Once more with feeling

I suppose in a way it's quite interesting to be in at the birth of a new political meme. This is the story that David Cameron personally intervened to block EU plans to tackle offshore trusts. Let's look at how the story was reported back when it actually happened:

New legislation planned in Brussels is set to heap fresh costs and paperwork on families’ financial planning, as well as leaving their affairs open to unwanted public scrutiny.  

British lawyers and tax experts are baffled by the potential implications. Most are bitterly opposed to the costs and intrusion that could result. The use of trusts or what the EU would define as “legal arrangements” is commonplace in Britain and Ireland, but not elsewhere in Europe. As a result many run-of-the-mill transactions between British individuals, or between individuals and financial institutions, would fall within the net of the law if applied to the UK. Similar transactions in Europe would not be affected, lawyers say.

Essentially the European Parliament weren't happy with proposed legislation to create a publicly available register of the beneficial owners of EU companies (which pretty much existed in the UK anyway) and broadened the scope to include all trusts as well. This was probably because EU legislators don't really know what trusts are, because they're only used in the UK & Ireland, and they think they sound dodgy.

The reaction of the British Government (and on the legal sector more widely) was that this was disproportionate and not particularly helpful to the wider aim. This was set out in the Lords by Lord Newby:

'The government opposes the mandatory registration requirement for trusts [which] unlike companies are used for a range of purposes, such as benevolence, inheritance, protecting vulnerable people and family support. As such, the implications for privacy are far greater, and trusts therefore warrant different treatment ... We consider registration of trusts to be a disproportionate approach and, in particular, one which undermines the common-law basis of trusts in the UK.'

This was what David Cameron had written to the President of the European Council about, and what the UK Government continued to lobby the EU about. Was this an attempt to assist tax avoidance? No.

The Treasury is now negotiating with the EU Council presidency and other member states to agree a compromise that would limit the scope of obligations on trusts to those holding financial assets, which the UK would satisfy through existing reporting obligations for trusts holding financial assets, domestic reporting requirements and automatic exchange of tax information agreements.

So in other words, the UK Government wanted to prevent a measure designed to prevent money laundering being applied so widely that it would affect hundreds of thousands of otherwise private legal arrangements. And it was successful in doing so.

The publication of details concerning the beneficiaries of trusts gave rise to an intense debate, as beneficiaries of a trust are in a very different position than, say, shareholders of a company. In many circumstances, beneficiaries are not aware of their position and often include minor and vulnerable family members. Accordingly, after intense lobbying by professional bodies, the final version of the 4th Money Laundering Directive has limited the circumstances in which information concerning trusts ought to be published on the new registers. 

A triumph for British diplomacy in preventing the negative and unintended consequences of a half-baked piece of legislation introduced by ignoramuses. Phew.

Now let's see what happens to that diplomatic triumph in light of the (entirely unconnected) scandal about offshore companies. First, the FT.

David Cameron personally intervened in 2013 to weaken an EU drive to reveal the beneficiaries of trusts, creating a possible loophole that other European nations warned could be exploited by tax evaders.

This is where the fun starts. Because the very first line of that is a touch misleading. It gives the impression that David Cameron's intervention was exceptional, or even that it was done in a personal capacity. It wasn't. It was a letter from a Head of Government setting out that Government's position - a position that was re-iterated in Parliament. David Cameron signed a letter written by civil servants explaining the UK's position on proposed legislation. I suspect he does that quite frequently. Anyway, at least the FT got the substance of the intervention right.

The Guardian, on the other hand, takes this and runs with it.

David Cameron intervened personally to prevent offshore trusts from being dragged into an EU-wide crackdown on tax avoidance, it has emerged.

Again with the personal intervention, but now it's about offshore trusts, and a crackdown on tax avoidance. Taking the first point first, it should go without saying (but apparently doesn't) that a register of beneficiaries of EU-registered trusts couldn't affect offshore trusts. Taking the second point, a directive that was about money laundering is now apparently part of a crackdown on tax avoidance. And, for good measure, "it has emerged" in this case means "a public letter that was reported on at the time, and remains on the Government website". Deep Throat this isn't.

And it really is as simple as that. A legally-supported UK Government objection to an ill-thought through piece of European heavy-handedness becomes David Cameron personally intervening to prevent the EU from cracking down on offshore trusts and tax avoidance. Sigh.