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Britain’s Tax Office, HMRC sold 600 state owned buildings to offshore property company


by Graham Vanbergen

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There are a number of interesting facts and figures emanating from the various offshore leaks of recent times. One of them involves Britain’s tax office HMRC, where there is a history of double dealing when it comes to tax haven transparency.

Last February HSBC’s Swiss banking arm got caught ‘red-handed’ assisting wealthy customers concealing millions of dollars of assets and then literally and quite unbelievably found to be handing out bricks of untraceable currency to them. HSBC was, at the same time, providing these clients the facilities and information needed to circumvent domestic tax authorities, according to a huge cache of leaked secret bank account files.

The leak clearly demonstrated that HSBC was providing account facilities to international criminals, corrupt businessmen and other high-risk individuals from all over the world, Britain included.

The leaked HSBC files, which covered the period 2005-2007, amounted, at the time, to the biggest banking leak in history, shining a very bright light on about 30,000 accounts holding almost $120bn (£78bn) of assets, an average of £2.6 million per account. After the files had been thoroughly checked out, the number of accounts held escalated to 130,000 individuals and organisations.

The revelations amplified calls for government’s the world over to take action and crackdown on offshore illegal tax havens. Politicians got on the bandwagon in an attempt to demonstrate they were on the side of law abiding citizens. HMRC recently issued a statement straight after the Panama papers scandal:

HMRC is committed to exposing and acting on financial wrongdoing and we relentlessly pursue tax evaders to ensure that they pay every penny of taxes and fines they owe”

The hypocrisy of politicians across Europe and America and HMRC in Britain demonstrates the level of lawlessness both are prepared to accept in every day life.

This is demonstrated best by the reactions of authorities when it came to the leak itself. The Swiss leak happened when Hervé Falciani, an IT expert at HSBC’s Swiss bank, hacked into its customer files in late 2007. He fled to France, with the Swiss police in hot pursuit, for breaching Switzerland’s rigid bank secrecy laws. The French authorities apprehended him once over the border and it appeared Falciani was done for. However, when the French authorities realised how many thousands of French citizens, especially wealthy and powerful ones, were named in the leak, they decided not to extradite him back to Switzerland. The French then defied the European Convention on Extradition much to the anger of the Swiss.

Falciani now lives comfortably under the full protection of the French authorities even though last November a Swiss court convicted him for aggravated industrial espionage, data theft and violation of commercial and banking secrecy. The Swiss were clearly aggrieved as they handed out the longest sentence ever demanded by the confederation’s public ministry in a case of banking data theft. As Falciani was not present, the trial was also the first ever conducted by the country’s federal criminal court in which the accused had not been present.

HMRC, Britain’s tax authority, also received a list from the same Swiss leaks in 2010. From which, it was able to identify the details of more than 1,000 British tax evaders. Given the serious nature of tax evasion and mounting public pressure you would have thought that HMRC could have prosecuted more than the one person it did. HMRC never revealed any of the 1,000 names other than that one scape-goat, no-one else was prosecuted and no legal action taken against HSBC.

Indeed, Downing Street was forced to defend David Cameron’s appointment of HSBC chairman, Stephen Green as trade minister in 2011 after the Swiss leaks revelations. Especially as HMRC had a cache of evidence of the scandal the year before his appointment. During Green’s 5-year tenure over HSBC, during which he was purportedly paid £25million, Bloomberg Markets accused the bank of laundering cash for state sponsored terrorists and being involved in handing cash to the Afghan Taliban amongst many other financial crimes.

Lord Green of Hurstpierpoint is now a tory peer in the House of Lords.

Back in 2001, Britain’s chancellor of the exchequer of the time, Alistair Darling, authorised a privatisation deal by selling around 600 of HMRC’s buildings. One could argue that selling off state owned assets only to be charged with exponentially rising rent is a bad deal for the taxpayer and makes no common sense whatsoever. In the meantime this story goes from farce to tradegy.

At the time HMRC said it had signed a private finance initiative (PFI) deal with the UK-registered Mapeley Limited, transferring “ownership and management” of the entire estate. The truth was that HMRC had sold the properties to a Bermuda-based sister company called Mapeley Steps Limited for £220m, while paying rent to a UK company called Mapeley Steps Contractors Limited. The former off-shored huge profits, the latter posted losses to HMRC and therefore paid no taxes to the treasury. This in itself should be a scandal.

Inland Revenue said that the precise details of contract structure that bought the estate was not revealed until late into the process. HMRC also stated that their, at best misleading press release, was simply a mistake – “There was no intention to mislead.”

I am at a loss to understand how a property portfolio of 600 buildings was worth only £220 million, an average price of just £365,000 even then. Since then of course, property values have at least doubled in the UK but trebled in London and rental prices have rocketed.

As mentioned, the sale of HMRC’s property estate went to Bermuda-based Mapeley Holdings Limited, a company ultimately owned by George Soros and US group Fortress Investment, which describes itself as an “alternative investment” company. This was the same man who broke the Bank of England by shorting Britain’s currency in 1993 on what is now famously known as ‘Black Wednesday‘ which personally made him $1.5billion in less than a month, whilst at the same time costing the treasury and therefore the taxpayer another £3.4 billion.

In an irony totally lost on our politicians, Britain sold an entire state owned property portfolio to become a tenant of the man who pillaged the country years earlier, who has located that portfolio off-shore to ensure no tax is paid to the treasury. In the last nine months of 2001, HMRC paid £165 million in rent to Maperley. Today, that annual rent bill likely to exceed £400 million.

And when you wonder why such unbelievable acts of stupidity, incompetence or criminality occurs, you then find out one last fact that will make your eyes roll as the penny drops, and this is no better explained than from zerohedge:

With all the anti-one-percenter rhetoric and tax-evading-evil-doer narratives spewing forth from the mainstream media mouthpieces of the establishment since The Panama Papers were exposed for all to see, it may come as a surprise to some to find out which cohort of the elites are the most populous among the tax-haven-creating documents…

…The Politicians themselves!


12 Comments

  1. John says

    What may also be of interest is to know that there is a secondary derivatives market in PFI contracts.
    Some of the earliest ones were paying a Return On Capital Employed (ROCE) of 25 per cent annually.
    Where can anyone get that sort of return from commercial banks today?
    They also – as pointed out above – charge hugely for so-called facilities management contracts.
    Even the very slightest variation in service needs attracts huge compensation for the operators.
    There was one story of a school funded through PFI in which the lights could not be turned off.
    The design specification forgot to include lighting on/off switches.
    This is like a Dissolution of the Monasteries – in reverse.
    Asset-stripping the state seems to be in vogue!
    Is it possible to identify the actual politicians actually involved in this – as mentioned in the article?

    Like

  2. Tony Horsfield says

    Good article, which sheds some light on an issue of asset privatisation by steath. The HMRC debacle isn’t the first example of a major UK Government Department transferring buildings across to a private sector ‘partner’: a good few years back, the entire Deaprtment of Work and Pensions (DWP) estate, head offices and local Job Centres, was given to the private sector without any consultation with staff unions. This was at least as large an estate, possibly larger because of the Job Centre network, than that of HMRC but it given away on the grounds that property management was no longer deemed to be part of DWP’s ‘core’ business.

    Like the HMRC ‘deal’, the transfer of DWP assets also meant that the ‘management’ of the estate passed to the new owners – in other words, the costs of running the estates rose significantly and the privateers – can’t recall their name – made nice returns for their shareholders. It also because very difficult to get anything done that wasn’tcontractual and/or glaringly essential like keeping roofs on buildings.

    If this situation is repeated in HMRC, the cost to the taxpayer will also include the never recorded costs of HMRC civil servants spending their time dealing with contractors to get things like toilets cleaned adequately or to keep lifts working that isn’t supposed to be part of their core function. Here’s an example from DWP: a manager wanted to get a coat hook in her office, getting the private contractor to fit it took around three months and a hell of a lot of calls and emails. In fact, the manager who ordered the coat hook had left her post by the time the hook was finally fitted for her replacement. Before privatisation, a job like that would take one email and would have been completed within a couple of weeks.

    As well as the HMRC and DWP assets give aways, UK Civil Service estate management has been almost entirely privatised over the last twenty-five years so that even Government owned buildings are run at a greater cost by what’s essentially a cartel of private facilities management companies. The same hidden costs accrue and entire tranches of support grade civil servants have been eradicated by the privatisation of estate management. Not that long ago, HMRC and DWP offices would have cleaners who were employed directly by these Departments, who were civil servants, and who had what were thought to be safe, pensionable jobs. Yes, UK civil service cleaners used to have an occupational pension – this would be unthinkable for the people what is absolutely the same job today.

    This article has touched on part of what is a long-running scandal that hasn’t been addressed or even propelry understood as what it is – a massive and ongoing transfer of assets from public to private interests. The privatisation and mismanagement of UK Home Civil Service property estates is something that cries out for further coverage, and while I’m glad that Off Guardian has carried this piece, it’s worth stressing that more needs to be unearthed about this issue if only to show how a kleptocracy functions.

    Liked by 1 person

    • Tezla Valve says

      I gather there’s been staff cutbacks at HRMC under successive (left and right) governments, so my first thoughts were: ‘this is further help for tax dodgers.’ Soros strikes again.

      Like

  3. The ridiculous part is that it serves no economic purpose for the government. They’re just giving income streams to private interests above and beyond the rate that they’d get buying so called government debt.
    It’s a wheeze for their mates. Nothing more.

    Like

    • bevin says

      There is nothing ridiculous about it. This is a transfer of public assets into private hands, which is what the government does.
      The fact that it will lead inevitably to taxpayers being bled annually to rent back the buildings that they just gave away is not a bug but a feature of the plan which is to bleed the poor until they are drained. At which point they are thrown upon the mercy of the labour market. Alternatively they will have body parts to sell.
      This is 21st Century capitalism in action. Cheer up!

      Like

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