God Forbid! - The Sunday Times is reporting that Lord Drayson, the new Labour defence minister, is a multi-millionaire businessman and has admitted holding part of his personal fortune in an offshore tax haven that experts say could have helped him avoid £3m in tax. Imagine that! What a crime!

He apparently established offshore trusts and companies in the Isle of Man that handled the £30m he raised from the sale of his pharmaceuticals business (good for him, he was obviously a very succesful businessperson).
 
But his actions will apparently embarrass the socialist Labour government, which has repeatedly sought to stop wealthy Britons avoiding tax by moving fortunes offshore. How dare they minimise their tax bills!

The socialist media in the UK will make a big deal about this. It is all part of an insidious attempt to blur the massive distinction between tax evasion - which is a crime - and tax avoidance, which is legitimate and every tax payers right. Remember the communist creed requires "from each according to his ability: to each according to his need". It failed miserably in the Soviet Union and China (both of which have now adopted free market economies). Sadly, the communist elites in the EU (now calling themselves socialists) are still trying to impose that philosophy on EU resident tax payers.

Let those of us that are net tax payers never forget these immortal words:

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
Judge Learned Hand in Helvering v. Gregory.

Of course, one of the major usages of offshore jurisdictions is to minimise the taxes that are payable in one or more onshore jurisdiction. For example, a company that operates in multiple onshore jurisdictions may be able to legitimately lower its effective worldwide tax bill by having a group holding company incorporated in a "tax neutral" jurisdiction like Bermuda. Such structures are perfectly legal and, as Judge Learned Hand famously stated, it is NOT unpatriotic for a company or individual to lower the tax they are required to pay within the bounds of the law.

There is nothing sinister about such tax minimization arrangements and the technical term for such a strategy is "tax avoidance". Tax avoidance is legal and smart. By assisting international companies to minimize their global effective tax rates offshore financial centres benefit each and every shareholder of those companies. And by allowing successful individuals like Lord Drayson to minimise their tax bills, the legal use of tax haven structures encourages such productive individuals to stay in the UK, rather than emigrate, when they have a liquidity event (such as the sale of a successful business).

Way to go Lord Drayson - congratulations on your successes.