2009 February » Tax Research UK

The next UK tax amnesty: what to expect

Amnesty, Banking, Guernsey, Isle of Man, Jersey, Switzerland, Tax evasion Comments Off

Feb 262009

Accountancy Age has been digging about the prospect of another UK tax amnesty. The last only really affected the activities of the UK’s five biggest banks – Barclays, Lloyds, HBOS (as was), HSBC and RBS. It successfully showed the massive support they provide to those who evade their taxes using the Crown Dependencies – for which they deny any responsibility and which they fought long and hard to hide on behalf of those who were breaching UK law – but it also left out vast numbers using other banks and more specialist organisations.

So, amnesty number 2 is on its way. As the Age says:

As many as 500 financial institutions will receive letters from HM Revenue & Customs by the end of March asking them to disclose details of UK taxpayers with accounts held offshore, Accountancy Age has learned.

According to a source familiar with the plans, contact with the banks would be the first stage in offering tens of thousands of account holders the opportunity to come clean, through a second offshore disclosure facility or amnesty – on the funds they are holding overseas.

And as they also report:

According to Richard Murphy, tax campaigner at the Tax Justice Network, Swiss investment bank UBS could be a top target for HMRC after US authorities imposed a $780m (£537m) on the bank for failing to disclose the details of account holders.

Several tax experts told Accountancy Age they expect HMRC to target customers of Swiss and private banks, including SG Hambros and Credit Swiss.

They got a comment from Jersey as well:

Robert Kirkby, technical director at Jersey Finance, a government association for banks trading on the island, said HMRC could not be ‘too aggressive with a second amnesty’.

Or in other words “please be kind on our poor criminal clients”.

And as the Age reported elsewhere:

The taxman is expected to use powers to parachute in investigators to question officials in tax havens, experts believe, as part of plans for a global clampdown on offshore tax jurisdictions that is due to be announced at April’s G20 summit.

I am sure this is true, but let’s be clear – this gives me big concerns about over stretched resources.

If we want to know how to pay for the bail out the answer is easy to find: recruit to the Revenue.

Memo to Alistair Darling: stop issuing mis-information

Guernsey, Isle of Man, Jersey, Tax Havens 1 Response »

Feb 262009

MEMORANDUM

To: Alistair Darling, Chancellor of the Exchequer
From: Tax Justice Network
Date: 25th February 2009

Subject: Mis-information about the UK’s responsibilities vis-?†-vis the Crown Dependencies

TJN has been contacted by a journalist working with the French newspaper La Tribune. He tells us that UK Treasury officials have informed him that the UK has no constitutional means of exerting influence over the activities of its Crown Dependencies, and therefore cannot interfere with the way they function as tax havens. This is not correct, and we would be grateful if you would ensure that UK officials desist from giving out this false information.

Despite not being part of the United Kingdom, Guernsey, Jersey and the Isle of Man are intricately linked to the UK by virtue of their being dependencies of the British monarch. The inhabitants of the Crown Dependencies are treated as subjects of the British Crown and are treated as part of the United Kingdom for the purposes of the British Nationality Act.

Being possessions of the British monarch means that they do not have independent status as sovereign nations in their own right. They have no independent status in the United Nations, or in any other multilateral organisation. The British government is responsible for representing the Crown Dependencies at international fora and for their good governance in international affairs.

Almost every law enacted by the local legislatures in the Crown Dependencies requires the assent of the Queen in Council, generally known as the Privy Council, prior to their enactment (the exceptions apply solely to the Isle of Man, where the monarch’s personal representative, the Lieutenant Governor, may grant assent to some laws). A UK Minister is appointed as Privy Councillor with the specific responsibility for ensuring the good governance of the Crown Dependencies. This role is currently undertaken by a Minister of State from the UK Ministry of Justice, which acts as the principal channel of communication between the UK government and the three Crown Dependencies (there is regular contact between Crown Dependency officials and other Whitehall departments, but the MoJ is the official link between the UK government and the insular authorities).

The UK Ministry of Justice is also responsible for processing draft legislation from Jersey, Guernsey and the Isle of Man prior to its receiving assent from the Queen in Council, and the MoJ is additionally responsible for consulting with the islands on extending UK legislation to them.

In addition to having effective responsibility for vetting all legislation passed by the local legislatures of the Crown Dependencies (by the way, why did New Labour give assent to Jersey’s Trust Law of 2006 which permits the creation of sham trusts?), the Ministry of Justice is also responsible for the appointment of almost all the key officials in the islands. The Bailiffs of Jersey and Guernsey, are Crown appointees. Ditto the Demesters and High Baillif in the Isle of Man. Likewise the Attorneys-General, Solicitors-General, and stipendiary Magistrates are all Crown Appointments. The British monarch is also responsible for appointing the Crown’s personal representative to the islands, known in all cases as the Lieutenant Governor.

Now, like most things relating to Britain’s constitutional arrangements, there is a degree of uncertainty surrounding the exact nature of the relationship between the UK and the Crown Dependencies. This allows for a certain amount of obfuscation and playing with smoke and mirrors to present a picture that suits the UK’s political games in the international arena. But we can look to the 1972/73 Royal Commission on the Constitution, whose report is widely known as the Kilbrandon Report, which whilst acknowledging a degree of uncertainty, also stated as follows:

“the United Kingdom Government are responsible for defence and international relations of the Islands, and the Crown is ultimately responsible for their good government. It falls to the Home Secretary to advise the Crown on the exercise of those duties and responsibilities. The United Kingdom Parliament has the power to legislate for the Islands, but it would exercise that power without their agreement in relation to domestic matters only in most exceptional circumstances”.

“[The UK] Parliament does have power to legislate for the Island without their consent on any matter in order to give effect to an international agreement”

Source: Hansard, House of Commons Debates, 3 June 1998, cols. 471 and 465.

Times have changed slightly since then: the MoJ has replaced the Home Office, but the wording is fairly clear and unambiguous:

The Crown is ultimately responsible for their good government.[BTW the same applies to Antigua so what went wrong there, and in the Turks & Caicos? Have you all fallen asleep on the job?]

The UK Parliament does have power to legislate for the Island without their consent on any matter in order to give effect to an international agreement.This could (and should) be applied, for example, to the European Union’s Savings Tax Directive.

All in all, it seems pretty conclusive that the UK government has both powers and responsibilities vis-?†-vis the Crown Dependencies, though you and your colleagues have chosen to exercise neither. But kindly stop your officials from mis-informing journalists and others: this smacks more than just a bit of la perfide albion.

Bono: I still will not pay to end poverty

Development, Ethics, Ireland, Tax avoidance 1 Response »

Feb 262009

The U2 Must Believe in Tax Justice event can now be seen on line:

U2 Must Believe In Tax Justice: Dublin Feb 25 2009 from aaronrip on Vimeo.

The event has attracted masses of publicity – including in the London Metro this morning.

Quite true. Bono is a hypocrite. You can’t support the poor and avoid your taxes.

I love the song lyrics!

EU says regulation must be pan-European

Banking, Regulation Comments Off

Feb 252009

The BBC has reported:

The City of London and other financial institutions should be supervised by a new pan-European watchdog, a European Commission report recommends.

Its proposals, written by ex-Bank of France Governor Jacques de Larosiere, include an EU-wide supervisory scheme for banks and financial bodies.

This has to be right. It is the only way to stop the current incestuous system of ” chaps regulating chaps” that means that nothing of consequence is reported.

There will be another benefit as well: the lax regulation in places like Ireland were a blind eye has been turned to the rule of law would be prevented.

I am aware that John Morton has described this as something like ” a wall of treacle”. I’ll tell you, I’d rather we have a wall of treacle than the current mess that we are in.

U2 must believe in tax justice

Development, Ethics, Ireland, Tax avoidance 4 Responses »

Feb 252009

More from “U2 must believe in Tax Justice”:

Photo: I. Irigoien

And from the Irish Times:

Protesters have demonstrated outside the Department of Finance against U2′s decision to move their tax affairs to the Netherlands to avoid paying tax on their royalties in Ireland.

The protest was organised by the Debt and Development Coalition Ireland (DDCI) which campaigns on issues related to the developing world. The coalition contains such organisations as Concern Worldwide, Tr??caire, Oxfam and various Catholic missionary orders.

U2 moved their publishing arm to the Netherlands in 2006 after the Government capped tax-free earnings for artists at €250,000. Previously, U2 had been one of the biggest beneficiaries of Ireland’s tax-free status for artist royalties.

Accounts for 2007 for U2 Ltd show the band paid out more than €21 million in wages in 2007 in a relatively quiet year where they were not touring or releasing new material.

Bono impersonator Paul O’Toole reworked the lyrics of I Still Haven’t Found What I’m Looking For to mock the band’s decision. “I know avoiding tax ain’t fair/it’s just because I’m a millionaire, I don’t need to pay like you, no, I won’t pay like you/because I still haven’t learned about democracy.”

Mr O’Toole said: “Their music does not bother me. It is their policy of avoiding tax that bothers me. Bono talks about dead kids, but he won’t pay a penny towards it.”

Mr O’Toole posed with a mock-up of a donation to the world’s poor in one hand and a large sack of unpaid tax in the other.

The DDCI is following it up with the launch of an “international song contest” inviting re-worded versions of U2 classics to highlight the band’s stance on tax.

It is timed to coincide with the release of U2′s new album No Line on the Horizon which goes on sale at midnight on Friday.

DDCI co-ordinator Nessa n?? Chasa??de said the decision to holding the protest outside the department of Finance was to highlight the fact that U2′s tax avoidance measures deprives the Irish exchequer of taxation revenue that could be spent on development aid.

“Bono has championed the call for increases in aid to impoverished countries, yet in his personal life he is engaged in tax avoidance issues and it is tax avoidance that is undermining the possibility of developing countries fighting their way out of poverty,” she said.

“The practice of being able to move your finances around easily and without high levels of transparency is extremely problematic for developing countries. The kind of practice that U2 is engaging in is part of that problem.”

Nobody from U2 was available for comment, but the band will defend their tax measures in an extensive interview to be published in this newspaper on Friday.

I’m looking forward to the justification

And massive respect for the guys in Dublin who pulled this off from me!

My del.icio.us bookmarks for February 24th through February 25th

Delicious 2 Responses »

Feb 252009

These are my links for February 24th through February 25th:

Belgium signals more cooperation over tax cheats – by fully joining the EU STD – Belgium's Finance Minister, Didier Reynders, said on Tuesday the country will improve cooperation and transparency with its European Union partners in tackling possible tax evasion. Belgium is only one of three countries — the other two are Austria and Luxembourg — that have opt outs from EU rules on taxing savings held by a citizens outside their home state.
Editorial: Clouds continue to gather over tax havens – "In a lengthy article on Saturday, under the headline “Clouds gather over tax havens”, Britain’s Daily Telegraph newspaper asked the question, as Gordon Brown urges global action, will the offshore industry survive the fall-out from the Stanford fraud charges?"
Cayman knows it's all over
FT.com / Companies / Technology – Gmail crash fuels web services fears – "Google’s e-mail service, used by more than 100m people, suffered a global crash on Tuesday, raising concerns about the world’s growing reliance on web services.
The Gmail outage lasted more than two hours from about 1.30am on the US West Coast, hitting users in Europe and Asia hardest as America slept"

And very annoying it was too…..
FT.com / Europe – Latvia debt rating cut to ‘junk’ – It won't be the last to get this status
FT.com / Europe – Iceland scraps threat to UK over asset freeze – Maybe they're seeing sense at last
And maybe they're realising that the world has changed

Either way, this is a wise decision
Liechtenstein prince faces German tax inquiry – Times Online – "A prince of the House of Liechtenstein, one of the world’s wealthiest royal families, is being investigated for tax evasion in Germany.
Prince Max von und zu Liechtenstein, chief executive of the principality’s largest bank LGT and son of the ruler Hans-Adam II, has been accused of withholding millions in taxes.

Based in Munich, he is the most prominent figure to be affected by one of the greatest tax evasion scandals of recent times after one of his former employees sold confidential bank data to the German equivalent of MI6"

Excellent

Send him down
University of Bums on Seats – Welcome – I was searching UBS yesterday and this came up
Go on – award yourself a PhD. You know you're worth it

U2 Must Believe in Tax Justice

Ethics, Ireland, Tax avoidance 1 Response »

Feb 252009

As U2 prepare to launch their new album, this week Irish global justice campaigners will be challenging the band to put their money where their mouth is and support global tax justice. Campaigners highlighted the millions of euro denied to impoverished governments through tax avoidance and evasion by multi-national companies shifting their profits to avoid tax.

Nessa N?? Chasaide of Debt and Development Coalition Ireland said, “Bono may campaign for a better deal for the world’s poor – but his band are taking advantage of the same tax avoidance schemes that rob impoverished countries of billions. At least $160 billion drains out of impoverished countries each year because of multinational companies shifting their profits to avoid tax. We need international action to ensure that everyone pays and pays their fair share.”

In 2006 U2 moved one of their companies from Ireland to the Netherlands to minimise their tax bill. This is depriving the Irish government of revenue that we need to pay for social services and development aid to impoverished countries.

Andy Storey from Afri added, “Tax is a fundamental question of global justice. Lost taxes in impoverished countries far outweigh what they receive from rich countries in aid. There are trillions of dollars stashed in tax havens. If that money was taxed in the countries where it was earned, governments would have their own resources to improve the lives of their people.”

Fleachta Phelan of Comhl?°mh continued, “Every person and company has a duty to pay tax and make their contribution to society. The Irish government must end tax dodging through supporting international action against bank secrecy and forcing companies to publish where they make money and where they pay tax.”

Campaigners are inviting believers in tax justice to write alternative U2 songs for tax justice. See www.debtireland.org for more details.

Jersey is a tax haven

Jersey 2 Responses »

Feb 252009

This isn’t new. But it’s worth airing again.

It’s a paper I co-wrote submitted to the US Senate in 2007 on the tax haven activities of Jersey, point by point rebutting their claims to be well administered and to not be a tax haven. It concludes:

This paper has sought to show that:

1. Jersey remains committed to conventional tax haven practices, with all that implies;

2. Jersey’s compliance is with the form of international standards but not with the substance of the conduct that they expect;

3. Jersey’s co-operation with the USA is not indicative of its general approach to international issues;

4. Jersey is purposefully creating structures and procedures for use by its financial services industry that will result in information not being available for exchange under internationally agreed arrangements, so nullifying their effect;

The evidence supports these conclusions. Jersey is offering no or nominal taxation to those using its legislation and secrecy space for tax haven purposes, whilst increasing the tax burden on its local population to pay for this.

The new laws it is introducing on corporate tax, the taxation of high net worth individuals and GST do not comply with international norms. Its new money laundering arrangements will allow abuse not possible at present. At a time when increased standards are expected internationally Jersey is finding ways to lower those it operates whilst offering apparent compliance with internationally imposed obligations. Its new laws on trusts, incorporated cell companies and redomiciliation are all indication of this. At the very least each makes information exchange harder: in the worst possible case each could be of benefit to those undertaking fraudulent transactions, and in the case of the trust laws correspondence that has been seen shows that the government in Jersey knew this to be the case.

It is apparent that in the light of this extremely limited range of tax agreements into which it has entered that the cooperation that Senator Walker claimed Jersey is providing to the USA in his submission to the US Senate dated 17 May 2007 is illusory. Even if some cooperation is being offered to the USA, it is unusual for tax haven activity to exist on a pure bilateral basis. As such if a US transaction is routed to Jersey via another location it is highly unlikely that effective information exchange arrangements will be in place to track it, so nullifying many of the benefits of the US TIEA. That TIEA should be seen for what it is: a token gesture designed to curry favour that is not indicative of any serious effort on the part of Jersey to exchange information that might limit its ability to be a fully effective tax haven.

So what is happening? The best explanation appears to be the simplest one. As pressure mounts for tax havens to exchange information so they are reacting by ensuring that they either do not have that information, or by providing mechanisms that make it both harder to secure, and easier for it to flee. The result is that corruption in places like Jersey can no longer be tackled at the transaction level. Put simply, transaction data will soon be unavailable or in perpetual transit between tax haven locations. As such offshore corruption can now only be tackled at the systemic level. This requires a changed approach. The corrupt user of tax haven services is no longer the problem; the corruption of the tax havens is the problem now.

It is time to tackle the suppliers of corruption services if the integrity of the world’s economy, taxation systems and democracies is to remain intact. Tax havens are at the heart of this challenge to the way we live. And tackling them systemically is the solution to this problem.

This was written before people began to see through the charade.

That charade is now falling.

The sham is becoming apparent.

UBS: £37 billion under management in the UK

Jersey, Switzerland, Tax avoidance, Tax Havens Comments Off

Feb 252009

The Guardian has reported this morning that:

The wealth-management arm of UBS, under fire in the United States for its part in a multibillion-dollar tax evasion scandal, has more than 20,000 clients in the UK who have entrusted £37bn to the battered Swiss bank.

That’s an average of £1.85 million each.

As the Guardian notes:

The size of UBS’s wealth-management business in the UK, confirmed by a bank spokeswoman, will come as a shock, especially as UBS said most of its clients are individuals rather than institutions.

UBS makes a virtue of its access to offshore financial centres, boasting of “more than 3,000 investment funds licensed for distribution in Jersey” on its UK website.

And it adds:

Asked whether UBS faces investigation for tax abuse in the UK, a spokeswoman said she was unaware of any inquiry.

But Vince Cable, the Liberal Democrat Treasury spokesman, said: “The scale of this demonstrates how pervasive tax avoidance through tax havens has become and clearly demonstrates the need for the authorities in the US and the UK to crack down hard on it.”

Quite right. As I noted here.