Browse content similar to Scotland's Paradise Papers. Check below for episodes and series from the same categories and more!
Line | From | To | |
---|---|---|---|
Crikey, she sounds pretty stressed. | 0:00:01 | 0:00:02 | |
Where exactly are you?! | 0:00:02 | 0:00:06 | |
This is a story about money,
and how the rich and powerful | 0:00:06 | 0:00:09 | |
try to hide it from the taxman. | 0:00:09 | 0:00:12 | |
It's the big guys who
are using their power, | 0:00:12 | 0:00:16 | |
their strength and their monetary
advantage in order | 0:00:16 | 0:00:18 | |
to game the system. | 0:00:18 | 0:00:27 | |
There do seem to be different
rules for billionaires. | 0:00:29 | 0:00:32 | |
In one of the biggest offshore
data leaks in history, | 0:00:32 | 0:00:34 | |
we learn how corporate giants
shift their profits | 0:00:34 | 0:00:36 | |
and avoid the taxman thanks
to the world's tax havens. | 0:00:36 | 0:00:39 | |
The trouble with this stuff
isn't that it's illegal. | 0:00:39 | 0:00:41 | |
The trouble is that it's legal. | 0:00:41 | 0:00:42 | |
If these companies are not
paying their fair share of taxes, | 0:00:42 | 0:00:45 | |
it means you and I are paying more. | 0:00:45 | 0:00:47 | |
It's as simple as that. | 0:00:47 | 0:00:48 | |
It's a story about how big
business and billionaires | 0:00:48 | 0:00:50 | |
use an elite law firm,
operating in tax havens right | 0:00:50 | 0:00:53 | |
on Britain's doorstep. | 0:00:53 | 0:00:57 | |
It looks like the Isle
of Man ExecuJet company | 0:00:57 | 0:01:00 | |
was a tax avoidance vehicle,
which allowed ExecuJet to avoid | 0:01:00 | 0:01:02 | |
more than $1 million
in tax over three years. | 0:01:02 | 0:01:06 | |
That is absolutely wrong. | 0:01:06 | 0:01:08 | |
These are Scotland's
Paradise Papers. | 0:01:08 | 0:01:12 | |
You've been hearing
about a leak ? it's a big one. | 0:01:24 | 0:01:29 | |
It's from inside Appleby,
a law firm with offices | 0:01:29 | 0:01:31 | |
in every major tax haven. | 0:01:31 | 0:01:33 | |
More than 13 million Appleby
documents were obtained by German | 0:01:33 | 0:01:36 | |
newspaper Suddeutsche Zeitung,
who shared them with | 0:01:36 | 0:01:40 | |
the International Consortium
of Investigative Journalists. | 0:01:40 | 0:01:45 | |
The ICIJ has been coordinating
a global investigation, | 0:01:45 | 0:01:49 | |
which includes BBC Panorama
and the Guardian newspaper, | 0:01:49 | 0:01:52 | |
and involves more than 350
journalists in over 100 countries. | 0:01:52 | 0:01:59 | |
These are documents that
should never have seen | 0:01:59 | 0:02:01 | |
the light of day, basically. | 0:02:01 | 0:02:03 | |
Every person who pays taxes should
care about what we're seeing here. | 0:02:03 | 0:02:12 | |
We are looking at a firm called
Appleby,. | 0:02:12 | 0:02:20 | |
We are looking at a firm
called Appleby,. | 0:02:20 | 0:02:22 | |
Appleby, which is the principal
focus of this investigation, | 0:02:22 | 0:02:24 | |
they're part of what they call
the magic circle of offshore law | 0:02:24 | 0:02:27 | |
firms - in other words,
the elite of the elite, | 0:02:27 | 0:02:30 | |
and their clients are also
the elite of the elite. | 0:02:30 | 0:02:32 | |
And there are some big names. | 0:02:32 | 0:02:34 | |
Lewis Hamilton's tax
dodge on his private jet. | 0:02:34 | 0:02:35 | |
Cast members of Mrs Brown's Boys'
offshore tax-avoidance scheme. | 0:02:35 | 0:02:38 | |
And the inner circles of the most
powerful men in the world. | 0:02:38 | 0:02:41 | |
You can't dismiss this
as just a few bad guys. | 0:02:41 | 0:02:43 | |
This is a whole system used
by the most powerful | 0:02:43 | 0:02:45 | |
and the wealthiest, the biggest
corporations - exposed. | 0:02:45 | 0:02:47 | |
BBC Scotland's investigations team
is the only Scottish media partner | 0:02:47 | 0:02:50 | |
with access to the leak,
and has been working | 0:02:50 | 0:02:52 | |
inside the Paradise Papers
for the past six months. | 0:02:52 | 0:02:54 | |
There are thousands
of documents relating to Scots | 0:02:54 | 0:02:56 | |
businesses and people -
some of them you'll have heard of, | 0:02:56 | 0:02:58 | |
and some you won't. | 0:02:58 | 0:03:07 | |
But they've all got one thing
in common ? avoiding tax. | 0:03:07 | 0:03:10 | |
Blackstone - not a household name,
but a global private equity giant | 0:03:10 | 0:03:13 | |
managing over $350 billion
worth of assets. | 0:03:13 | 0:03:15 | |
It's founder and chief executive
is Stephen Schwarzman, | 0:03:15 | 0:03:17 | |
a close confidant of President
Trump. | 0:03:17 | 0:03:22 | |
And his company has a major
interest in Scotland. | 0:03:22 | 0:03:25 | |
St Enoch Centre in Glasgow. | 0:03:32 | 0:03:35 | |
One of the most recognisable
buildings in the country. | 0:03:35 | 0:03:37 | |
It was bought by Blackstone
in 2013 for £190 million. | 0:03:37 | 0:03:45 | |
Blackstone is one of Appleby's
biggest customers, and the law firm | 0:03:45 | 0:03:48 | |
was integrally involved
in the purchase of St Enoch. | 0:03:48 | 0:03:51 | |
The Paradise Papers lay bare
the lengths Blackstone, | 0:03:51 | 0:03:56 | |
one of the biggest, richest
companies in the world, | 0:03:56 | 0:03:58 | |
went to to avoid paying UK taxes. | 0:03:58 | 0:04:03 | |
The data reveals the confidential
reports by one of the UK's | 0:04:03 | 0:04:06 | |
biggest accountancy firms,
Deloitte. | 0:04:06 | 0:04:09 | |
Under the codename Project Genesis,
they provide a step-by-step guide, | 0:04:09 | 0:04:13 | |
tailor-made to help Blackstone avoid
tax at every stage of | 0:04:13 | 0:04:17 | |
the purchase of St Enoch. | 0:04:17 | 0:04:20 | |
It starts with a deft
swerve of £7.6 million | 0:04:20 | 0:04:23 | |
in stamp duty land tax,
made by possible by owning | 0:04:23 | 0:04:27 | |
the shopping centre through a Jersey
property Trust, or JPUT. | 0:04:27 | 0:04:32 | |
Jersey is a Crown Dependency -
which means it's independent, | 0:04:32 | 0:04:36 | |
but ultimately the UK
is responsible. | 0:04:36 | 0:04:40 | |
And, like several of the UK's
Overseas Territories, | 0:04:40 | 0:04:42 | |
it's a tax haven. | 0:04:42 | 0:04:45 | |
Jersey specialises in Trusts,
and there are thousands | 0:04:45 | 0:04:48 | |
of them based here. | 0:04:48 | 0:04:49 | |
One of the many main
benefits to holding, say, | 0:04:49 | 0:04:52 | |
property in a Trust is privacy -
it's completely hidden | 0:04:52 | 0:04:55 | |
from the public. | 0:04:55 | 0:04:57 | |
But the other main attraction
is that it helps companies avoid | 0:04:57 | 0:05:00 | |
paying British taxes. | 0:05:00 | 0:05:08 | |
This Trust we're interested in is
operated by something the called | 0:05:08 | 0:05:11 | |
St Enoch Centre Trustee Company
Limited. | 0:05:11 | 0:05:14 | |
Its registered address is here,
at Appleby's Jersey office. | 0:05:14 | 0:05:18 | |
Its directors are Appleby staff. | 0:05:18 | 0:05:21 | |
It's a brass plate company,
which means a company with no | 0:05:21 | 0:05:24 | |
obvious economic relationship
to a shopping centre in Glasgow. | 0:05:24 | 0:05:29 | |
What did the islands' leading
politician think about companies | 0:05:29 | 0:05:31 | |
using Jersey to avoid the UK taxman? | 0:05:31 | 0:05:35 | |
If there are concerns
in the United Kingdom about how | 0:05:35 | 0:05:37 | |
people are structuring
their investments into | 0:05:37 | 0:05:40 | |
the United Kingdom... | 0:05:40 | 0:05:42 | |
If there are concerns there,
then the United Kingdom Government | 0:05:42 | 0:05:44 | |
should change its tax code
to deal with them. | 0:05:44 | 0:05:47 | |
Some organisations use Jersey
as part of a complicated | 0:05:47 | 0:05:49 | |
ownership structure. | 0:05:49 | 0:05:51 | |
Some might say that the way
that the way Jersey Trusts | 0:05:51 | 0:05:53 | |
operate isn't transparent. | 0:05:53 | 0:05:56 | |
The United Kingdom Government
and their competent authorities can | 0:05:56 | 0:06:01 | |
request information about what's
happening in Jersey wherever | 0:06:01 | 0:06:03 | |
they might have a concern,
and we're at the stage now | 0:06:03 | 0:06:07 | |
where that information can be
exchanged in as little as an hour. | 0:06:07 | 0:06:13 | |
We asked George Turner,
tax researcher and campaigner, | 0:06:13 | 0:06:15 | |
to look into this structure for us. | 0:06:15 | 0:06:18 | |
What you have here at
the St Enoch Centre to all intents | 0:06:18 | 0:06:21 | |
and purposes is an economic fiction. | 0:06:21 | 0:06:22 | |
The property is owned
by a Trust in Jersey. | 0:06:22 | 0:06:25 | |
So when the original owners sold
the property to Blackstone, | 0:06:25 | 0:06:30 | |
they weren't selling
the property itself. | 0:06:30 | 0:06:33 | |
They were selling an interest
in the Trust that own the property, | 0:06:33 | 0:06:38 | |
and because that Trust is owned
offshore, they can avoid stamp duty. | 0:06:38 | 0:06:43 | |
So that's £7 million
or £8 million saved right away. | 0:06:43 | 0:06:47 | |
Saved, or taken. | 0:06:47 | 0:06:51 | |
The Jersey Trust is owned
by a series of Blackstone | 0:06:52 | 0:06:55 | |
Luxembourg companies. | 0:06:55 | 0:06:57 | |
Despite having a major base
in London, Blackstone has been given | 0:06:57 | 0:07:01 | |
non-resident landlord status
by HMRC, meaning they can collect | 0:07:01 | 0:07:07 | |
rental income on the property
tax-free and send it to Luxembourg. | 0:07:07 | 0:07:12 | |
The data suggests that
could be £10 million a year, | 0:07:12 | 0:07:15 | |
but they should pay corporation
income tax on that in Luxembourg. | 0:07:15 | 0:07:20 | |
But do they? | 0:07:20 | 0:07:23 | |
So what appears to be
happening is that the rental | 0:07:23 | 0:07:25 | |
income which is coming in,
the companies that are receiving | 0:07:25 | 0:07:28 | |
that are then borrowing huge amounts
of money from other companies | 0:07:28 | 0:07:30 | |
which are part of
the Blackstone Group. | 0:07:30 | 0:07:32 | |
Now, when they borrow that money,
they need to pay interest on it, | 0:07:32 | 0:07:35 | |
and those interest payments destroy
any profitability | 0:07:35 | 0:07:37 | |
in those companies. | 0:07:37 | 0:07:40 | |
And the end result is no tax is due? | 0:07:40 | 0:07:42 | |
Because they're borrowing
money from themselves, | 0:07:42 | 0:07:45 | |
they can claim a tax
deduction on that. | 0:07:45 | 0:07:49 | |
According to registry documents,
the Luxembourg companies | 0:07:49 | 0:07:52 | |
in the St Enoch structure paid just
a few thousand pounds | 0:07:52 | 0:07:54 | |
a year in taxes. | 0:07:54 | 0:07:57 | |
And, guess what? | 0:07:57 | 0:07:59 | |
If Blackstone sells the place on,
the Jersey Trust structure | 0:07:59 | 0:08:01 | |
will allow them to avoid capital
gains tax, too ? which could run | 0:08:01 | 0:08:04 | |
into tens of millions. | 0:08:04 | 0:08:08 | |
It seems like a complete charade. | 0:08:08 | 0:08:10 | |
A Glasgow shopping centre
generating cash in rental | 0:08:10 | 0:08:13 | |
income here in Scotland,
but that cash flows tax-free out | 0:08:13 | 0:08:18 | |
of Scotland and over
to Luxembourg via the tax haven | 0:08:18 | 0:08:23 | |
where the St Enoch Centre
is effectively owned in Jersey. | 0:08:23 | 0:08:28 | |
Deloitte, the architects of
the structure, declined to comment. | 0:08:28 | 0:08:37 | |
It's not the first time
Blackstone used these methods. | 0:08:37 | 0:08:39 | |
This is Chiswick Park ? a business
centre in West London. | 0:08:39 | 0:08:42 | |
Blackstone bought it in 2011 -
and in tax advice, this time | 0:08:42 | 0:08:45 | |
from accountancy firm PwC. | 0:08:45 | 0:08:49 | |
And there was no messing about. | 0:08:49 | 0:08:51 | |
It states the proposed tax
structure was designed: | 0:08:51 | 0:08:54 | |
To mitigate, where possible,
taxes on acquisition. | 0:08:54 | 0:08:57 | |
To minimise ongoing income,
corporate, withholding | 0:08:57 | 0:09:00 | |
and other taxes in UK,
Jersey and Luxembourg. | 0:09:00 | 0:09:04 | |
To minimise tax on exit from a UK,
Jersey and Luxembourg perspective. | 0:09:04 | 0:09:10 | |
The language is quite shocking,
because it's so blatant | 0:09:10 | 0:09:14 | |
what the intention is. | 0:09:14 | 0:09:17 | |
Blackstone sold Chiswick Park
to the Chinese government | 0:09:17 | 0:09:20 | |
in 2014 for a £300 million. | 0:09:20 | 0:09:25 | |
So it would appear Blackstone
followed the PwC advice | 0:09:25 | 0:09:29 | |
to the letter, and paid no stamp
duty, paid next to no | 0:09:29 | 0:09:33 | |
income tax on the millions
of pounds of rental income, | 0:09:33 | 0:09:36 | |
and no capital gains
on the disposal. | 0:09:36 | 0:09:42 | |
Not a bad bit of business. | 0:09:42 | 0:09:44 | |
PwC told the BBC... | 0:09:44 | 0:09:46 | |
"The advice we provide
is given in accordance | 0:09:46 | 0:09:49 | |
In a statement, Blackstone said:
"Blackstone's investments are wholly | 0:09:56 | 0:10:00 | |
compliant with UK and international
tax laws and regulations". | 0:10:00 | 0:10:04 | |
The properties were acquired
by "Institutional investors, | 0:10:04 | 0:10:06 | |
and are of a type commonly used
for decades for investments | 0:10:06 | 0:10:09 | |
in UK real estate." | 0:10:09 | 0:10:11 | |
And were "Adopted after appropriate
advice was taken from leading tax | 0:10:11 | 0:10:14 | |
and legal advisors". | 0:10:14 | 0:10:18 | |
So, whilst Blackstone was
the beneficiary of the structure, | 0:10:20 | 0:10:22 | |
it was Appleby who implemented it. | 0:10:22 | 0:10:26 | |
And that's what they do. | 0:10:26 | 0:10:30 | |
They'll create companies
for you in tax havens, | 0:10:30 | 0:10:32 | |
even provide the directors. | 0:10:32 | 0:10:35 | |
There are thousands of examples
of this in data, and some | 0:10:35 | 0:10:38 | |
specifically involves one
of Scotland's biggest industries - | 0:10:38 | 0:10:43 | |
Ithaca Energy, a Canadian company
with its headquarters in Aberdeen. | 0:10:43 | 0:10:49 | |
In 2012, they were in the process
of buying a share in this. | 0:10:49 | 0:10:52 | |
FPF-1 is a floating
oil production vessel. | 0:10:52 | 0:10:56 | |
The company agreed a deal
for £18 million to buy half | 0:10:56 | 0:11:03 | |
of FPF-1 and share it
with two other companies. | 0:11:03 | 0:11:05 | |
But just days before
the transaction, they decide | 0:11:05 | 0:11:07 | |
they need a shell company
in a tax haven. | 0:11:07 | 0:11:09 | |
Why would a Canadian company
with its headquarters in Aberdeen | 0:11:09 | 0:11:15 | |
need a Bermudan company
to own its stake in an oil vessel | 0:11:15 | 0:11:20 | |
working in the North Sea? | 0:11:20 | 0:11:27 | |
The Paradise Papers
could have the answer. | 0:11:27 | 0:11:31 | |
Ithaca's Aberdeen office tells
Appleby: "It is important | 0:11:31 | 0:11:34 | |
for our tax position
that the company is managed | 0:11:34 | 0:11:36 | |
and controlled from Bermuda". | 0:11:36 | 0:11:38 | |
Seems clear enough. | 0:11:38 | 0:11:39 | |
Ithaca need the company to operate
properly, for tax reasons. | 0:11:39 | 0:11:42 | |
Appleby agree to provide
a local director. | 0:11:42 | 0:11:50 | |
There're reasons to head to Bermuda
other than its sun-kissed beaches - | 0:11:50 | 0:11:54 | |
mainly the island's
generous tax laws. | 0:11:54 | 0:11:58 | |
There are no taxes
on profits or income. | 0:11:58 | 0:12:01 | |
But does the company have any real
business in Bermuda? | 0:12:01 | 0:12:04 | |
Or is it just a show
for tax purposes? | 0:12:04 | 0:12:12 | |
Take this minute of a company board
meeting in June 2012. | 0:12:12 | 0:12:15 | |
It says two Ithaca executives called
in from Canada and the UK, | 0:12:15 | 0:12:20 | |
and Appleby's Bermudian director
fails to attend. | 0:12:20 | 0:12:24 | |
An Ithaca board meeting in Bermuda,
with apparently no-one in Bermuda. | 0:12:24 | 0:12:30 | |
We asked an international tax
expert for his opinion. | 0:12:30 | 0:12:34 | |
I think the reality of the matter
is this whole show was being run | 0:12:34 | 0:12:37 | |
from Aberdeen, not from Bermuda. | 0:12:37 | 0:12:40 | |
The only reason to have a Bermudan
company in there is because | 0:12:40 | 0:12:45 | |
Bermuda's a tax haven,
and they can get interest into it | 0:12:45 | 0:12:48 | |
without paying taxes,
and whenever the Canadian company | 0:12:48 | 0:12:50 | |
wants to withdraw the money
they can withdraw the money | 0:12:50 | 0:12:53 | |
without paying any taxes. | 0:12:53 | 0:12:54 | |
I can't see any other reason
to have this extra holding | 0:12:54 | 0:12:57 | |
company in the structure. | 0:12:57 | 0:13:00 | |
FPF-1 only started producing
oil this year - and, | 0:13:00 | 0:13:03 | |
because of tax breaks,
won't pay UK tax until 2020 anyway. | 0:13:03 | 0:13:07 | |
So what's the point? | 0:13:07 | 0:13:10 | |
I think the point
is looking forward. | 0:13:10 | 0:13:12 | |
You want to plan ahead
when you do these things, | 0:13:12 | 0:13:14 | |
because doing it when you actually
are profitable is harder. | 0:13:14 | 0:13:19 | |
For a few weeks, we've been trying
to get some answers from Ithaca | 0:13:19 | 0:13:22 | |
about just what exactly the purpose
of this Bermudan company was. | 0:13:22 | 0:13:28 | |
They say it's got
nothing to do with tax. | 0:13:28 | 0:13:31 | |
Our evidence suggests otherwise. | 0:13:31 | 0:13:35 | |
I'm going to go and knock
on their door and see | 0:13:35 | 0:13:38 | |
if someone will talk to us. | 0:13:38 | 0:13:46 | |
Hello. Hello. Mark Daly, BBC
Scotland. How are you? Very well. | 0:13:46 | 0:13:54 | |
We're just trying to find
out what the purpose | 0:13:54 | 0:13:56 | |
of the Bermudan company is? | 0:13:56 | 0:13:58 | |
The Bermudan company exists to hold
an asset that we have a share of. | 0:13:58 | 0:14:01 | |
Why hold it in Bermuda? | 0:14:01 | 0:14:03 | |
It's convenient for future
deals that we may do. | 0:14:03 | 0:14:09 | |
It's a complex business. | 0:14:09 | 0:14:11 | |
Is it a real company,
the Bermudan company? | 0:14:11 | 0:14:13 | |
Absolutely. | 0:14:13 | 0:14:14 | |
Because nothing really
happens there, does it? | 0:14:14 | 0:14:16 | |
I mean, you have board meetings. | 0:14:16 | 0:14:18 | |
You've even had board
meetings where nobody's | 0:14:18 | 0:14:21 | |
been physically present,
and people have been | 0:14:21 | 0:14:23 | |
calling in from abroad. | 0:14:23 | 0:14:24 | |
That would suggest, would it not,
that the company's being | 0:14:24 | 0:14:27 | |
managed and controlled
from outside of Bermuda? | 0:14:27 | 0:14:34 | |
Mark, Mark, you're concocting
a story, and frankly | 0:14:34 | 0:14:39 | |
part of the reason that | 0:14:39 | 0:14:44 | |
to have approached this
with a story in mind, | 0:14:44 | 0:14:46 | |
and I don't think it's helpful
to create a story based | 0:14:46 | 0:14:49 | |
on partial information. | 0:14:49 | 0:14:50 | |
Maybe you could give us
the full picture, then? | 0:14:50 | 0:14:52 | |
Now, the information that we have
suggests very strongly | 0:14:52 | 0:14:54 | |
that the Bermudan company
was created for tax purposes. | 0:14:54 | 0:14:57 | |
No, no that's not true. | 0:14:57 | 0:14:58 | |
I think we've said very clearly
that that's not true. | 0:14:58 | 0:15:00 | |
Now, you can choose to believe
us, or not believe, | 0:15:00 | 0:15:02 | |
us, that's up to you. | 0:15:02 | 0:15:06 | |
Have a good day. All the best, thank
you very much for speaking to us. | 0:15:06 | 0:15:11 | |
In a statement, Appleby
said it works in "highly | 0:15:11 | 0:15:13 | |
regulated jurisdictions",
and advises clients | 0:15:13 | 0:15:15 | |
on "legitimate and lawful ways"
to conduct their business. | 0:15:15 | 0:15:21 | |
Within the millions of documents
in this leak, we can see it's not | 0:15:21 | 0:15:25 | |
just corporate giants who have used
Appleby to try to | 0:15:25 | 0:15:27 | |
help them avoid tax. | 0:15:27 | 0:15:30 | |
Our data reveals even
middle-sized property developers | 0:15:30 | 0:15:32 | |
were getting in on the act. | 0:15:32 | 0:15:35 | |
This is Logie Green
Road in Edinburgh. | 0:15:35 | 0:15:39 | |
In 2009, a number of addresses
on this street were sold | 0:15:39 | 0:15:41 | |
for millions of pounds. | 0:15:41 | 0:15:45 | |
The deal involved a group
of investors who included | 0:15:45 | 0:15:47 | |
Chris Stewart and Alex Watts. | 0:15:47 | 0:15:51 | |
The deal was done for a very
healthy profit indeed. | 0:15:51 | 0:15:56 | |
The data shows more than £5
million profit was made. | 0:15:56 | 0:16:00 | |
£750,000 due to Stewart
and £1.3 million to Watts. | 0:16:00 | 0:16:03 | |
The data suggests they tried
to take their cut offshore | 0:16:03 | 0:16:06 | |
to the Isle of Man, where Appleby,
who were then called | 0:16:06 | 0:16:09 | |
Dickinson Cruickshank,
created a land Trust called | 0:16:09 | 0:16:11 | |
the Palmerston Partnership. | 0:16:11 | 0:16:15 | |
An internal Appleby memo sets out
the purpose of the scheme: "A UK | 0:16:15 | 0:16:19 | |
property development in Scotland
utilising a Land Trust Partnership | 0:16:19 | 0:16:21 | |
structure to mitigate any tax due". | 0:16:21 | 0:16:27 | |
"Profits from the sale
have been distributed | 0:16:27 | 0:16:28 | |
amongst the partnership". | 0:16:28 | 0:16:31 | |
And here's how it worked
for the Edinburgh pair. | 0:16:31 | 0:16:34 | |
An Isle of Man vehicle
called the Palmerston | 0:16:34 | 0:16:35 | |
Partnership was created. | 0:16:35 | 0:16:38 | |
Two offshore Trusts
were also created - | 0:16:38 | 0:16:39 | |
one for Stewart, one for Watts. | 0:16:39 | 0:16:43 | |
The profits from the Logie Green
land deal flowed into | 0:16:43 | 0:16:45 | |
the partnership in the Isle of Man. | 0:16:45 | 0:16:48 | |
From there, Stewart and Watts' cuts
were moved into their Trusts, of | 0:16:48 | 0:16:51 | |
which they were the beneficiaries. | 0:16:51 | 0:16:55 | |
And it gets even more complicated. | 0:16:55 | 0:16:58 | |
Appleby set up two companies
to act as Trustees, called | 0:16:58 | 0:17:00 | |
Muttermore and Cuttermore. | 0:17:00 | 0:17:03 | |
These were supposedly independent
of Stewart and Watts. | 0:17:03 | 0:17:08 | |
Appleby staff then sign off
on a series of loans to companies | 0:17:08 | 0:17:11 | |
registered in Scotland,
which were controlled | 0:17:11 | 0:17:12 | |
by Stewart and Watts. | 0:17:12 | 0:17:16 | |
So what does all that mean? | 0:17:16 | 0:17:19 | |
I needed an expert,
and Philip Simpson is one | 0:17:19 | 0:17:21 | |
of the country's leading tax QCs. | 0:17:21 | 0:17:24 | |
The structure is well-known as a tax
avoidance structure. | 0:17:24 | 0:17:29 | |
Certainly the documents I've seen
strongly suggest the motive | 0:17:29 | 0:17:32 | |
for using it was to avoid UK tax. | 0:17:32 | 0:17:42 | |
So it's difficult to come
to any other conclusion | 0:17:43 | 0:17:45 | |
than that the purpose
of it was avoiding UK tax | 0:17:45 | 0:17:48 | |
in a fairly aggressive manner. | 0:17:48 | 0:17:57 | |
But in 2012, HMRC came calling. | 0:17:57 | 0:18:00 | |
A deeply unhappy Mr Watts wrote
to Appleby expressing concern over | 0:18:00 | 0:18:05 | |
the way the structure had been
managed, which could "weaken any | 0:18:05 | 0:18:07 | |
position with HMRC",
which he said would be "looking | 0:18:07 | 0:18:09 | |
to attack wherever they can". | 0:18:09 | 0:18:14 | |
Seemingly worried HMRC
will see through the scheme, | 0:18:14 | 0:18:16 | |
Mr Watts writes: "If as a layman
I am picking these up, | 0:18:16 | 0:18:18 | |
what am I missing? | 0:18:18 | 0:18:20 | |
That experts at HMRC will not". | 0:18:20 | 0:18:24 | |
In layman's terms, the taxman
caught up with them. | 0:18:24 | 0:18:26 | |
That's what it looks like. | 0:18:26 | 0:18:32 | |
If one might put it in a colloquial
manner, then yes, one | 0:18:32 | 0:18:35 | |
might put it like that. | 0:18:35 | 0:18:40 | |
Appleby documents suggest the pair
had, at least initially, | 0:18:40 | 0:18:42 | |
avoided more than £1 million in tax
from the profits. | 0:18:42 | 0:18:44 | |
So I had a few
questions for Mr Watts. | 0:18:44 | 0:18:47 | |
Mr Watts, Mr Watts. | 0:18:47 | 0:18:48 | |
Hi there, Mark Daly, BBC Scotland. | 0:18:48 | 0:18:51 | |
I've just got a few questions
for you, would you mind? | 0:18:51 | 0:18:53 | |
I would mind, actually. | 0:18:53 | 0:18:54 | |
Would you? | 0:18:54 | 0:18:55 | |
I'd just like to ask
you about your offshore Trust. | 0:18:55 | 0:18:58 | |
We have written to you to ask a few
questions about your Trust. | 0:18:58 | 0:19:01 | |
And we've written back,
so I think we've been fairly | 0:19:01 | 0:19:03 | |
reasonable with you,
and we've written back to you. | 0:19:03 | 0:19:05 | |
I think what you're doing is really
pretty unethical, actually, | 0:19:05 | 0:19:08 | |
from journalistic guidelines so I'd
rather just leave it there. | 0:19:08 | 0:19:12 | |
Well, the thing is,
you haven't actually | 0:19:12 | 0:19:13 | |
answered our questions,
which is why we're | 0:19:13 | 0:19:15 | |
here this morning. | 0:19:15 | 0:19:16 | |
Well, you know... | 0:19:16 | 0:19:17 | |
On the profits of the
Palmerston Partnership, | 0:19:17 | 0:19:19 | |
£1.3 million was your share. | 0:19:19 | 0:19:20 | |
How much tax on that did you pay? | 0:19:20 | 0:19:22 | |
OK, I'm not going to answer. | 0:19:22 | 0:19:24 | |
You've written to us,
and we've responded | 0:19:24 | 0:19:26 | |
to you professionally and properly. | 0:19:26 | 0:19:27 | |
What you're doing here... | 0:19:27 | 0:19:37 | |
Mr Watts' spokesperson told us
he was a "positive tax | 0:19:40 | 0:19:43 | |
contributor" who had always
lodged his tax returns. | 0:19:43 | 0:19:45 | |
He added that "following legislative
changes", Mr Watts entered | 0:19:45 | 0:19:47 | |
into "open and cooperative
discussion with HMRC" to establish | 0:19:47 | 0:19:54 | |
any potential tax due
on a "retrospective basis". | 0:19:54 | 0:19:56 | |
Mr Stewart's spokesperson
told us that "all tax | 0:19:56 | 0:19:58 | |
has been paid in full",
and any "retrospective tax payments | 0:19:58 | 0:20:00 | |
paid" ahead of "timescales
discussed with HMRC". | 0:20:00 | 0:20:03 | |
She added that there
was "no case to answer", | 0:20:03 | 0:20:06 | |
that HMRC was "in possession
of all relevant facts" and that "no | 0:20:06 | 0:20:08 | |
tax is owed to HMRC". | 0:20:08 | 0:20:14 | |
The key to the Palmerston
Partnership was the Isle of Man. | 0:20:14 | 0:20:18 | |
Stories about the island
come up again and again | 0:20:18 | 0:20:20 | |
in the Paradise Papers. | 0:20:20 | 0:20:24 | |
I'm here to investigate one
of them ? it involves | 0:20:24 | 0:20:27 | |
a billionaire and private jets. | 0:20:27 | 0:20:35 | |
The aviation business is clearly
a big part of what Appleby | 0:20:35 | 0:20:37 | |
does on the Isle of Man. | 0:20:37 | 0:20:39 | |
The trouble with this stuff
isn't that it's illegal. | 0:20:39 | 0:20:41 | |
The trouble is that it's legal,
but it's only available to people | 0:20:41 | 0:20:44 | |
with enough money to pay the right
lawyers and accountants | 0:20:44 | 0:20:46 | |
to do it for them. | 0:20:46 | 0:20:51 | |
One day, in June 2012,
there was much excitement | 0:20:51 | 0:20:53 | |
in the office behind me. | 0:20:53 | 0:20:56 | |
Appleby had been contacted by a very
exclusive private jet company | 0:20:56 | 0:20:58 | |
from Switzerland, called ExecuJet. | 0:20:58 | 0:21:02 | |
Could you set up an Isle of Man
company for us, Appleby were asked. | 0:21:02 | 0:21:05 | |
Yes, we could, Appleby said. | 0:21:05 | 0:21:07 | |
Could you provide some
directors for us? | 0:21:07 | 0:21:09 | |
Yes, we could, Appleby said. | 0:21:09 | 0:21:10 | |
And can you do it today? | 0:21:10 | 0:21:12 | |
We'll try our very
best, Appleby said. | 0:21:12 | 0:21:16 | |
The firm even waives some
of its usual background checks | 0:21:16 | 0:21:19 | |
to guarantee it closes the deal. | 0:21:19 | 0:21:22 | |
Perhaps because the owner
of ExecuJet is one of | 0:21:22 | 0:21:24 | |
the richest men in the world -
Dermot Desmond, best known | 0:21:24 | 0:21:28 | |
here as the largest single
shareholder of Scotland's biggest | 0:21:28 | 0:21:30 | |
football team, and with an estimated
fortune of around £2 billion. | 0:21:30 | 0:21:36 | |
He's familiar with offshore ?
his 35% share of Celtic | 0:21:36 | 0:21:39 | |
is held by in Gibraltar. | 0:21:39 | 0:21:44 | |
He's also no stranger
to controversy. | 0:21:44 | 0:21:45 | |
Matt Cooper, sued by Mr Desmond in
2011, has written extensively him. | 0:21:45 | 0:21:51 | |
Dermot Desmond came to prominence
during the 1980s in Ireland, | 0:21:51 | 0:21:54 | |
and he was regarded as a somewhat
brash, somewhat flash figure. | 0:21:54 | 0:21:57 | |
You don't become a billionaire
unless you are absolutely aggressive | 0:21:57 | 0:22:00 | |
in making sure that you make as much
profit as you can from your | 0:22:00 | 0:22:03 | |
businesses and that you keep as much
of that profit for yourself. | 0:22:03 | 0:22:09 | |
Mr Desmond's luxury jet firm had
offices all over the world. | 0:22:09 | 0:22:12 | |
So why did they need Appleby to make
them an Isle of Man company? | 0:22:12 | 0:22:18 | |
This internal Appleby memo states
ExecuJet has taken Swiss tax | 0:22:18 | 0:22:21 | |
guidance and found out that
having their Swiss headquarters | 0:22:21 | 0:22:26 | |
as the main company
on their insurance policy "has | 0:22:26 | 0:22:28 | |
a negative tax consequence",
as they would need to pay a 5% | 0:22:28 | 0:22:31 | |
levy under Swiss law. | 0:22:31 | 0:22:33 | |
"ExecuJet would like to set up
a company in the Isle of Man, | 0:22:33 | 0:22:39 | |
namely ExecuJet Limited,
to be the primary insured | 0:22:39 | 0:22:41 | |
under the policy". | 0:22:41 | 0:22:45 | |
So by switching to a brass plate
company set up by Appleby, | 0:22:45 | 0:22:48 | |
ExecuJet swerves up to $200,000
a year in Swiss taxes, | 0:22:48 | 0:22:50 | |
just like that. | 0:22:50 | 0:22:54 | |
But that's not all. | 0:22:54 | 0:23:00 | |
ExecuJet also receives
a brokerage fee back | 0:23:00 | 0:23:02 | |
from its insurers every year -
but this is classed as income, | 0:23:02 | 0:23:05 | |
and should be taxed in Switzerland. | 0:23:05 | 0:23:06 | |
Appleby can see to that, too. | 0:23:06 | 0:23:08 | |
In another memo, Appleby write:
"This is a low-risk structure that | 0:23:08 | 0:23:11 | |
has been set up to receive monies
due to EAG under the insurance | 0:23:11 | 0:23:14 | |
policies on the group aircraft. | 0:23:14 | 0:23:18 | |
By having the monies paid
into the Isle of Man entity, | 0:23:18 | 0:23:20 | |
EAG are not required to pay Swiss
tax on the income of around 22%. | 0:23:20 | 0:23:27 | |
We expect to receive two payments
per year of approximately | 0:23:27 | 0:23:29 | |
US$600k under this policy". | 0:23:29 | 0:23:36 | |
For ExecuJet to get the tax benefits
of being based in the Isle of Man, | 0:23:36 | 0:23:40 | |
it has to be managed
and controlled from there. | 0:23:40 | 0:23:42 | |
But the only employees
there are the directors | 0:23:42 | 0:23:44 | |
Appleby provided for them. | 0:23:44 | 0:23:46 | |
And it seems Switzerland
was calling the shots. | 0:23:46 | 0:23:51 | |
This email from head office clearly
instructs Appleby to transfer more | 0:23:51 | 0:23:56 | |
than $500,000 to the ExecuJet
group's bank account in Switzerland. | 0:23:56 | 0:24:00 | |
My understanding, having
read the legislation, | 0:24:00 | 0:24:05 | |
is that if individuals
in Switzerland are making | 0:24:05 | 0:24:12 | |
all decisions as regards
what the IOM companies does, | 0:24:12 | 0:24:14 | |
then, from a Swiss point of view,
the IOM company may be resident | 0:24:14 | 0:24:18 | |
in Switzerland for tax purposes. | 0:24:18 | 0:24:21 | |
And if it's resident in Switzerland,
then despite the structure that | 0:24:21 | 0:24:23 | |
has been put in place,
stamp duty is due on the insurance | 0:24:23 | 0:24:28 | |
premium paid, and Swiss corporation
is due on the money received back | 0:24:28 | 0:24:34 | |
from the insurance broker. | 0:24:34 | 0:24:35 | |
So the Swiss taxman might have
something to say about the up | 0:24:35 | 0:24:40 | |
to $1.3 million in tax that seems
to have been avoided | 0:24:40 | 0:24:45 | |
by Mr Desmond's company. | 0:24:45 | 0:24:47 | |
Would you say this was an aggressive
tax avoidance vehicle in operation? | 0:24:47 | 0:24:50 | |
It would certainly be reasonable
to describe this as aggressive, | 0:24:50 | 0:24:52 | |
given in particular what appears
to be a lack of economic | 0:24:52 | 0:24:58 | |
substance to the IOM company. | 0:24:58 | 0:25:04 | |
I hoped someone at ExecuJet Isle
of Man's registered office, | 0:25:04 | 0:25:06 | |
which is here at Appleby,
could help with some answers. | 0:25:06 | 0:25:15 | |
No joy. | 0:25:15 | 0:25:16 | |
So perhaps Mr Desmond himself
could provide some answers. | 0:25:16 | 0:25:21 | |
We knew there would be one
place his own jet would be flying | 0:25:21 | 0:25:27 | |
into on a Champions League evening,
so we tried to catch | 0:25:27 | 0:25:29 | |
up with him there. | 0:25:29 | 0:25:31 | |
Were you aware that, whilst
the company was under your control, | 0:25:31 | 0:25:33 | |
that ExecuJet was using a shell
company in the Isle of Man | 0:25:33 | 0:25:36 | |
as a tax avoidance vehicle? | 0:25:36 | 0:25:43 | |
We never used any company
as a tax avoidance vehicle. | 0:25:43 | 0:25:45 | |
What was the Isle of
Man ExecuJet company for, then, | 0:25:45 | 0:25:48 | |
if not for avoiding tax? | 0:25:48 | 0:25:51 | |
Well, then you'll have
to educate yourself. | 0:25:51 | 0:25:57 | |
So, ExecuJet asked Appleby to set
up effectively a shell | 0:25:57 | 0:25:59 | |
company in the Isle of Man
so that the company would not be | 0:25:59 | 0:26:02 | |
liable for Swiss aviation tax. | 0:26:02 | 0:26:04 | |
Is that not case, Mr Desmond? | 0:26:04 | 0:26:10 | |
You're incorrect. | 0:26:10 | 0:26:15 | |
Could you put me right, then? | 0:26:15 | 0:26:17 | |
I'm not duty-bound to educate
you in how we run our affairs. | 0:26:17 | 0:26:22 | |
We have written several letters
to you to try and get clarity | 0:26:22 | 0:26:25 | |
on what the situation is,
and what it looks as if, | 0:26:25 | 0:26:27 | |
as it looks like, the Isle
of Man ExecuJet company was a tax | 0:26:27 | 0:26:31 | |
avoidance vehicle, which allowed
ExecuJet to avoid more | 0:26:31 | 0:26:32 | |
than $1 million in tax
over three years. | 0:26:32 | 0:26:37 | |
That is absolutely wrong. | 0:26:37 | 0:26:39 | |
But maybe you could tell us,
what was the Isle of Man company | 0:26:39 | 0:26:42 | |
for if not to avoid tax,
Mr Desmond? | 0:26:42 | 0:26:46 | |
That is exactly, that
is our own business. | 0:26:46 | 0:26:48 | |
Every company in the Isle of Man
is not for avoidance of tax. | 0:26:48 | 0:26:53 | |
OK, one final question. | 0:26:53 | 0:26:54 | |
Did ExecuJet Isle of Man
help ExecuJet avoid tax? | 0:26:54 | 0:27:01 | |
Absolutely not. | 0:27:01 | 0:27:02 | |
OK, Mr Desmond, thanks
very much for your time. | 0:27:02 | 0:27:05 | |
Mr Desmond wasn't prepared
to give too much detail | 0:27:05 | 0:27:08 | |
about the Isle of Man company,
but what he did say was that it | 0:27:08 | 0:27:11 | |
was not a tax avoidance vehicle. | 0:27:11 | 0:27:13 | |
But I'm afraid, in terms
of what the Isle of Man company | 0:27:13 | 0:27:16 | |
was for, I'm none the wiser. | 0:27:16 | 0:27:21 | |
The next day, Mr Desmond
wrote me a letter. | 0:27:21 | 0:27:24 | |
"Dear Mr Daly, are you
a Rangers supporter?!" | 0:27:24 | 0:27:27 | |
He went on: "During my period
of majority ownership, | 0:27:27 | 0:27:32 | |
ExecuJet was tax and regulatory
compliant in all the various | 0:27:32 | 0:27:35 | |
jurisdictions it operated in,
nor was it under any investigation. | 0:27:35 | 0:27:39 | |
There are good operational reasons
for having a presence in the Isle | 0:27:39 | 0:27:42 | |
of Man, and many international
companies do so". | 0:27:42 | 0:27:45 | |
Appleby told the BBC it had
"thoroughly and vigorously" | 0:27:45 | 0:27:47 | |
investigated the allegations,
and they were "satisified that there | 0:27:47 | 0:27:53 | |
is no evidence of any wrongdoing",
either on the part of "ourselves | 0:27:53 | 0:27:55 | |
or our clients". | 0:27:55 | 0:28:02 | |
The Paradise Papers have given us
an insight into the secret world | 0:28:02 | 0:28:04 | |
of the rich and powerful. | 0:28:04 | 0:28:10 | |
And we've learned many of them
do not appreciate the scrutiny. | 0:28:10 | 0:28:15 | |
Tax loopholes will close,
and regulations will tighten. | 0:28:15 | 0:28:17 | |
But firms like Appleby
are paid million to find the gaps. | 0:28:17 | 0:28:24 | |
The impact of this story
is being felt across the globe. | 0:28:24 | 0:28:26 | |
But the offshore world continues
to turn, and much of what goes | 0:28:26 | 0:28:31 | |
on remains shrouded in secrecy. | 0:28:31 | 0:28:32 | |
Until, perhaps, the next big leak. | 0:28:32 | 0:28:42 |