2010 October » Tax Research UK

Why is the ConDem government suddenly so keen on Switzerland?

ConDems, HMRC, Switzerland, Tax avoidance 14 Responses »

Oct 312010

I have been musing on why the UK government is proposing to do such a disastrous deal with the Swiss government. A deal so bad that one of my usual critics from the Isle of Man has said:

Richard, I rarely agree with you, but on this occasion I have to admit that everything you have said is right. In fact, when I first saw the headlines, I thought that this cannot possibly be what the British government’s intentions are when they sign up for this.

If it is, then every other offshore centre will have to give way to Switzerland because they can no longer compete. Now, everyone who pays more than a 35% tax rate, or who doesn’t want to pay IHT on their estate can just put their money in Switzerland and it will be alright. If this deal becomes law, your work is now finished

So why this sudden enthusiasm in the ConDem government for supporting Swiss banking secrecy? Could it, possibly have anything to do with this man?:

You’ve met him before, here. He is, of course, the Rev Stephen Green, current chairman of HSBC, and former chair HSBC Private Banking Holdings (Suisse) SA. Yes, that HSBC’s Swiss private bank. And he, of course, is shortly to become Lord Green and a Trade Minister in the ConDem government.

No chance then that he’s already using his influence to suggest there’s really nothing wrong with Swiss private banking? Even if it does undermine the whole future of tax collection in the UK?

The Isle of Man is told to renegotiate its VAT deal – downwards

Isle of Man, VAT 7 Responses »

Oct 312010

My, so far, invariably reliable sources on all things Isle of Man have told me that HM Treasury has called in the Isle of Man and they have been told to renegotiate their VAT sharing agreement, again. Only one direction of movement is being considered – and that’s downwards as far as the Isle of Man is concerned.

Rumour has it that the publicity given on this blog to the blatant attempt made by the Isle of Man to manipulate the agreement in its favour by restating its basis for calculating its gross domestic product and gross national income may have been influential in forcing this renegotiation on the Isle of Man, but I couldn’t possibly comment on that.

What I do know – if this is true – is that some serious apologies are due in this direction from the Isle of Man.

But I’m not expecting any to be forthcoming.

What I am pleased about is the fact that the ordinary people of the UK will, I hope, stop subsiding the pernicious abuse promoted by the government of the Isle of Man as a result of such renegotiation. And that has to be good news.

For the whole saga, read here.

The European Commission has noted the Swiss tax treaties – and are not amused

ConDems, Europe, Switzerland, Tax evasion 25 Responses »

Oct 292010

My sources tell me that:

The European commission has realised that the [proposed UK and German] DTAs [with Switzerland] would compromise the EU work on automatic exchange of info. Now the Commission has been in direct touch with Germany and UK regarding this issue.

Most important is that they are concerned about Switzerland now being a conduit for all black money back to the UK / Germany if assets are regularised…

So they should be. With the fundamentalist free market government of the UK (yes, I mean that fundamentalist comment – those in our government are as dangerous in their ideological blindness as those usually attributed with such description) being in my opinion at the forefront of this process of promoting bank secrecy to assist their clear objective of undermining government and taxation whilst promoting income inequality the European Commission clearly has very good cause to be concerned. In April 2009 the world agreed that closing down tax havens was fundamental to creating the transparency markets need and generating the revenues all governments are due. Now the ConDems (yes, both parties) are going out of their way to support the corruption that secrecy jurisdictions in general and Switzerland in particular promote.

This is an act of the highest international irresponsibility. I am amazed that international protest is not pouring in. Why? Well note this from Swissinfo (who I note have been reading this blog this week):

Barely two years ago Swiss banking secrecy appeared to be on the rocks with little prospect of it surviving a battering from the United States and Europe.

The impending negotiations of tax accords with Britain and Germany now appear to have lifted the pressure from the Swiss financial centre’s most prized asset. But to what extent has the threat really been lifted?

Konrad Hummler, head of Switzerland’s oldest private bank Wegelin, believes that talks with the two powerful countries – which centre on withholding tax as opposed to an automatic exchange of tax information – will leave banking secrecy intact.

“The protection of privacy through banking secrecy has been strictly separated from the issue of taxation,” he told the Tages-Anzeiger newspaper. “Banking secrecy has therefore been strengthened because it is no longer under suspicion of protecting injustice.”

That’s his story.

But as they note:

Writing on his blog this week, Richard Murphy of the watchdog group Tax Research UK accused Britain of “abandoning the fight against tax havens”.

“No indication is given as to how these accounts are to be regularised,” he went on. “Indeed, there is no prospect that they can be because the £40 billion [SFr63 billion] or so of evaded assets will not have to be declared by name by the Swiss. In that case there is no prospect of UK interest or penalties being charged.”

And Swissinfo added:

But before Swiss bankers can breathe a collective sigh of relief that their cherished secrecy has been saved, the European Union warned that the proposed deals with Germany and Britain would not be allowed to supercede EU demands for an automatic exchange of tax information.

“We have assurances from Germany and the United Kingdom that they are totally behind our aim of achieving automatic exchange of information within the EU, and of promoting as broad a system of information exchange as possible at an international level,” said Emer Traynor, spokeswoman for the EU commissioner for taxation, Algirdas Semeta.

“If there is a conflict, European law always takes precedence over bilateral agreements,” she added.

The pressure to ensure the EU delivers has increased. This is a fight with Cameron they have to win.

Protest works. Just look at the proof

ConDems, Tax avoidance Comments Off

Oct 292010

Johann Hari, who I’ve never met but admire has written a great editorial comment for the Independent under the above title.

The evidence is drawn from the tiny initial protests against the Vietnam war.

The analogy is with the Vodafone protests.

Vodafone won’t pay more tax as a result of them.

But they express the fundamental underlying angst in society at the injustice the ConDems are imposing without a mandate on this country, which are bound to increase inequality in society.

More protests are planned for tomorrow. I hope they are peaceful. I hope they are well organised. I hope they are effective.

Singapore: far from clean

Corruption, Secrecy jurisdictions, Tax Havens Comments Off

Oct 292010

Singapore is the world’s eighth most corrupt nation, according to the Tax Justice Network’s rankings. It is a haven for secrecy and one of the biggest, and fastest-rising, sinks for illicit, tax evading and criminal loot from developing and other countries around the world. Just look here to see some of the things that Singaporeans have been saying about their country, for instance.

So we are distressed to see Transparency International’s Corruption Perceptions Index (CPI) ranking Singapore as the world’s "cleanest" country, alongside Denmark and New Zealand. It is not the cleanest. It is one of the dirtiest.

Transparency International, to be fair, has supported the Financial Secrecy Index, which is in the process of being updated (though results won’t be out any time soon.) But this CPI is showing a very false picture of what is really going on in the world.

Read more on what corruption really means, from a tax justice perspective, here and here.

NB: from the TJN blog, with permission

The Isle of Man: debasing its regulation in the race to the bottom

Isle of Man 6 Responses »

Oct 292010

I note that TaxNews.com reported last week that:

The Isle of Man parliament last week approved two separate sets of regulations modernizing the island’s company law.

Firstly, the company law was amended to change the obligation on private companies to hold annual general meetings; and to change the types of business that can be conducted by Protected Cell Companies (PCCs).

I admit, I am well aware that most AGMs are a farce, involving the initialling of a pre-prepared minute. But in the Isle of Man this does, of course, create another degree of separation between the reality of control and the veneer of presence that underpins the whole essence of a secrecy jurisdiction. And so this is, for that reason, another retrograde step in the debasement of Isle of Man regulation.

I am much more worried about the second change, about which it is noted:

The Protected Cell Companies (Eligibility) Regulations 2010 allow PCCs incorporated under the Companies Act 1931 to 1993 to conduct any class of business, the same as PCCs incorporated under the Companies Act 2006. The former category of PCC was previously restricted to insurance and collective investment business.

When protected cell companies were introduced they were to supposedly support the insurance industry. But there were those who sought to abuse them from the outset. As is noted in the TJN briefing on the subject, it has been said of them:

The structure of PCCs has been compared to a house with a lock at the entrance and many rooms inside, each room locked separately with its own door, but also with an escape tunnel only accessible from inside the room. If an investigator seeks to find out what is going on in one room inside the house, she first needs to unlock the main outer door. But imagine that by opening that first door everybody inside the building is alerted to the fact that someone has entered the house. Anybody seeking to flee the investigator will be given enough time to do so thanks to the second lock at the individual room door. While the investigator tries to unlock the second door (by filing a second costly information request), the perpetrator has enough time to erase all traces of guilt and escape through the secret tunnel. This colourful metaphor neatly illustrates how a PCC might work in practice.

This is the reality of what the Isle of Man is promoting, shamelessly.

And that is why we oppose the abuse it promotes.

Who doesn’t like banking?

Banking 3 Responses »

Oct 282010

Who said this?:

For all the clever innovation in the financial system, its Achilles heel was, and remains, simply the extraordinary – indeed absurd – levels of leverage represented by a heavy reliance on short-term debt.

And this?

The real failure was a lapse into hubris – we came to believe that crises created by massive maturity transformation were problems that no longer applied to modern banking, that they belonged to an era in which people wore whiskers and top hats. There was an inability to see through the veil of modern finance to the fact that the balance sheets of too many banks were an accident waiting to happen, with levels of leverage on a scale that could not resist even the slightest tremor to confidence about the uncertain value of bank assets.

Answer? Mervyn King. This week.

He’s really got it in for banks. And rightly so.

Pity he has no apparent real idea what to do about it.

Understanding the Vodafone story, care of Forbes

HMRC, Tax avoidance 20 Responses »

Oct 282010

Want to know more about the Vodafone tax story? Parmy Olson has given a good guide to it in Forbes on her return from maternity leave (congrats Parmy).

OK, it’s pretty clear if you read her story she talked to me quite a lot when preparing the story – but she has pulled the themes and links together really well.

Recommended.

We’re not all in this together

ConDems 3 Responses »

Oct 282010

The ConDems claim “we’re all in this together.

Like hell.

As the Guardian notes:

Britain’s bosses have been accused of greed and ignoring economic reality after boardroom pay leapt by 55% over the last year.

FTSE 100 directors saw their total earnings soar in the 12 months to June, thanks to sharp rises in bonuses and performance-related pay. The average FTSE 100 chief executive now earns £4.9m a year, or almost 200 times the average wage.

And you still don’t believe me that there is a deliberate policy to divide society?

If not, why not? The evidence is clear. And we know the harm is significant.

Now do something about it, please.