It’s been a big week in the world of global mega-banks, financial secrecy and tax-dodging. In case you were hiding under a rock somewhere, we are talking about whistle blower Herve Falciani, ‘the worlds local bank,’ HSBC and the “Swiss leaks” scandal.
‘Too Big to Jail’ HSBC has been caught with it’s pants down yet again, this time for stashing around 180 billion of clients undeclared wealth in its HSBC Suisse branches.
Following a week of venomous press criticism and political posturing, HSBC the most secretive and corrupt of UK banks has been forced to come out with that rarest of commodities, a press statement/ non-apology from CEO Stuart Gulliver.
As anyone who read up on HSBC’s Mexican money laundering activities in 2012 would attest – HSBC’s ‘financial crime compliance’ standards are not exactly what you would call world class.
HSBC is not just helping Swiss elites, terrorists and drug money launderers move money, evade taxes and break laws, there is a far more “vanilla” form of systematic tax abuse going in, plundering billions from taxpayers from right under our noses.
HSBC and its ‘offshore,’ Guernsey based offshoot HICL (formerly HSBC Infrastructure Company Ltd) are major players in the UK Private Finance Initiative (PFI) game, set up by City of London banks and accountancy firms such as PwC in the 1990’s to fund public infrastructure “off balance sheet” using private capital instead of cheaper Government borrowing.
Through PFI, HSBC and HICL have a controlling ownership stake in somewhere between 27 and 43 UK PFI infrastructure projects – mostly schools and NHS hospitals (including Barnet, West Middlesex and Stoke Mandeville). [following image via @scriptonite]
These public infrastructure assets, funded via UK tax revenues are now owned by HSBC, via PFI “special purpose vehicle” shell companies, registered ‘offshore’ for maximum ‘tax efficiency’ in the tax havens of Guernsey and Luxembourg.
I say HSBC owns somewhere between 27 and 43 PFI projects because as Xavier Riley of Open Corporates attests, the HM Treasury database which attempts to record the “secondary market” for the trading of “equity” ownership of PFI deals is: “hopelessly out of date.”
HMT 2013/14 data for HICL owned schools and hospitals can be seen below:
Far from being discreet regarding PFI tax chicanery, HSBC kindly provides investors with the following offshore company structure diagram, illustrating the relationship between administration and investment arms in the UK, Luxembourg and Guernsey.
HSBC HICL PFI ‘special purpose vehicle’ offshore corporate structure
It is not just HSBC’s Swiss Branches that demand the utmost secrecy. The PFI contracts entered into by HSBC and other such PFI partners are deemed “commercially sensitive” meaning the PFI contracts and the exact terms and conditions are closely guarded by Government authorities, unavailable for scrutiny in the public realm without time-consuming FOI requests.
If sunlight is the best disinfectant, what we don’t know from HSBC/ HICL’s use of complex offshore tax structure is exactly how much the company is [legally] avoiding in UK taxes.
We do know however, that HICL is incredibly profitable, they have actually gone to the trouble of noting actual vs target rates of return for investors on HSBC infrastructure projects, some exceeding 20% per annum. Projects ultimately funded by your taxes.
To get some perspective on the tax arrangements of HSBC PFI projects, former tax inspector turned Private Eye hack and author Richard Brooks has the inside story.
Brooks latest book “The Great Tax Robbery” sets out in jaw-dropping detail how the big 4 banks and accountancy firms partner with complicit HM Treasury and HMRC mandarins such as Dave Hartnett (now HSBC) to draft tax loopholes favouring big corporates.
Nowhere is this Corporate-State collusion in tax avoidance more apparent than within the PFI industry.
The big 4 accountancy firms (PwC, EY, Deloitte, KPMG) effectively play both sides of the PFI contract negotiation process, creating tax loopholes, writing PFI contracts favouring the City and private sector and literally dripping with fat, then charging public sector ‘clients’ (i.e. taxpayers) hefty fees to renegotiate the rip-off PFI deals.
Richard Brooks on page 218 of ‘The Great Tax Robbery’ states:
“All told by 2012, over 200 PFI companies were partly owned offshore, more than 70 of them running health service projects. By my calculations, 168 state schools, many of which are run under a single PFI contract are at least partly owned offshore. That so many public assets should be shunted into offshore tax havens is a remarkable outcome.”
And it’s not just our hospitals and schools owned offshore. Brooks sets out that 600 HMRC offices are owned by a PFI company based in Bermuda, while HM Treasury and HMRC’s head offices are owned via PFI company lend-lease, based in Jersey.
Ironically, the UK “Home Office” is 100% owned by HICL via the tax haven of Guernsey. You couldn’t make it up!
Can we really trust the UK state to crack down on tax avoidance, when its very offices are so intrinsically linked to the practice of tax avoidance by the widespread use of PFI?
Richard Brooks estimates that while:
“Britain’s public services are hawked around, getting passed on like kids dog-eared playing cards, the PFI companies have drunk in estimated gains of £4.4 billion, almost entirely tax free!!”
It is one thing for rich elites to abuse Swiss bank secrecy laws, stashing millions of tax-free loot in HSBC vaults out of sight from the UK exchequer.
It is another thing entirely for HSBC to brazenly stash taxpayer funded NHS hospitals and schools, tax free offshore – aided and abetted by the corrupt UK state.
With £320 billion worth of PFI projects already commissioned in the UK and Labour’s Lord Adonis promising more PFI2 if Labour are elected – any Government promising a crackdown on tax avoidance whilst allowing the PFI tax dodge to continue unchecked simply is not credible.
As long as the cozy ‘revolving door’ between Westminster, Government and the big 4 banks and accountancy firms which designed and profit from PFI schemes is allowed to continue – our politicians cannot be trusted to clean up HSBC and prevent further tax evasion scandals.
For more information on fighting back against shady PFI deals, follow @pplvspfi on twitter and check out peoplevspfi.org.uk for more information.