2010 May » Tax Research UK

Jersey and the Isle of Man tax regimes to be reviewed by Europe in September – so what will the Tories do?

Europe, Guernsey, Isle of Man, Jersey 3 Responses »

May 272010

News reaches me of a meeting of the EU’s Tax Code of Conduct Group, held last week.

This Group was established to monitor compliance with the EU Code of Conduct on Business Taxation – established in 1997.

Aficionados of this blog will know that in the wake of publication of this Code – with which the UK’s Crown Dependencies are obliged to comply since they are part of the UK for these purposes – The Isle of Man, Jersey and Guernsey (in that order) announced plans to create what were described as zero/ten corporate tax systems.

Suffice to say, I was one of the leading critics of this move and when an advisor to a committee of the States of Jersey in 2005 exposed Jersey’s plans as hopelessly non-compliant with the Code. It followed that the Isle of Man’s and Guernsey’s were too. The reason was simple: the proposed arrangements kept in place the ring fence that the EU Code was meant to abolish: it just claimed to move it from company tax law to personal tax law. So, as a result local companies remained taxable and those owned by all other people – even if trading in Jersey, Guernsey or the Isle of Man were not. This was blatantly abusive under the EU Code and last year the UK told the Crown Dependencies this was the case (at long last, and after a lot of publicity on the issue from the likes of me).

Each island has now to come up with new tax laws.

Guernsey has said it will do a 10% flat tax rate, irrespective of ownership.

Jersey and the Isle of Man have not announced plans yet.

So, last week the EU’s Tax Code of Conduct Group met and considered their responses.

Guernsey they decided is off the hook for now: a 10% across the board tax will keep the EU happy.

As for Jersey and the Isle of Man: no news to the EU was not good news for them. Their tax arrangements are to assessed formally in September. I gather Spain and the UK are gunning for Jersey and the Isle of Man and are putting on tons of pressure for rejection of the current arrangement.

Expect a lot of lobbying of Tory and Lib Dem politicians from the Crown Dependencies before September then.

This one is vital: when imposing cuts on everyone else will the Con Dems stand up to the tax havens or not?

There’s one to watch out for – and the fireworks will surely fly if they let the Crown Dependencies off the hook.

Rebels press Osborne on capital gains

Conservatives 2 Responses »

May 272010

FT.com / UK / Politics & policy – Rebels press Osborne on capital gains.

The right wing are out to bring the Tories down.

As the FT notes:

George Osborne was under mounting pressure on Wednesday night from Tory MPs to offer significant concessions over the capital gains tax increase planned for next month’s Budget.

The ironic possibility of Labour having to save Osborne from his bank benchers on this issue is just too significant not to note.

But will they?

And what real chance is there for this coalition in the face of the madness of the Tory back benchers?

UK and France reject EU bank plan

Transaction Taxes 1 Response »

May 272010

FT.com / Global Economy – UK and France reject EU bank plan.

As the FT notes:

Britain and France were at odds with other European Union countries on Wednesday over plans to insure against future bank failures, in another sign of the problems in trying to forge a common response to the bloc’s economic woes.

Michel Barnier, EU internal market commissioner, set out plans for member states to form national funds to help wind up or reorganise failing banks, funded by a levy on the financial sector.

The UK is right to oppose this – although it is doing so for all the wrong reasons.

The right tax on banks is, without doubt a full financial transaction tax – designed to reduce liquidity in the system and raise revenue at the same time. I’ve written about this here.

A levy to create a fund makes no sense at all. First there’s the risk of moral hazard. second, where is it to be invested? If via banks a loop is created, and that negates the purpose.

In which case a tax that changes the system is needed. Bring on financial transaction taxes!

This could get very nasty

Economics 3 Responses »

May 262010

FT.com / China / Economy & Trade – China reviews eurozone bond holdings.

As the FT reports:

China, which boasts the world’s largest foreign exchange reserves, is reviewing its holdings of eurozone debt in the wake of the crisis that has swept through the region’s bond markets.

Representatives of China’s State Administration of Foreign Exchange, or Safe, which manages the reserves under the country’s central bank, has been meeting with foreign bankers in Beijing in recent days to discuss the issue.

Safe, which holds an estimated $630bn of eurozone bonds in its reserves, has expressed concern about its exposure to the five so-called peripheral eurozone markets of Greece, Ireland, Italy, Portugal and Spain.

This is not going to be pretty.

The proverbial may be hitting the fan soon if this happens.

And as one commentator has written:

At some point, one fears, we must all face the possibility that there will be no one left to blame, and that governments will be too broke to bail out the banks. And what then?

I can assure you that’s what worries me because that’s the recipe for extremism.

Is that what the OECD et al want, plus Osborne and laws in the UK?

It is the way this is heading, fast.

And no I’m not over-stating my concern – I’m trying to be as calm as possible.

New briefing sheet – financial transparency

Briefings, Tax justice, Transparency Comments Off

May 262010

There’s another new briefing sheet out, published today, on financial transparency. It’s available for download here and says:

Introduction

Transparency is at the core of the demand for tax justice. But what is it? What do campaigners mean when they say they want increased transparency? This paper seeks to provide a concise answer to that question, but each dimension of transparency, noted below, will be the subject of an additional briefing sheet to provide greater detail on just what it might mean in practice.

The 11 steps to financial transparency

Tax justice cannot happen by chance. To achieve it information is needed. That means all potentially taxable people, whether they are human beings or legal entities created under law, must be transparent about what they do, are and have done.

Financial transparency exists when the following information is readily available to all who might need it to appraise transactions they or others might undertake or have undertaken with another natural or legal person:

1. Who that other person is;

2. Where the person is;

3. What right the person has to enter into a transaction;

4. What capacity the person has to enter into a transaction;

And with regard to entities that are not natural persons:

5. What the nature of the entity is;

6. On whose behalf the entity is managed;

7. Who manages the entity;

8. What transactions the entity has entered into;

9. Where it has entered into those transactions;

10. Who has actually benefited from the transactions;

11. Whether all obligations arising from the transactions have been properly fulfilled.

Conclusion

Only when these questions can be answered on timely basis and at low or no cost by anyone who wishes to make enquiry does financial transparency exist.

New briefing sheet – who are the users of accounts?

Accounting, Country-by-country, IASB Comments Off

May 262010

A new briefing sheet on who might be considered the users of accounts has been published by Tax Research LLP today. It’s available here.

The briefing is, of course, produced in response to the International Accounting Standards Board claim that only capital providers can be considered proper uses of financial statements – all other users having to make do with the information capital providers need, as decided upon by the IASB.

The paper argues that the IASB is wrong – and goes on to show that their claim is in conflict with their own constitution and long held views by accounting standards setters.

There’s no doubt the IASB is going to have change its position on his issue or its whole project will come to an end as legislators realise that the IASB is refusing to act in the public interest. In which case the time for change is soon.

UK must raise interest rates, warns OECD

Economics 3 Responses »

May 262010

UK must raise interest rates, warns OECD | Business | guardian.co.uk .

As the Guardian reports:

The Bank of England should raise interest rates before the end of this year to keep inflation in check, the Organisation for Economic Co-operation and Development said today.

In its half-yearly health check of the global economy, the Paris-based thinktank said that UK interest rates must rise from their current record low of 0.5% “no later” than the last quarter of 2010. By the end of 2011 rates should have risen to 3.5%, it said.

That’s a 3% increase in base rates.

In simple terms if that is passed on that is an increase of £500 a month on an about average mortgage.

And this at a time when VAT is also set to rise, pushing inflation up and likely to increase upward pressure on rates still further.

Both will have an immediate impact on household spending power – sucking demand out of the economy, leading to increasing unemployment and substantial risk of a double dip recession.

The economic prescriptions of the madhouse are coming at increasing frequency: the consequent catastrophe awaits.

African Economic Outlook 2010: a mixture of hope and failure

Uncategorized Comments Off

May 262010

Tax Justice Network: African Economic Outlook 2010: a mixture of hope and failure.

A good review of the OECD review of the economic situation in Africa – and its tax implications.

The new politics needs a realignment of the mind. It needs Caroline Lucas

Green New Deal Comments Off

May 262010

The new politics needs a realignment of the mind. It needs Caroline Lucas | David Marquand | Comment is free | The Guardian .

As David Marquand writes:

No single thinker, party or school of thought offers a complete answer, or anything like it [to the current crisis]. Answers will have to be hammered out in open-minded dialogue, between all those who accept that tinkering is not enough, across the lines of party and creed. The need, in fact, is for a realignment of the mind, socialist in economics and republican in politics. In such a realignment the Green movement must surely have a central place, along with radicals and dissenters from all parties and none. Caroline Lucas, over to you.

Cue, the Green New Deal.

Caroline Lucas MP, leader of the UK Green Party, is a colleague of mine in the Green New Deal group.