Se­crets of cash stashed over­seas

The Week - Junior - - Front Page -

An in­ves­ti­ga­tion by jour­nal­ists in sev­eral coun­tries has re­vealed a set of se­cret doc­u­ments that show that hun­dreds of peo­ple and com­pa­nies are avoid­ing pay­ing mil­lions of pounds in tax.

What is tax?

Al­most ev­ery­one who earns money must give some of it to their gov­ern­ment. It pays for ser­vices such as the armed forces, ed­u­ca­tion, hous­ing, the po­lice and pub­lic health ser­vices. Usu­ally, the more money you earn, the more tax you pay. Businesses must pay tax on the money they make, and gov­ern­ments add taxes to some goods that peo­ple buy, such as cars, clothes and houses. This is called value added tax (VAT).

How do peo­ple avoid pay­ing tax?

One way of avoid­ing pay­ing tax is by us­ing a sys­tem called off­shore bank­ing. That means us­ing banks in for­eign – off­shore – coun­tries, rather than your own. One so­cial-me­dia user, DanGlie­sack, com­pared it to hav­ing two separate piggy banks: imag­ine you have a piggy bank where you save your pocket money. Your par­ents check it from time to time to see how much money you have. One day you de­cide you don’t want them to know how much money you have. You get an­other piggy bank and se­cretly take it to your friend’s house. You then put your sav­ings in the new piggy bank and don’t tell your par­ents about your se­cret stash of cash. This is what those named in the se­cret doc­u­ments have re­port­edly done. It is claimed they used banks in a tax haven (a coun­try or ter­ri­tory where peo­ple pay lit­tle or no tax) to avoid pay­ing tax in the UK. Tax havens in­clude sev­eral trop­i­cal is­lands in the Caribbean – such as the Ba­hamas – which is why the se­cret papers have been named the Par­adise Papers.

Is this against the law?

In the UK, it is not against the law to use a bank in an­other coun­try if you de­clare this to UK tax of­fi­cials. How­ever, some peo­ple ar­gue off­shore bank­ing is morally wrong. They say that it is not fair for peo­ple to avoid pay­ing tax be­cause it means the Gov­ern­ment has less money to pay for ser­vices. It is usu­ally only very rich peo­ple and com­pa­nies who use tax havens; most peo­ple pay all their tax in full.

Who is in­volved?

Many fa­mous peo­ple are named in the doc­u­ments. £10 mil­lion of the Queen’s money is said to have been in­vested in off­shore com­pa­nies. Buck­ing­ham Palace says the Queen knew noth­ing about this and has not avoided pay­ing tax. It is claimed that the For­mula One world cham­pion Lewis Hamil­ton used tax havens to avoid pay­ing VAT on a pri­vate jet that he bought in 2013. Hamil­ton’s lawyers said he has done noth­ing il­le­gal. Pop stars, ac­tors and other mem­bers of the royal fam­ily are also named in the Par­adise Papers, along with com­pa­nies in­clud­ing Ap­ple and Nike, two of the

world’s big­gest businesses.

How have peo­ple re­acted?

Labour leader Jeremy Cor­byn said peo­ple should think about the dam­age they do to so­ci­ety by not pay­ing taxes. Theresa May, the UK Prime Min­is­ter, said peo­ple and businesses should “pay the tax that is due”.

Lewis Hamil­ton

An Ap­ple store.

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