H M Revenue & Customs has, as many will be aware, announced a new penalty regime for offshore disclosures.
As they say:
These new penalties come into force from 6 April 2011 and apply to Income Tax and Capital Gains Tax.
The legislation can be found in Schedule 10 of Finance Act 2010.
The new penalty is an enhancement of the penalties for
- failure to notify
- inaccuracy on a return
- failure to file a return on time
Under the new legislation, these penalties will be linked to the tax transparency of the territory in which the income or gain arises. Where it is harder for HMRC to get information from another country, the penalties for failing to declare income or gains arising in that country will be higher.
There will be three new levels of penalty:
- where the income or gain arises in a territory in 'category 1', the penalty rate will be the same as under existing legislation
- where the income or gain arises in a territory in 'category 2', the penalty rate will be 1.5 times that in existing legislation - up to 150 per cent of tax
- where the income or gain arises in a territory in 'category 3', the penalty rate will be double that in existing legislation - up to 200 per cent of tax
So far, so good.
But then note the lists of places that are in categories 1 and 3. Guernsey and the Isle of Man are in category 1.
Jersey is in category 2.
What are H M Revenue & Customs trying to tell us?
And what's the official response of Jersey to this? Surely they must have one?
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Will anyone, with a better understanding of slightly less than reputable places, please explain the logic of rating Bulgaria in Category 1 and Albania in Category 3?
And what is shadier about Saint Kitts and Nevis when compared with the Cayman Islands?
“That must be wonderful; I have no idea of what it means.”
Albert Camus
Possibly because the Bulgarians are EU members and thus subject to sanctions that can’t be used on the Albanians.
St Kitts & Nevis is an independent state – unlike the Caymans, which the UK can lean on as required.
That must mean HMRC is seeing some positive signals out of the IOM Treasury. You shouldn’t give up on us Richard…
Jersey is perhaps an addict, and probably needs outside support to tone-down its economic dependence on avoidance activity.
Unfortunately the last time I looked, attracting more ‘tax exiles’ was on the front page of the JEP. This is the expected behaviour of an addict…GDP/Cap is so unsustainably high (though it’d be interested to see how much of this is from firm profits, and how much is in the hands of the workforce – this would tell us whether Jersey is looking square at an economic crash, or is survivable).
On another subject, any nation approaching productive capacity should minimise Government intervention in its industrial policy (and that includes ‘Clustering’)…otherwise you get industrial bubbles. Sorry, I’m with the ‘ConDems’ again! 😯
Though I believe you are quite correct on another argument…
Q1) who wins by avoiding tax? (A: Banks?)
But the excessive levels of Sovereign debt appear linked to the proliferation of the offshore model (I feel a time series coming on).
Q2) Who ultimately profits out of all that Sovereign debt? (A: Banks?)
I’d suggest the faults in the banking system go far further back than the Blair/Brown Government, and must include the manipulation of vulnerable Governments.
@James – January 31st, 2011 at 23:51
Thanks to Richard and the Tax Research blog the PSG is gaining greater knowledge of “financial matters” … and an increase in contempt for the opaque world of the mysterious islands; Isle of Man, Jersey and Guernsey.
The British Virgin Islands do not appear to have been categorised by HM Revenue aand Customs.
Would you slot it into Category 1 along with the Caymans?
Or some other category with Jersey?
The British Virgin Islands — BVI
Over 40% of the world’s offshore companies are formed in the BVI and almost a million companies are registered here.
The BVI is also a major target for drug traffickers and problems associated with the drug trade are the most serious threat to the stability of the islands.
The BVI is not placed in any HMRC category — but is probably Category 1
Along with the Isle of Man.
Nice place?