True beneficial ownership

I was reading the blog of the Tax Justice Network the other day, whilst it remains my belief that fundamentally they are wrong in supporting bureaucracy, one cannot dispute that Richard Murphy and John Christensen are aware of issues which affect us normal people in our every day lives.

The roof of your house caves in. It’s a huge job to fix it – and you get some builders in. They charge a fortune – but, well, what price a roof over your head?

Then six months later, your roof caves in again! Time to sue the builder. Only there’s a problem. The building company has gone bankrupt. So you chase down the company owners – but find that the company’s registered in a tax haven. You go through the courts, and you’re delighted that your country has an agreement to share information with the tax haven! After a lot of work, you find out the names of the company’s directors, along with photocopies of their passports and even their shoe sizes. 

Only now there’s another problem. And it’s a biggy.

The company ‘directors’ are in fact ‘nominees’: directors who have merely rented their name to the company. Each of them, it turns out, are directors of thousands of companies. They are straw men hiding the real builders – those people who extracted those tens of thousands from you for ‘fixing’ your roof, and who doubtless extracted millions from many other unsuspecting punters – and who remain a mystery. The tax haven has ‘shared’ all the information it has with your country and the courts – but still you are no closer to tracking down the real, warm-blooded humans who set up the building company – humans who are quite likely to be swilling champagne now, driving their Ferraris through the streets of Monaco, and laughing heartily.

While you, in your dilapidated home, wonder how to pay for a new roof.

Countries have signed lots of agreements to share information with each other. Tax havens enthusiastically sign up to these agreements. “We will give you all the information we have, whenever you ask for it,” they say. And they mean it – only it’s a trick. They simply make sure they don’t have the information in the first place. They will tell you all about the nominee directors, the trustees, and the other sham officials who make the secrecy world function – knowing that you are no closer to finding the real warm-blooded humans behind the mischief.

Enter Disclosure of true beneficial ownership of companies.

We can stop this. We can make sure that every human who has a stake in a corporate structure like this has their identify available on a searchable, low-cost public register. And we should slap severe sanctions on those havens that don’t shape up.

Richard Murphy has quite clearly identified a valid problem, but his suggested solution does not address the real issue. The only solution is to ensure that there can be no form of limited liability organisation whatsoever. Any form of legal fiction is a straw man, even the company itself. Is Richard Murphy becoming a Libertarian?