What is it about chancellors and not paying Taxes?
Does Sajid Javid’s questionable past beg the question of his suitability to be a Minister at all, never mind the Prime minister?
Sajid Javid’s appointment as health secretary saw him return to the Cabinet he abruptly left in shock fashion after his resignation as Chancellor.
Javid was just six months into his role as chancellor, and less than a month away from delivering his first budget, when he quit after being told he must sack all his advisers if he wanted to keep his job.
His departure in February 2020 came after a bruising Whitehall power struggle with Boris Johnson’s then-chief adviser, Dominic Cummings.
But in a reversal of fortunes, Javid returned to Boris Johnson’s top team as Health secretary, while Cummings was left to hurl criticism from outside government.
It’s worth noting that Carrie Johnson, the prime minister’s wife, who previously clashed with Cummings, was once a special adviser to Javid during his tenure as communities secretary.
Javid had a relatively quiet role as Health Secretary especially when you compare how Matt Hancock was never of our TV’s during his tenure in the same role, he seemed to be constantly briefing and hugging the limelight, right to the point where he was seen once too often on TV, all be it CCTV, and a ministerial ending appearance to boot.
However, last week along with former Chancellor Rishi Sunak, Health Secretary Sajid Javid quit Boris Johnson’s government, leading a wave of resignations.
This has now opened up a Tory leadership contest, both Sajid Javid and Rishi Sunak have entered the race to become the next British prime minister, they both have a lot in common apart from driving the ship into the rocks along with the rest of the Tory government, they both like their nom dom status.
Ironically on Monday, the Conservative leadership hopeful called for greater scrutiny of candidates as he launched his campaign, on doing so he was questioned over some of his dubious past, in particular, the non-dom perks he would only reply that he gave up the controversial tax status “before entering public life” and refused to answer further questions on his tax affairs.
However, it has now come to light according to sources familiar with Mr Javid’s tax planning, while the former health secretary gave up non-dom status in 2009, he preserved some of the tax benefits through an offshore trust until 2012. This step, which is entirely legal, allowed him not to pay UK income tax on some foreign income from investments. From 2011, Mr Javid worked in the Treasury as a ministerial aide to then chancellor George Osborne.
While MPs are not allowed to use non-dom on a so-called personal basis, for either income tax or inheritance tax purposes, they can still benefit from it via trusts. This is because trusts are legal entities in their own right, like companies, according to tax experts.
Dan Neidle, founder of Tax Policy Associates Ltd, told The Independent: “Non-dom status runs out after 15 years. It’s standard planning for non-doms approaching this limit to put their foreign property into an ‘excluded property trust’. That effectively preserves the benefit of non-dom status forever.”
“To my mind, this is tax avoidance – parliament intended that non-dom status end, and this is a loophole that avoids that result,” he added.
Mr Javid has refused to say where his trust was based, but he has said it was not dissolved until 2012, when he had already started his political career and was serving as a PPS – the eyes and ears of the then chancellor.
He told reporters on Monday when asked about where he was historically domiciled for tax purposes: “I’m not getting into any more detail about my tax affairs that were to do with a time that I was not in public life. I haven’t been non-domiciled in all my time in public life.” Approached separately by The Independent, Mr Javid’s spokesperson declined to comment on the use of non-dom perks while an MP.
The tax status of leadership contenders has been in the spotlight after The Independent revealed that HMRC experts were investigating chancellor Nadhim Zahawi’s financial affairs. Earlier this year his predecessor, Rishi Sunak, now the leadership frontrunner, faced questions when it emerged that his wife, Akshata Murty, had used non-dom status.
When asked about publishing his tax returns on Sunday morning, Mr Javid said: “I have no issue with transparency like that. I think if I get in the final two, the final two candidates should be quite open about their tax affairs.”
Zahawi has vowed to “answer any questions that HMRC has of me” and publish his accounts annually if he succeeds Boris Johnson at No 10. Obviously, it would be a little too late then to do anything about the issue as he would already be prime minister and as we have seen once in that once great office now much reduced, truth and promises mean very little.
Mr Sunak is yet to comment on publishing his tax details.
Being so-called non-domiciled on a remittance basis allows individuals to only pay UK tax on their income derived in Britain, rather than, like ordinary citizens, their entire worldwide income.
Mr Javid said on Sunday he had used non-dom status on his tax returns for about “four or five years” in the 2000s.
But Who is Sajid Javid…
Before becoming an MP in 2010, Javid travelled the world in his job while working in international finance, including New York where he paid US taxes between 1992 and 1996.
In 2006 he moved to Singapore with his family and was no longer a UK tax resident, later giving up his non-dom status when returning to Britain in 2009.
In brief: Euroskeptic who backed Remain then wished he hadn’t. Promoted to become Home Secretary, resigned, promoted to Health secretary after Hancock resigned.
Son of a Pakistani-born bus driver, as he may have mentioned. Worked as a banker earning £3 million-a-year at Deutsche Bank. Arch-Thatcherite. So pro-market he once described ticket touts as “classic entrepreneurs.” Stood back while the U.K.’s largest steelworks went bust. Went on holiday while Tory MPs revolted over business rates. Keeps getting promoted anyway
Sajid Javid’s suitability as chancellor of the exchequer was called to question.
Sajid Javid’s suitability as chancellor of the exchequer has been called into question by his opposite number, John McDonnell, wrote a scathing letter to Boris Johnson demanding an investigation into Javid’s time at Deutsche Bank.
In the letter to the prime minister, dated July 31, the shadow chancellor called for Johnson to launch a probe into Javid’s nine-years at the German lender before he became a politician, focusing on his time as a banker in the run-up to the financial crisis.
“I ask you to immediately launch two investigations into Mr Javid’s past conduct in matters of financial stewardship and decision making,” McDonnell wrote.
Javid – who was appointed in Johnson’s cabinet reshuffle – held several senior executive positions at Deutsche Bank, including a role in the department that structured collateralised debt obligations.
CDOs are a type of complex financial product deemed to have played a critical role in the 2008 crisis. Banks were accused of packaging highly rated loans with more toxic forms of debt and selling this on to investors.
McDonnell specifically took issue with comments Javid made in 2006 regarding his role in structuring an emerging markets CDO at Deutsche Bank. Javid said that “as long as investors understand the risk/rewards of an emerging markets CDO, they are very appropriate”.
McDonnell wrote: “It will not be lost on those that have suffered the consequences of the last nine years of austerity following the 2008 financial crisis that the newly-appointed chancellor profited from the greed that contributed to it.”
CDOs often carried strong credit ratings, making them appear safer than they were. When the global markets turned in 2008, the value of many highly rated CDOs fell through the floor.
McDonnell also called for Javid to answer questions over any connection the 49-year-old may have had with a tax avoidance scheme known as Dark Blue during his time at the German bank.
A Cayman Islands-registered company called Dark Blue was used by staff at Deutsche Bank between 2003 and 2004, but the Supreme Court later found it to have had no “genuine business or commercial purpose” other than to help shareholders avoid tax.
McDonnell said: “Every penny avoided in tax by wealthy large corporations is a penny taken from our desperately underfunded public service.”
He added: “Mr Javid’s widely reported implication in some of the worst excesses of the casino economy, defending the sale of high-risk financial products that contributed [to] the 2008 crisis, calls into question whether he can be trusted with the secure stewardship of the nation’s finances.”
Deutsche Bank declined to comment.
Labour never caused the 2008 global financial collapse the Tories lied to you.
George Osborne admits that the “Labour crashed the economy” lie is well…. a lie. pic.twitter.com/pPHoKiTLoE— Labour Heartlands (@Labourheartland) December 1, 2019
Chain of cause and effect:
- US housing and mortgage bust
- Liquidity and credit crunch spread to all credit and financial markets
- Economy wide recession in the United States
- Recession in most leading advanced economies including the UK
- Banking crisis then led to sovereign (government) debt crisis
- Great Recession of 2008-09 bottomed out in late 2009
- But long period of slow growth in countries burdened by high levels of debt
- Recovery also hit by imposed fiscal austerity
Root Causes of The Great Recession of 2008-09
- Years of low interest rates
- Lax supervision and regulation of the financial system – regulatory failure
- Excessive risk taking and leverage of the banks – especially sub prime lending
- Global current account imbalances and global savings glut
- Irrational exuberance and animal spirits leading to financial bubbles
- Distorted incentives of credit rating agencies
Rebecca Long-Bailey touched on Javid’s past connections in a recent election special on the BBC when she laid into Conservative MP Rishi Sunak after he attempted to accuse the Labour Party of crashing the UK economy. Rebecca let him have it with both barrels and reminded him how his Chancellor, Sajid Javid, “was working at Deutsche Bank , selling the very derivatives that caused the banking crash in the first place”
In 2018 German police raided Deutsche Bank offices on money laundering allegations
A money laundering probe stemming from the “Panama Papers” led police to Deutsche Bank, according to authorities. Prosecutors believe the bank helped clients “transfer money from criminal activities” to tax havens.
Federal police on Thursday raided the Frankfurt offices of Deutsche Bank. The Frankfurt prosecutor’s office said the raids stemmed from an investigation into suspected money laundering at the German bank.
About 170 law enforcement agents took part in the operation. The investigation revolves around multiple Deutsche Bank employees, including two believed to still be working at the financial institution.
Deutsche Bank said it was “fully cooperating” with authorities. “The case is related to the Panama Papers,” a spokesperson said.
According to prosecutors, Deutsche Bank is suspected of helping some 900 customers set up offshore shell companies in tax havens to “transfer money from criminal activities.” They said some €311 million ($354 million) are believed to have been laundered, citing information gleaned from the so-called Panama Papers.
Markus Meinzer, financial secrecy director at the Tax Justice Network, said he was “surprised that German officials would finally take action” on information garnered from the Panama Papers.
“It has been two years that they’ve been analysing these files,” Meinzer said. “We have seen in other situations that German prosecutors took very long to take action” against tax avoidance schemes and financial crimes.
The Panama Papers data leak comprised some 11.5 million documents, which were leaked anonymously to German newspaper Süddeutsche Zeitung in 2015. At least 28 German entities were identified in the leak, according to reports at the time, including Deutsche Bank.
Again the German authorities raided Deutsche Bank over Danske scandal
They are investigating whether Germany’s biggest bank facilitated money laundering and whether it failed to alert authorities about suspicious transactions quickly enough, the prosecutors said.
Danske Bank is under investigation in several countries, including the United States, Denmark, Britain and Estonia, over suspicious payments totalling 200 billion euros ($220 billion) moved through its tiny Estonian branch. Deutsche Bank acted as a correspondent bank for Danske.
Prosecutors said the period in question is 2014 to 2018, and that there was a suspect who worked at the bank during that period.
Deutsche Bank had alerted authorities to 1.1 million suspicious transactions, prosecutors said.
Prosecutors also said that a double-digit number of transactions, with a volume of 12.5 million euros, were either registered by Deutsche too late with authorities, or the bank should have blocked them from the start.
The Sueddeutsche Zeitung was the first to report the raid on Deutsche.
Deutsche Bank has previously faced issues over money laundering and the controls in place to prevent it.
In 2017, Deutsche Bank was fined nearly $700 million for artificial trades between Moscow, London and New York that could have been used for money laundering. An investigation by the U.S. Department of Justice is still ongoing.
- Given the level of interest and not wanting to be responsible for sharing anything that can’t be substantiated, I decided it might be worth doing a little digging around to see if we can get to the facts behind the claims. So, here goes…
- Prior to becoming a politician in 2010, Javid had an 18-year career in banking.
- Javid started in banking in 1991 and gradually built up his annual salary to seven figures by 2000.
- Javid joined Chase Manhattan Bank in New York City immediately after graduation and became their vice president. He then returned to London in 1997 and joined Deutsche Bank as a director in 2000. He became Managing Director at Deutsche Bank in 2004 and global head of Emerging Markets Structuring in 2005.
- In 2007, he relocated to Singapore as head of Deutsche Bank’s credit trading, equity convertibles, commodities and private equity businesses in Asia and was appointed a board member of Deutsche Bank International Limited.
- As MD, Sajid Javid would have taken responsibility for global credit trading in Asia ex-Japan, based in Singapore.
- When he became an MP in 2009, the Evening Standard said Javid took a 98% pay cut. As MPs are on £67k, this suggests he could have been making around £3.4m a year as Managing Director of Deutsche Bank.
- Some credit head hunters claimed that their 2006 pay survey found that MDs at tier 1 houses were earning salaries of £130k plus bonuses of £1.5m- £2m but if he was based in Singapore then Javid would have received an additional ex-pat package of around £200k, making his total salary more like £2.3m [$3.6m].
- In 2014, the Daily Mail accused Javid of channelling some of this money through a tax haven. They claimed that an investigation by The Mail on Sunday had established that Javid was among a group executives and senior staff at Deutsche Bank who were paid bonuses worth at least £50,000 each (likely to be a lot higher for Javid as he was a senior executive) via shares in a Cayman Islands company in order to avoid paying tax.
- It is suspected that Javid was working on the controversial products that were behind the financial crisis during the six years he spent at Deutsche Bank in London.
- A former colleague of Javid’s said he was astonished at how Javid had been spinning his banking career as if he were some sort of a sober investment banker and revealed that Javid was actually ‘a structured credit trader’ and that he was in fact at the heart of the business that precipitated the financial crisis.
- An ex Deutsche board member reported that shortly before the crisis “All the profit & losses was taken upfront and bonuses paid on it,”
- Earlier this year, in August, Johns McDonnell accused Javid of “some of the worst excesses of the casino economy” during his time as a banker and said that Javid had questions to answer over a tax avoidance scheme used by Deutsche Bank and that he should publish his tax returns. In a letter to the PM, McDonnell said that Javid had been selling collateralised debt obligations (CDOs), a complex financial product largely attributed with playing a key role in the 2008 financial crash. “It will not be lost on those that have suffered the consequences of the last nine years of austerity following the 2008 financial crisis that the newly appointed chancellor profited from the greed that contributed to it,”
- McDonnell also points out how a US Senate committee had found that Deutsche Bank had in fact caused “material damage to ordinary people and the wider global economy”, during the time Javid was actually on the board at Deutsche Bank.