The Guernsey Evening Press has an article of the sort rippling around the press of the secrecy jurisdiction world suggesting they might have a tough time as a result of the election of Barack Obama.
The discussion below the article referred to my work, that of others I know and of the Tax Justice Network, despite which some thought Guernsey might get favourable treatment when compared to the Isle of Man, for example. I have posted the following comment as a consequence:
I trust you will not mind me joining this discussion since you have referred to my work in comments above.
Please let me assure you, the Tax Justice Network does not think that Guernsey is any better than Jersey, the Isle of Man or any of the other tax haven. I am not, of course, in a position to tell you of the mindset of those who advise, or might advise, the new US administration, but I'm very strongly inclined to believe that they will share my opinion.
Let me be clear about what offends us so much about tax havens. It is not your tax rate. The Tax Justice Network does not have a position on tax rates, even if I do personally. And your commentator who suggests that we are controlled by the socialist Fabian Society is quite wrong. I have never been a member of that society, and nor to the best of my knowledge have John Christensen or Prem Sikka ever been so either. Our position is much more complex than that which some of you would wish to represent, and to resort to such personal comments really does not do your position any credit. As democrats (and in my case, I fully admit, as a social democrat) our position is unambiguous. If a government can secure a democratic mandate to run its administration with low or even zero rate taxes then so be it, that is a valid democratic choice which we respect.
But this is not the situation in which Guernsey or the other tax havens find themselves. Guernsey seeks to run an administration which delivers OECD member state levels of service to its community without charging the appropriate taxes on that community to pay for that service. To ensure that it can do this it does three things. First it passes legislation to create financial services structures that have little or no use to the domestic community of Guernsey, and which are only designed to facilitate transactions that take place elsewhere, i.e. in other countries. Second, it creates a deliberate and legislatively backed veil of secrecy over the operation of those structures so that in many cases the country in which they have their economic impact cannot identify who the beneficial owner of that structure might be, and whether as a consequence it should be taxed in the place where it really undertakes its investments or trade. Third, it attracts to it shores a range of financial services professionals who are willing to facilitate these transactions, in no small part by turning a blind eye to the regulatory requirements of the places where they actually undertake their trades, whilst ensuring they are fully compliant (and this I acknowledge) with the requirements of regulation in Guernsey.
Let me be clear, once again we have no objection to a structure created in one place being used in another. This is normal. We are well aware of that. But we do have fundamental objection to the secrecy that all tax havens create around such structures. So, for example, we object to no accounts ever being put on public record by a Guernsey company. We object to the use of nominees to hide the ownership and control of those companies, just as we object with regard to the similar abuse that is allowed in the UK and in Delaware. We object to the fact that many of these companies are considered not resident in Guernsey, but there is absolutely no evidence that they are as a consequence considered resident somewhere else for taxation purposes. We object to the use of protected cell companies which Guernsey first created, the consequence of which are unknown at present, but which do, we believe, create opacity, uncertainty, and unwarranted disadvantage to those seeking to make claim on these entities. We object to the use of offshore trusts, most of which we consider to be pure nominee arrangements undertaken solely to facilitate tax abuse without full disclosure being made in most cases to the countries where they have their economic impact. We object to the refusal of places like Guernsey to participate in the EU savings tax directive as a full member, the sole reason for which must be the facilitation of tax evasion. We object to the fact that Guernsey makes it exceptionally difficult for a tax enquiry to be made with regard to the affairs of any structure created in its domain, and the latest tax information exchange agreements do not change this because they are little more than a token gesture in this regard.
Most of all, we object to the deliberate distortions in trade that Guernsey and other tax havens deliberately create by providing an artificial factor of production, called secrecy, which can only be enjoyed by large companies, those with wealth, long established companies, multinational concerns, and those who are blatantly willing to break the law. This provides a deliberate competitive advantage to those who already enjoy great benefits in society and ensures that small companies, new companies, nationally-based companies, the poor in any society and those who are law-abiding will always suffer a greater burden of tax than is justified.
And we object to the fact that these taxation driven structures, hidden behind a veil of secrecy, can also be used by the corrupt and criminal elements of societies around the world. We know that they are used in that way. We know that the money laundering rules of banks in tax havens turn a blind eye to issues outside their own domain: if this was not the case then the thousands of reports of suspected money-laundering in the form of tax evasion in the UK should have been submitted by the main high street UK backs with regard to their customers in Guernsey who refused to exchange information with HM Revenue and Customs under the terms of the EU savings tax directive, which must in every case have created a reasonable suspicion that tax evasion was taking place, giving unambiguous grounds for reporting suspicion under the terms of your money laundering legislation, and yet as far as I know no such reports were made. Why should I assume that any tighter regulation is applied in the more complex cases where corruption is really taking place as a consequence?
We object to injustice. We object to crime. We promote fair competition. We promote fair trade. We believe that markets should have sufficient information to ensure that resources are allocated effectively to maximise the well-being of mankind.
And we believe that Guernsey promotes injustice, might harbour crime, does create unfair competition and unfair trade that will result in market distortions that will be harmful to mankind as a whole, and most especially in the developing countries of the world whom we have proven lose dramatically as a consequence.
And as a consequence of all this you also made a major contribution to the current financial crisis in the world, by promoting private equity that has laden our markets with debt and damages the future employment generation prospects of many otherwise viable companies; by facilitating securitisation which has contributed to the sub-prime crisis; by creating opacity that has generated the uncertainty that means that banks will not lend to each other, and by assisting, through the creation of your make-believe world of offshore structures the degradation of the culture of sound corporate governance that once existed, but does no longer do so, at cost to us all.
Do not doubt, you have a lot to answer for. You will be held to account along with the other tax havens of the world. And you will not get favourable treatment. There is no reason why you should.