Creating a Stink With Tax Havens?

Bad Smells Courtesy

Bad Smells

Why is it such a big deal when high profile leaders are discovered to have benefitted from Tax Havens? After all, they have usually done nothing illegal. MP’s expenses, directors’ fees and loans, or questionable material in newspapers, have also generated similar questions, even though the people involved were operating within the rules.

The answer is in something called ‘The Sniff Test’ – it may be legal, but does it smell clean? Judgements will be based in part on the way any of the individuals concerned deal with something that might not smell so clean once it becomes public. David Cameron, for instance, didn’t help himself by obfuscating before admitting his connection with his father’s offshore Blairemore fund.

Edward Troup who was recently appointed Executive Chair at HM Revenue and customs provides another example. He was presented as poacher turned gamekeeper having previously been Head of Tax Strategy at Simmons and Simmons and involved in creating tax avoidance vehicles.

This looked a good appointment until it was revealed that he previously described tax as “legalised extortion”[1], and tried hard not to admit he had said it. This was compounded when a Tax QC stated that he thought Troup was “unlikely to agree that there should be greater transparency in HMRC’s arrangements with big corporations” (Ibid). The bad smell got worse, however, when the number of investigations was revealed to be remarkably small.

The two major leadership issues at play here are the impact of hypocrisy and personal motives. We are all hypocritical at times, and our motives are not always that worthy. However, more important than being whiter then white is probably the way that we deal with ‘the smell’. Scandinavians sometimes use the phrase ‘we need to get the fish on the table’ when something smells bad but you can’t see what it is. To follow the analogy through, once on the table, we can see just how big the fish is.

The other issue here is that if we never see what’s behind the smell, we always assume it’s something big and/or rather bad. As a leader, we do need to be honest about our mistakes and to avoid the big temptations if we want buy-in from our teams and our publics.

[1] Robert Booth: ‘Edward Troup: from tax haven adviser to leading HMRC’s Panama inquiry’, The Guardian, 11 April 2016.


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