Tax dodgers hide behind top charities

By Jon Ungoed-Thomas, Duncan Campbell and Craig Shaw | Originally published in the Sunday Times on 28 April 2013
Yacht moored next to tropical beach

The British Virgin Islands is one of the world’s most secretive tax havens (Jean-Pierre De Mann)

SOME of Britain’s best known charities are being used by offshore trusts to shelter hundreds of millions of pounds from the tax authorities.

A cache of 2.5m leaked documents from one of the world’s biggest tax havens reveals that rich investors are naming charities as the main beneficiaries of offshore trusts that in reality have been created to benefit themselves.

By naming charities as the purported beneficiaries of a trust, the real owners can avoid scrutiny by the tax authorities.

Cancer Research UK, the NSPCC, the National Trust, Greenpeace and Amnesty International are among organisations whose names have been used by trusts in the British Virgin Islands (BVI), a British overseas territory, and the Cook Islands in the Pacific.

The charities say they were never told of the existence of these trusts and have not received any money.

The investigation by The Sunday Times and the International Consortium of Investigative Journalism reveals:

Cancer Research UK and the NSPCC were among four charities that were named as beneficiaries from a BVI trust which was set up to receive profits from property deals. The charities were not told about the trust and received no money.

— Paul Hogan, the Crocodile Dundee actor investigated for illegally evading tax, placed $34m in the offshore Carthage Trust which listed the British Red Cross as the beneficiary. Hogan admits this was a sham to “protect his privacy”.

— A London firm set up trusts for wealthy Italians naming charities for the blind, for mistreated children and for Aids sufferers among beneficiaries. None has received any money and they are considering suing.

Margaret Hodge, chairwoman of the Commons public accounts committee, said: “It is beyond belief that people have stooped so low [as] to name charities in schemes which could be used to avoid tax, conceal identities or launder money. We need to lift the lid on the tax havens to stop this abuse. The problem is the complete lack of transparency.”

The leaked documents reveal more than 300 trusts with charities named as the key beneficiaries. The most commonly used charity is the Red Cross.

A nunnery in the US state of Virginia, the international charity World Vision and the Save the Children Fund are among other beneficiaries in the leaked files.

Offshore financial experts say there is no tax advantage in creating elaborate and costly offshore trusts for charities, which are already tax exempt.

“The trick of using charities is something that we often uncover,” said L Burke Files of the Lubrinco Group, a US financial compliance company. “These are sham trusts. They are a very effective money laundering tool.”

Experts believe there may be tens of thousands of charity trusts controlling billions of dollars in tax havens. The trust deeds are worded to ensure the concealed owners maintain full control of the funds.

Yesterday George Osborne announced a deal to clamp down on British taxpayers’ use of tax havens. The chancellor has signed an agreement with the Cayman Islands under which it will share information about UK taxpayers who have bank accounts on the islands. The Treasury is believed to be working on a similar deal with the BVI.

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