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Thursday, December 06, 2007


We are well used to some millionaires and multinational corporations exploiting loopholes so as to avoid paying tax, indeed there is a whole industry built around the facilitation of such aims. Her Majesty's Revenue, Customs and Excise has even joined in such practices by selling its offices to an off-shore company and then leasing them back. However, this article in the Guardian is the first sign of a similar attempt by political parties to exploit so-called loopholes in the Political Parties Elections and Referendum Act.

They report that Labour officials helped lawyers acting for David Abrahams to draw up complex covenants that allowed him to pay up to £650,000 indirectly to the party. They say that the arrangement, which was set up four years ago, was regarded as a "loophole" that allowed Abrahams to lawfully pay the money and remain unidentified:

Sources close to the party say the officials are said to have taken legal advice from Labour solicitors and sought approval from other senior party members. Lord Triesman, who was general secretary at the time, has categorically denied that he had any knowledge of the agreement.

Under the arrangement, Abrahams is said to have covenanted the money to his close associates and fellow company directors Janet Kidd, Ray Ruddick and McCarthy, the solicitor.

They then used the cash to donate to the Labour party in their own names. It is understood that Labour officials were well aware that the arrangement exploited what they believed was a loophole in Labour's recently passed legislation, the 2000 Political Parties Act, so as not to reveal Abrahams' identity.

In the words of a Labour insider, the two officials were then "given the job of shepherding the cash", aware that the arrangement was technically legal, even though it went against the spirit of the legislation which is to ensure transparency for all donations to political parties.

The article goes on to say that 'according to sources, the reason for the covenant or bond was to ensure that Abrahams' associates only used the money paid to them for the purpose that he intended.

He also wanted to ensure that neither he nor his associates would have to pay tax on what were technically personal gifts to his associates. Abrahams' office said it would not comment on the disclosures.'

If this is true then it must surely make things worse for the Labour Party. Accepting illegal donations is one thing, but to have allegedly acted so as to exploit a possible loophole in a law of their own making is quite another.
Not only that, but to do so as a tax-dodging scheme means this whole thing stinks.
The Guardian does not let go, as Jonathan Aitken found to his cost. The Labour Party is in real trouble.

- Frank Little
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