Treasure Islands - Nicholas Shaxson [30]
Trusts are not only about tax, either. As we shall see, many of the structured investment vehicles that helped trigger the latest economic crisis involved offshore trusts. Most people would be surprised, even shocked, to find out how central they are to global finance.
In choosing the trust mechanism to protect their vast wealth, the Vesteys had chosen a powerful weapon indeed. And when the Argentinian senator Lisandro de la Torre found those crates of Vestey documents buried under the guano on the Norman Star in 1934, he was probably unaware just how crafty his adversaries were in this kind of offshore subterfuge. Soon after the raid, new and incriminating Vestey documents turned up in Uruguay, and the senator achieved another coup when he got the British Foreign Office, whose diplomats were deeply uneasy with the Vesteys’ business practices, to agree to turn Argentina’s quest into a multicountry joint committee of investigation.
There was no telling what such a probe might uncover, so the Vesteys went on the offensive. When their local manager died of a heart attack, William Vestey wrote to the committee and brazenly accused Senator de la Torre of murdering him. Argentina’s government responded furiously, calling Vestey’s letter “an unprecedented piece of insolence.”
Things went downhill from there. The committee worked for two more years while the Vesteys pulled strings in London to emasculate it, and despite sixty meetings and a report filled with detail about the Argentine meat trade, they never got to see the Vestey books in London. Senator de la Torre shot himself on January 5, 1939, leaving a suicide note that, as his biographer Philip Knightley notes, “expressed his disappointment at the general behaviour of mankind.”
Each time Britain’s authorities tried to tax overseas trusts in the ensuing decades, William and Edward, and their descendents, kept refining their tax planning and slipping through the net. “Trying to come to grips with the Vesteys over tax,” one tax officer said, “is like trying to squeeze a rice pudding.”
In 1980, shortly after one such assault by the Inland Revenue, an investigation by the Sunday Times, then one of the world’s most respected newspapers, revealed that in 1978, the Vesteys’ Dewhurst chain of butchers in Britain had paid just £10 tax on a profit of more than £2.3m—a tax rate of 0.0004 percent. “Here is an immensely wealthy dynasty which for more than sixty years has paid trivial sums in tax,” the newspaper wrote. “All that time its members have enjoyed the considerable pleasures of being rich in England without contributing anything near their fair share to the defences which kept those pleasures in being—against foreign enemies in wartime, against disorder and disease in times of peace.” Edmund Vestey, the grandson of the original Edmund, put the icing on this particular cake. “Let’s face it, nobody pays more tax than they have to. We’re all tax dodgers, aren’t we?”21
The Paris trust loophole was finally closed in 1991,22 but opportunities for legal tax avoidance for Britain’s wealthy remain abundant. When the British Queen finally started paying income tax in 1993 after a public outcry, the latest Lord Vestey smiled and said: “Well, that makes me the last one.”
As we shall soon see, he was very far from alone.
3
THE OPPOSITE OF OFFSHORE
John Maynard Keynes and
the Struggle against Financial Capital
IT IS WITH A STRANGELY DEFENSIVE TONE that Robert Skidelsky, the best-known biographer of John Maynard Keynes, prefaces the U.S. edition of volume 3 of his biography of the great British economist. He takes issue with U.S. economist Bradford DeLong’s accusation that he has fallen under the influence of “a strange and sinister sect of British imperial conservatives.”1
Skidelsky