Jersey: costing £500 million in tax evasion to the UK a year, at least

Posted on

Jersey has published its figures for tax retained under the EU Savings Tax Directive in 2007. The press release they put out is misleading. I thought it would be useful to compare the 2007 data with that for 2006 as an indication of how things are really going.

The data is as follows:

It's important to note that these are the funds paid: Jersey retains 25% of the sums retained, and that has been deducted before the above is taken into account.

In graphical form the data looks like this:

That gets the message across as clearly as I want: despite all it claims Jersey is a UK captive.

In 2006 63.8% of the sum retained related to UK based accounts. It was 64.3% in 2007.

The amount retained went up by 19.7%.

The even more important fact is this. In 2007 61,600 people opted to have tax disclsoure made. In 2006 that number was 80,191. In other words, despite initiatives such as the UK 'tax amnesty' the number of people cooperating with the UK tax authorities who hold accounts in Jersey fell by 23%. The amount of cash they held went up by 20.8%.

The cost to the UK rose considerably as a result. It is likely that all who refused information exchange were tax evading. There is no reason to refuse information exchange otherwise. It is likely that anyone holding serious funds in Jersey will be a higher rate tax payer. The total sum retained on UK based accounts in 2007 was £22.51 million (having grossed up for the part Jersey keeps). This, at the retention rate of 15% implies total interest paid of almost exactly £150 million. Tax at 40% on that should be £60 million. The UK actually got £16.9 million.

The consequence is clear. Jersey's banks directly helped defraud the UK of tax revenue of £43 million in 2007 by not reporting those who did not agree to exchange information even though they can only have reasonably believed that this was as a result of tax evasion. And that's on cash alone.

It is fair to assume that an average interest rate of about 5% would have been paid during the course of 2007. That means the cash on which this interest was deducted was probably about £3 billion in total.

Now let's note that there were £212 billion on deposit in Jersey at the end of December 2007. Other funds amounted to £246 billion then. Other funds under management amounted to almost £80 billion. That's over £530 billion in all. Most is entirely outside the EU STD - all significant funds will be in trust.

Extrapolation is always a little uncertain on this data: Jersey makes sure it is hard. But what is unambiguously clear is that first of all there is a significant appetite for evasion in Jersey still. The published data proves that. Second it is clear that this is not being reported by the local banks who are not raising suspicious activity reports on all those not disclosing although evasion is the only obvious reason for not disclosing and therefore they are, in my opinion, duty bound to report every single person not disclosing or be party to an offence of assisting money laundering. Third, Jersey has taken no action against the banks not reporting their suspicions and so is complicit in this process. Fourth, the total loss to the UK is vastly bigger than that lost on bank deposits held in personal names alone.

Suppose the UK provides a quarter of all funds in Jersey. That seems generously low given the data noted above and the number of our banks there. And suppose non-disclosure happens on only one tenth of the total funds held. That means UK non declared assets are maybe £26.5 billion of undeclared assets are held. Lost income on that at 40% tax rate is over £530 million a year. That's more than the cost of two fully equipped new hospitals in the UK a year.

Ans I suspect that massively underestimates the cost of this one island alone.

Worse it may massively underestimate the cost of non-disclsoure by our high street banks who hold many of the accounts involved in that island. What price corporate social irresponsibility, I ask?

Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:

You can subscribe to this blog's daily email here.

And if you would like to support this blog you can, here: