The PEP Minister and a [pounds sterling]35m will; The extraordinary saga of a socialist millionaire, a rich divorcee 25 years his senior, and questions about tax avoidance.

Byline: WAYNE FRANCIS;ANDREAS WHITTAM SMITH

SUPERRICH minister Geoffrey Robinson faces a highly-embarrassing tax inquiry over his [pounds sterling]9million inheritance from a Belgian businesswoman. Tax officials in Brussels want to question the British Paymaster General about the [pounds sterling]35million will of divorcee Joska Bourgeois.

Mr Robinson, 59, is the Minister for Private Finance who this week sounded the death knell for PEPs by announcing new tax penalties for savers with more than the relatively modest sum of [pounds sterling]50,000.

He also faced questions over a [pounds sterling]12.75million Guernsey trust set up for his family by Madame Bourgeois, who was 25 years his senior.

A close friend of Tony Blair and Gordon Brown, Mr Robinson was the financial adviser and confidant of Mme Bourgeois when she left her native country in 1979 and became based in Geneva as a tax exile. They remained close until her death at the age of 81 three years ago.

Last night a high-ranking civil servant at the Belgian Ministry of Finance said the huge income tax debts of Madame Bourgeois were still under investigation. Pierre Goblet declined to reveal the amount she owed when she died at her penthouse apartment in Cannes on October 9, 1994. But he said it was a 'very considerable sum' and added: 'Her death does not mean we consider this matter is shelved. We have a right to demand this tax money from those who inherited her estate in the will.'

M Goblet said the Belgian tax authorities had not been informed officially of the identity of any of the beneficiaries or the size of their inheritance.

'If Mr Robinson sets foot on Belgian soil, we won't go so far as to arrest him. We can only do that if we suspect a crime or fraud is involved. But we would certainly like to question him. It would be easier if he had property in Belgium which could be used to settle any debts.' The existence of the Guernsey trust fund left Mr Robinson open to Tory charges of hypocrisy, given the Government's commitment to abolishing opportunities for the wealthy to avoid tax through offshore trusts. The trust was not disclosed in the register of members' interests.

Mme Bourgeois's bequest to him is understood to have included cash and property, not least her [pounds sterling]1million apartment in the Avenue Hesperides in Cannes. 'The succession of Madame Bourgeois has now been settled,' said a letter to the property's managing agent a year after she died. 'Would you please change your lists to the name of her heir - Mr Geoffrey Robinson.' At the funeral of Mme Bourgeois in Brussels, he climbed into the pulpit and read from Matthew, chapter 25. His theme was the wealthy master who divided his gold between his servants and charged them to invest it wisely.

One timid serf buried his share in the ground, earned nothing for his master and was rebuked for his failure. Another, entrusted with five bags of gold, 'employed them in business' and made five more.

He was warmly praised and given added responsibilities. The significance of the reading would not have been lost on the cream of Belgian society who packed L'Eglise Saint-Lambert to pay their respects to the flamboyant but canny figure reputed to be the 12th-richest woman in the world.

She loaned young Geoffrey Robinson not five bags of gold but [pounds sterling]100,000 to start his engineering firm, TransTec. Today TransTec is worth [pounds sterling]175million and Mr Robinson enjoys a stake worth [pounds sterling]30mil-lion.

The couple met at a motor trade convention in Birmingham in the early 1970s. Mr Robinson was the 32-year-old boy wonder of British Leyland, destined to become chief executive of Jaguar. Mme Bourgeois was the 57-year-old exclusive importer of Jaguar cars to Belgium. A former model, during the Nazi occupation she was the mistress of a casino owner and legend has it that she sheltered shot-down Allied airmen and helped smuggle them out the country.

Her love affair with Jaguar is said to have begun after she outpaced Nazi pursuers in a British-made Swallow car - the forerunner of the Jaguar. Her contract with Jaguar is similarly shrouded in folklore. She is said to have travelled to the offices of the company founder Sir William Lyons and demanded the contract. When he refused, she told him she would not leave until he agreed. So he did.

By the time of her meeting with Mr Robinson, she was hugely successful, wealthy and free, having divorced her husband Georges Buytendyk in 1963 and reverted to her maiden name. Mr Robinson was evidently in awe of her business acumen. Each recognised a kindred spirit - and potential ally.

In many ways Mme Bourgeois, who looked 20 years younger than her age, was everything that Mr Robinson's wife was not. Hard-headed, worldly and imperious one contemporary likened her to the Lord High Executioner in the Mikado - the Belgian cut a striking contrast to Mr Robinson's temperamental wife, Maltese-born Marie Elena Giorgio. Married in 1967, the couple have two children, Margot, 27, and Alexander, 19. Mrs Robinson gave an interview shortly after her husband was elected MP for Coventry North-West in 1976, in which she spoke of her distaste for politics and her determination to lead a separate life from her husband. An opera singer, she had plans to study under a maestro in Venice.

Of her husband's career she said: 'I don't think I should follow like a little dog.' Most startlingly, she said: 'Divorce? Even if there was that would be a personal matter for both of us. I cannot say yes or no about divorce.' Only last year Mr Robinson told an interviewer that he and his wife continued to lead separate lives: 'She feels herself most fulfilled in her singing and I do everything I can to promote that.'

His friendship with Mme Bourgeois was intense and inevitably raised eyebrows among the expat business community in Belgium. One contemporary from that period recalls that Mr Robinson would fly out to see her every week.

'Everybody suspected they might be having an affair, but nobody actually knew for sure,' she said. 'There was the age difference, of course, but Joska had a penchant for young men.

People naturally speculated but other than gossip there was nothing to show whether the rumours were true or not.' One friend recalls how Mr Robinson took friends home to his penthouse apartment in Park Lane and they were surprised to discover Mme Bourgeois, who was staying there as a guest, in a bath robe.

He had already advised her on the sale of her business International Motor Company for an estimated [pounds sterling]80million (of which she netted [pounds sterling]17million) when she ventured the [pounds sterling]100,000 loan in 1981. And he took an ever-closer interest in her business affairs as years passed.

Their simmering resentment boiled over when she died and he assumed his role as one of the two executors of her [pounds sterling]35million will.

Businessman Maxim Chalot counted Mme Bourgeois as a family friend and called her Aunt Joska. He claims that she promised him [pounds sterling]4million in her will.

M Chalot says: 'Robinson built a barrier around Joska.

You could only get to her through him.' He recalled how he saw them out on the town together in Brussels in the early years of their friendship.

Jacques Mounier, Mme Bourgeois's managing director who worked with her for 33 years, said: 'In 1979 she sold the business and went to live in Geneva.

The tax office in Belgium acted like the Gestapo.

Madame Bourgeois wanted to retire and in Switzerland she negotiated a fixed amount of tax.

Of the will, M Mounier said: 'Each beneficiary received a copy only with the section { No one knew what he got|

referring to his or her bequest.

No one knew exactly what Geoffrey Robinson inherited.

Madame Bourgeois did it this way so that nobody could be jealous.' Sources have told the Daily Mail that Mr Robinson was aware Mme Bourgeois had made crucial, handwritten alterations to her will on June 25 1993, 15 months before she died.

For the last 12 years of her life she was escorted by an Algerian factory owner called Saad whom she met in Paris. It is not known if he was a beneficiary of the will but he refused to speak to Mr Robinson at her funeral.

The service, organised by Mr Robinson, was held in Belgium because of Mme Bourgeois's desire to be buried with her family. One mourner said: 'It was a strange affair. Some of the people there shouldn't have been in the country because of tax reasons. I have never seen so many people retreat from a church so quickly. They were away in their planes and helicopters like a shot.' Only Geoffrey Robinson lingered.

COMMENTARY

Should he set our tax rules?

HOW ironic it is. In the very week that Geoffrey Robinson, MP and Treasury minister, presents the Government's proposals for creating individual savings accounts that provide limited tax advantages for ordinary people, perhaps less generous than the Tory schemes they are designed to replace, Robinson is revealed as the beneficiary of a multimillion-pound offshore trust.

The arrangement with the Guernsey-based trust did not involve any tax avoidance. Alistair Darling, Chief Secretary, said Robinson had done what ministers with shares had done in the past and 'put them into a blind trust'.

It is easy to be dazzled and confused by such manoeuvres. Let us examine them for what they are. The first question is why rich people such as Mr Robinson have trusts and put their assets into them. After all, to do so reduces, at least marginally, your freedom of action. And in terms of lawyers' fees and trustees' remuneration, trusts are costly to set up and maintain.

One reason is to disguise the ownership of assets. Another is to minimise or avoid the inheritance tax that would otherwise be payable by the beneficiaries of your will; nowadays trusts are much less useful than before in avoiding income tax and capital gains tax.

Here, then, is a straight question: will Mr Robinson's heirs enjoy tax advantages from his family trust in due course? We may also ask ourselves why trusts are created offshore, in places such as the Channel Islands.

The explanation is that putting a bit of distance between your assets and the Inland Revenue has its advantages.

It may be, for instance, that the buying and selling of shares within the trust can be conducted without paying tax as you go along.

In the UK, if I own ICI shares and sell them to buy BP, I shall have to pay tax on any gain in ICI, even though I reinvest the proceeds in BP.

OFFSHORE trusts can avoid that necessity. Tax becomes payable only when the beneficiary in this country receives a dividend or capital payment.

Furthermore, it is sometimes the case that tax payable becomes due rather more slowly when shares are held in offshore trusts than when they are held directly by a UK resident.

Delay has a monetary value.

A second question, therefore: are there tax advantages for the operation of Mr Robinson's trust compared with owning the same assets directly?

As we cluck-cluck about Robinson's offshore trust and wonder about the advantages it may confer, Mr Darling informs newspapers that the money was put into the trust by a Belgian woman living in Switzerland, so it was not a way of avoiding tax in Britain.

Assets weren't taken out of the UK.

Forgive me, but I think you should always inquire into schemes that involve Belgian women living in Switzerland putting money into trusts based in the Channel Islands for beneficiaries living in Britain.

Why not just send a cheque to Mr Robinson's home address or transfer the assets into his name? I can think of a possible reason why not. Because UK tax would become immediately payable on the benefit.

Equally curious is the ambiguity in Mr Robinson's weekend statement. On the one hand he stated that he had never transferred capital or other assets into the trust - Mr Darling's point. That is on line 21 of his statement. He was just the fortunate beneficiary of Madame Joska Bourgeois' munificence.

But then, on line 27, he also admitted that the 'right' to buy [pounds sterling]9 million of shares in the prosperous British company TransTec, which he controls, had passed to the offshore trust. The minister states that capital gains tax is liable on the transaction.

When we look at the details of this particular transaction, we find a further

oddity. Between Mr Robinson and the offshore trust was interposed another company owned by Mr Robinson -Stenbell. Mr Robinson sold his rights to Stenbell; in turn, Stenbell sold them on to the offshore trust.

Again there are two reasons why this complication might be thought advantageous: to disguise the ownership of assets or to harvest a tax advantage.

Was this the case?

Finally, there is the matter of the blind trust. They are devices which place the management of your assets into the hands of trustees who do not, indeed may not, tell you what they are doing. The technique is designed to prevent conflicts of interest. But ministers know they will regain control of their assets when they leave office.

We are never told who the trustees are. For all we know, they may be friends, associates, employees of the companies in which the minister has an interest, chosen because they know what to do without being told.

BUT whatever the merits of a blind trust, in this particular case Robinson's evident conflict of interest hasn't been removed. The offshore trust established for the minister's family, of which he is a discretionary beneficiary, hasn't been included in the blind trust arrangement.

This is a serious problem. Treasury ministers set the tax rules for residents of the UK who are beneficiaries of trusts, whether established overseas or not. Mr Robinson, as a Treasury minister, has a conflict of interest by virtue of being the beneficiary of a trust.

Nor can it be argued that Mr Robinson, as Paymaster General, has nothing to do with personal taxation.

The question, thus, is for the Chancellor of the Exchequer: given Mr Robinson's conflict of interest, should he remove Mr Robinson from playing any role in the Treasury's management of the nation's tax system?

Andreas Whittam Smith was founding Editor of The Independent and a former City Editor of The Daily Telegraph.