(British Prime Minister David Cameron)
Tax policies – and the politicians that compose, debate, and codify them – affect nonprofits. From the IRA-to-charity rollover to deductions to incentivize philanthropy, tax polices in the United States have a direct impact on people’s giving behavior. When politicians make it simple for the wealthy to stash funds away in tax havens across the globe, they are indirectly cheating charitable organizations of invaluable revenue streams.
Across the Atlantic in Britain, this reality is no less true, and details emerging from the Panama Papers with regard to Prime Minister David Cameron’s family wealth and actions on behalf of offshore trusts have created an air of mistrust and the possibility of a conflict of interest.
Cameron’s late father – Ian Cameron – was a client of Mossack Fonseca, the Panama-based offshore tax firm at the heart of the ongoing tax haven revelations. The elder Cameron set up an investment fund called Blairmore Holdings, Inc. through Mossack Fonseca. A prospectus released by the fund bluntly stated that it “should be managed and conducted so that it does not become resident in the United Kingdom for United Kingdom taxation purposes.” It did so by utilizing an intricate system of untraceable certificates, called “bearer shares,” along with situating its officers in the Bahamas.
The behavior of David Cameron’s father is a reflection of how closely connected the world’s political and financial elite are to the tax avoidance schemes detailed in the Panama Papers. While there is not currently evidence that the prime minister was directly connected to the fund, the details shed some unsettling light on his efforts to shield trusts from an EU crackdown on tax shelters in 2013.
At the time, the EU was debating whether or not to publicly reveal a registry of actual asset holders at the helm of offshore shell companies. In a letter to Herman Van Rompuy – then president of the European council – Cameron stated that it
is clearly important we recognise the important differences between companies and trusts … This means that the solution for addressing the potential misuse of companies – such as central public registries – may well not be appropriate generally.
While it is yet uncertain if Cameron was acting on behalf of certain parties, a Downing Street spokesperson refused to answer questions from the press as to whether or not Cameron still held assets in his father’s former offshore interests.
The prime minister’s family history and actions are part of a larger trend. A culture of tax avoidance runs throughout elite circles in the Western world. In Britain, Michael Geoghegan – the former head of HSBC – attempted to shirk an £8 million tax on his luxurious townhouse, creating an elaborate offshore arrangement through which he could rent the house to himself using a shell company registered abroad. Geoghegan is among the highest profile leaders of the Brexit movement, which seeks to extricate Britain from the EU – the multinational body that is actively trying to clamp down on offshore tax havens.
This culture generates a rift between the ultra wealthy and the rest of society, depriving countries of important financial resources not only through the deprivation of tax dollars to fund government programs, but also by circumventing the system of incentivized charitable giving. Coupled with the fact that the tax havens exist in the same shadows that permit the actions of sanction-breaking firms selling energy to war crime-perpetuating governments – along with other forms of criminal behavior – and the continued existence of tax loopholes across the world is a menace to charitable organizations and their causes.