Consulting industry at the heart of ‘golden passports’ furore

The UK’s consulting industry has been revealed to have been tapped for its opinions on the loosening of visa rules for super-wealthy investors. The UK Government sought the opinions of a number of the Big Four, as well as controversial ‘golden passport’ advisory Henley & Partners before offering investors fast-track visas.

So-called "golden passports" are schemes which essentially allow rich foreign investors to buy citizenship, or long-term residency rights, in a country, in return for a certain degree of investment. Part of the current scandal miring the use of golden passports is that they offer wealthy investors a route to under-declare their assets, and shift between tax jurisdictions more easily.

Henley & Partners is a global citizenship and residence advisory firm with its main office in London and with over 25 offices worldwide. It advises governments on residence and citizenship-by-investment policy and works with them to develop and implement residence and citizenship programs. The consultancy is currently mired in the golden passport scandal in the Caribbean, where the firm is alleged by the Guardian to have worked with Strategic Communications Laboratories to influence elections in the region, and maintain it as a tax haven for some of the world’s largest corporate interests.

The Caribbean holds a collective of $97 billion in shifted profits, with an average effective tax rate of just 2%. Those championing such behaviours say that small countries can create an entire profitable industry by passing a few laws, offering them a cheap and effective road to economic development. However, this also enables many companies to maintain some of their least ethical practices without fear of public accountability. Meanwhile, domestic tax payers are lumbered with the financial burden of subsidising public infrastructure that the users of tax havens are all too happy to access, without paying their way. Countries with higher taxes that lower their rates also actually steal income from each other, with the result being that capital is taxed less and less, benefitting usually well-to-do shareholders and few others.

In 2014, the Organisation for Economic Co-operation and Development (OECD) – an intergovernmental economic organisation, founded to stimulate economic progress and world trade – established a “Common Reporting Standard” (CRS), which compels financial institutions in member states to automatically exchange information on who holds bank accounts. Motivated by the negative impacts of tax avoidance on society, the environment and the economy, it is designed to make it more difficult for people to evade income tax by holding money offshore. Now, however, the OECD is warning that golden passports, as advised upon by the likes of Henley & Partners, “can be misused to undermine the CRS due diligence procedures” by helping some people under-declare their assets and mislead about their tax jurisdiction.

Now it has been revealed that Henley & Partners was among a group of private-sector specialists consulted by the UK government ahead of changes to immigration rules that led to a surge in wealthy Russians and other non-Europeans securing the right to live in Britain. While the UK Home Office was still marshalled by current Prime Minister Theresa May, the Government ushered in a special visa scheme available for those who were willing to invest £200,000 in a UK business.

While Henley said it had “never formally advised” the UK government, the Home Office has since confirmed to the British press that “Henley & Partners was one of several firms who attended a roundtable event during the consultation.” At the same time, Henley’s own website boasts to have “regular involvement in the consultation process with the Home Office and UK Border Agency regarding the Tier 1 (Investor) category.”

Henley is not the only professional services set-up to have been tapped by the Government during the process, however. Three of the Big Four, as well as established London law firms and specialist advisory firms were also invited to a series of events hosted by civil servants. PwC, EY, KPMG, Clifford Chance, Eversheds and HSBC bank were among those who responded to a UK Border Agency questionnaire issued in the autumn of 2010 as part of the consultation. The responses which that poll yielded were used to inform changes to investor visas that were introduced in March 2011, including a new fast track mechanism for the super-rich, alongside a decrease in the number of days investors would have to spend in Britain in order to qualify. This saw the number of successful applicants for the scheme boom from 211 in 2010 to a peak of 1,172 in 2014, and the scheme was particularly popular with Chinese and Russian applicants.

The changes with a view to attracting rich foreign investors came as the then Home Secretary was introducing controversial hostile environment measures, aimed at curbing overall immigration. With critics lambasting May for attacking hard-working yet less financially powerful migrants while favouring potentially unsavoury individuals on the basis they had more money, May told Parliament in 2010, “It is possible to reduce numbers while promoting growth and underlining the message that Britain is open for business.”