CONSIDER some business activities in which Scotland appears to have played a small but important part: gun-running; child pornography; vodka industry corruption; international diet pill scams; the looting of Moldovan banks; and the sale of cannon shells to the United Arab Emirates. How is this possible? Using a loophole in company law introduced in 1907, unscrupulous operators abroad, particularly in eastern Europe, are able to set up what are effectively “offshore companies” in Scotland.
They do this by establishing Scottish limited partnerships (SLPs) with no presence here beyond postboxes at addresses operated by small companies, who may have no idea whom they are dealing with. By registering here, dubious operators avoid paying tax in their home country. The set-up is suitable for money laundering and overseas embezzlement. It is not suitable for Scotland; it is an embarrassment. Investigations by The Herald flushed it out. Representatives of the SNP, Labour, the Liberal Democratss and the Greens in Scotland have spoken out. Now, backing an initiative by Oxfam Scotland, Scottish Tory leader Ruth Davidson has also demanded action.
Scotland is united in abhorring a system with serious consequences abroad. Company law is reserved to Westminster, which has been accused of acting too slowly on the matter. However, last month, Security Minister Ben Wallace at least indicated serious appreciation of the issue, giving rise to hopes that something will be done.
That “something” must be a root-and-branch review that investigates how to stop the misuse of SLPs through better transparency, including disclosure of accounts, and the possibility of criminal sanctions to end a situation that could seriously tarnish Scotland’s business reputation and that associates us, however inadvertently, with deeply unsavoury activities.
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