax evasion and avoidance rather than paying lower taxes, adding: "That is correct and I understand why people find that difficult to accept, but the point is the territories are trying to make a living."
Mr McCleary said the British Government had been liaising with overseas territories in a bid to improve the amount of information available to the tax authorities.
"There's more to be done but progress is being made," he added, pointing out moves were under way to create a registry of company owners.
The former diplomat said there was an issue about whether the registry should be public but added: "The territories are working closely with the authorities to improve the exchange of information."
The retired Governor told how it had not been his role in the BVI to attempt to persuade companies registered there to be more transparent.
But he added: "Certainly, I encouraged the BVI to work with the Government and they were responsive to that. They recognised the need to move towards transparency and to respond positively to requests from authorities and police to ensure money laundering doesn't happen.
"It is getting better and does need to get better still, but I think things are moving in the right direction at least."