The Camerons could not have avoided income tax through Blairmore

The nature of the tax avoidance carried out by Blairmore Holdings, the investment company where David Cameron's father Ian was a director, may have been misunderstood.

There is a widespread presumption, I think, that the incorporation of Blairmore in Panama, and its location for operating purposes in the Bahamas, somehow meant that its shareholders - including members of the Cameron family - were protected from paying income tax and capital gains tax.

But Blairmore's 2006 prospectus is explicit that this is not so.

Its British investors were and are liable to income tax on the dividends they receive and capital gains tax on whatever profits they earn when they sell their Blairmore shares (and as far as I can tell they would have been lucky to make profits, since the performance of this small £21m fund has been anything but stellar).

So any Cameron who received income or capital from Blairmore should have paid tax on it.

That said, Blairmore's offshore status does reduce - probably to zero - the tax liabilities of Blairmore itself.

Any profits it makes from its investments are not subject to corporation or income tax.

Which many of you may see as scandalous.

But it is worth making three points:

As a company incorporated in Panama, the tax would go to the Panamanian taxman - which would do naff all good to our deficit (and Panama as a point of principle doesn't want the tax).

Second, the less tax Blairmore pays in Panama, the bigger the dividends it can in theory pay to investors in Britain - who should therefore pay commensurately more tax in the UK.

And finally, Blairmore's Panama/Bahamas structure - which latterly became a Panama/Dublin structure - is spectacularly conventional.

There are thousands and thousands of investment funds with near identical offshore structures.

I can think of loads of hedge funds, private equity funds and international investment funds with incredibly similar offshore identities.

They are so common that I would be staggered if there were not Labour MPs - among others - who had not at some juncture held investments in funds with similar offshore structures, though they might not have been aware of it.

None of which is to argue that we should approve of the likes of Blairmore legally dodging taxes.

But it is to point out that Blairmore's tax avoidance does not in and of itself prove that Ian Cameron and his family avoided tax.

UPDATE

So for the avoidance of doubt, what I am saying is that the Blairmore furore shines a light on the extraordinarily high incidence of the use of offshore arrangements by businesses to avoid tax.

Most would say that is a noxious phenomenon.

And given David Cameron's public stand against such tax avoidance, it is embarrassing for him that his late dad employed such techniques at the investment fund he founded.

But Blairmore itself does not appear to have been a vehicle designed to reduce the personal tax bill of the Camerons.