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Monetry Authority
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January 2001
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Bermuda
At Centre Of Al-Fayed Tax
Investigation,
Adam Cooper, Royal Gazette
11 January 2001 |
Bermuda is at the centre
of a tax
investigation of Mohamed
al-Fayed, the billionaire Egyptian businessman and chairman of Harrods
department store in London whose interests include a local trust.In
one of the biggest investigations of its kind, Britain's Inland Revenue
has targeted Fayed's offshore business interests, Harrods Group, which
includes the
Bermuda-based
Al Fayed Investment & Trust private partnership, according to a report
in last week's edition of the Sunday Times. The group controls the
Knightsbridge store and the financing of Fulham football club, the
newspaper said.
The Inland Revenue is said to be studying a complicated tax avoidance
scheme which allows Fayed to draw no salary from Harrods but lets him
benefit from dividends - totalling millions between 1995 and 1998 - paid
by Harrods Holdings to the
Bermuda
trust. The payment of dividends offshore is legal, the Sunday Times
said, but what the taxmen want to know is if the money sent offshore
returns to Britain as income for Fayed, in which case tax might be due.
The
Bermuda
trust is linked with two offshore companies based in Panama and the
British Virgin Islands, and officials suspect that these and other
offshore companies are under Fayed's control from the UK, thus making
them liable for millions of pounds in corporation tax.
In March, with the
investigation
pending, the Inland Revenue cancelled an arrangement whereby Fayed and
his brothers paid a fixed tax of £250,000 a year instead of undergoing
an annual assessment because officials could not rely on certain
information they were given on the businessman's tax affairs, the
newspaper said. The Fayeds are contesting the move, and the newspaper
said the investigations could yield tax bills totalling millions of
pounds.
The
investigation
of Fayed was first launched after comments were made during a libel
battle between Fayed and MP Neil Hamilton. Revenue officers were
surprised that Fayed had access to large sums of cash - as much as
£40,000 a week - which he withdrew from a London bank and said the
information was inconsistent with that provided to the Inland Revenue.
According to the Sunday Times, pressure also came from Christopher
Cope, the Conservative MP, who wrote to the Inland Revenue after the
trial: "I believe there is an overwhelming case for a full
investigation
of Mr. Fayed's affairs by your special compliance unit." Attached to the
letter was a file of alleged breaches of British tax laws.
The alleged dealings could tarnish
Bermuda's
image as a clean offshore jurisdiction, but Ross Weber, marketing
manager for the
Bermuda
International Business Association, said the problem was purely a
British one.
"If (Fayed) is declining to declare income for taxes in Britain, that
is illegal on his part and has nothing to do with what goes on in
Bermuda,"
he said.
Mike Warburton, senior tax partner at Grant Thornton, an independent
accountancy firm, told the Sunday Times the probe would take in all
aspects of Fayed's financial interests.
"Once the Revenue starts an
investigation,
it rarely confines it to one narrow aspect of someone's affairs," he is
quoted as saying in the paper.
Further enquiries by the Inland Revenue will examine Harrods
Limited's purchase of Alpha Airports, whose market value fell by more
than half after the deal.
A spokesman for the Harrods chairman refused to discuss the
investigation
with the Sunday Times. The newspaper said lawyers for Fayed had accused
the Inland Revenue of an "abuse of power" and of being "oppressive."
Fayed is tied for 22nd in The Sunday Times Rich List, which ranks
Britain's wealthiest residents, and is said to have assets in the region
of £8 billion. The businessman is an Egyptian national by birth and
accused the Duke of Edinburgh and intelligence services of orchestrating
the Paris car crash that killed Diana, Princess of Wales, and his son
Dodi in 1997.
The Fayed affair was one of two times last week that
Bermuda's
financial services industry was dragged to the forefront in Britain. The
most recent edition of the Sunday Times criticised the Labour government
of hypocrisy with regard to offshore jurisdictions after the party
received a £2m donation from party supporter Christopher Ondaatje via an
account with the Bank of
Bermuda. |
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