Off message: Taking the axe to questions on tax
Euromoney Limited, Registered in England & Wales, Company number 15236090
4 Bouverie Street, London, EC4Y 8AX
Copyright © Euromoney Limited 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Off message: Taking the axe to questions on tax

In the old days, tax rows were a marketing opportunity. Now, tax bankers would rather self-harm than reveal their secrets through the media.

By John Anderson

Off message

The idea of using offshore investments as a good way to safeguard capital has been around almost as long as stories of pirates burying their ill-gotten treasure on tiny Caribbean islands.

Today, as the world awaits the next data dump in the Panama Papers saga, it’s worth considering what constitutes full-frontal tax avoidance and what is merely prudent wealth management.

The majority of those identified so far in the hacking of the files of the Panamanian law firm Mossack Fonseca have actually been quite conscientious in paying their fair amount of taxes. That picture may change as more material arrives in the public domain, but so far there has been a lot more light than heat in this story.

There have been numerous occasions in my career in investment banking PR when I have had to figure out strategies to fend off journalists curious about what my employers might be up to in the area of tax avoidance.

Oddly, the first such situation I was ever aware of was managed in an incredibly counter-intuitive way that ended up working very well for the bank involved. This took place at a New York-based firm whose private bank in Miami Beach was under investigation for helping wealthy Latin American clients shield their money from the tax collectors in the respective countries.

It was a fascinating situation, with US authorities waging a very public war against the bank as a way to bring on a quick settlement of tax avoidance charges.

What the authorities did not realize was that the bank was using the notoriety for its own marketing purposes.

While it politely declined to comment publicly on the situation, it made it known on a background basis that it had no intention of cooperating with the investigators and would fight to the death before it would release any client records to those same investigators.

Things became rather uncomfortable as the drama played out but once the dust had settled, the bank got exactly what it wanted – a sharp rise in the number of clients and assets under management in its Miami Private Bank branch.

Unwilling to surrender

Why? Because all of its clients and potential clients were fixated on how the bank would conduct itself in the face of the investigation. When they saw a bank that was unwilling to surrender to the authorities, its brand equity rose accordingly. Obviously this is not a strategy you could use today.

Years later I would work alongside huge departments – called structured finance by the way – that were devoted entirely to working on tax avoidance structures. One bank derived virtually all of its income from such structures during the first three years of its existence.

As you might expect, those departments were entirely off-limits to any type of PR activity. I remember an occasion when a journalist from a leading financial newspaper asked if he could speak, for background purposes on a story he was writing, with the head of the department. I relayed the request dutifully.

I remember the response precisely: “I would rather set my hair on fire and put it out with an axe than talk to a journalist.” Enough said.

But that didn’t stop me from getting to know the banker and trying to understand how he went about his mission. There was something he told me that I found astonishing. When the department discovered a loophole in a tax code that it was able to use on behalf of just one or two big clients, it immediately called the tax authorities to let them know of the discovery.

Why? First, because in doing so the bank was signalling to the tax collectors that they needed to do something about the loophole; and secondly the bank also let it be known that it was only going to use its discovery in a limited way for a few special clients. To embarrass the tax officers by being too aggressive in exploiting the finding could, in the long run, be counterproductive.

So far in the Panama Papers story, the biggest PR gaffe has come from the UK’s prime minister, who instead of dealing a swift, sharp punch and putting the story behind him, dragged things out uncomfortably by initially labelling the matter a private affair. 

In the banking world, the highest-profile name implicated in the Papers has been former HSBC chief executive Michael Geoghegan, who was revealed to have held his £8 million London townhouse through an offshore company, which he supposedly planned to avoid tax on by effectively renting it to himself.

What then would be my advice to any banker caught up in this melee? First, acknowledge the reality in one go, thereby avoiding any Cameron-like awkwardness. Secondly, explain what the purpose of the offshore structure was. If it was simply for estate planning, say so. If there was a tax mitigation element, explain that as well. 

And then, if you know the journalist well, ask them the following question: if you had the opportunity to pay less tax legally, would you take it? The number of people who wouldn’t love to minimize their tax bill is the square root of a gnat’s behind.

John Anderson is a freelance writer who spent more than 20 years as a senior corporate communications official at a number of leading global financial institutions. He welcomes comments at

Gift this article