2011 January » Tax Research UK

Know your enemy

Jan 182011

There’s a column in the Guardian this morning written by Geoff Cook of Jersey Finance. It’s been submitted in response to the serialisation of Nick Shaxson’s book ‚Äò Treasure Islands’ in the same paper and it does include all the usual guff Cook rolls out whenever he can on how compliant a jurisdiction Jersey is – compliance designed, of course, to ensure almost absoluter opacity is maintained at all costs.

But the funniest thing about the comment is the opening word. Cook begins ‘”Nigel Shaxson’s new book‚Ä¶.” It’s Nick Shaxson, Geoff.

The first rule of finance is ‚Äòknow your client’.

The rule of opposition is ‚Äòknow your enemy’.

And you fell at the first hurdle Geoff. Which says a lot about your competence.

And Jersey says it is not a tax haven

Jersey, Secrecy jurisdictions, Tax Havens 30 Responses »

Jan 172011

From today’s Jersey Evening Post:

DOZENS of super-rich immigrants are to be lured to Jersey with the promise of lower taxes under plans being drawn up by the Treasury.

Senator Philip Ozouf [the Finance Minister] is hoping to attract 15 tax exiles to Island shores a year by lowering the amount they have to pay on their worldwide income.

However, in return for the more generous tax rates, they would be required to pay at least £125,000 in income tax a year and 20 per cent on their Jersey income.

It is hoped that the lower rates will increase the cash coming into Island coffers, because more 1(1)ks would be bringing more of their money to be managed in Jersey – thus creating jobs and other indirect sources of income.

And despite that Jersey still has the nerve to say it is not a tax haven, which pushes the bounds of credibility to their limit.

Reasons to tax

Economics, Tax compliance, Tax management, Tax Research TV 8 Responses »

Jan 172011

As the first of a series of new videos on tax and related issues I offer the following, on the five reasons to tax. Feedback would be welcome.

Financial support for this work from the Task Force on Financial Integrity and Economic Development and Joseph Rowntree Charitable Trust is gratefully acknowledged.

It’s not just the economy – it’s also the NHS

ConDems, Economics, NHS 17 Responses »

Jan 172011

Larry Elliot says this morning:

Without wanting to sound too hyperbolic, what happens in the first half of this year is going to shape politics for some time to come. A combination of falling unemployment, easing inflationary pressures and steady retail sales would calm the coalition’s jitters about the economy, and allow ministers to claim that they are sorting out the “mess” inherited from Labour.

Conversely, if the jobless total rises by Easter, inflation edges above 4% and consumers save rather than spend, Labour will be able to say that it is the coalition that has messed things up, killing off growth with its ill-timed and harsh austerity programme.

And that’s really not far from the truth – and I suspect Larry knows as well as I do that the former is much less likely than the latter.

And usually in politics that would be enough to sway the issue one way or another. But these are not usual times and although it goes against my normal policy I am reproducing this morning’s cartoon from the Guardian for very good reason:

17.01.11-Martin-Rowson-on-005.jpg

This week the government publishes the Health and Social Care Bill. For all practical purposes it might be called the Privatisation of the National Health Service Bill. That is what it is seeking to achieve. Worse, by demanding that European competition law applied to the NHS, by demanding that the lowest bid always get the work, by demanding that all work be open to private bidding, and by demanding that GPs who do not have the capacity to undertake these tasks manage them it guarantees three things.

First is the breakdown in the relationship between the various tiers of healthcare provision in the UK. As a result there will be no relationship of trust between GPs and hospitals anymore.

Second there will be no relationship of trust between patients and GPs, because patients will know the GPs are not dealing with their best interest because they will be managing budgets as their first and highest priority.

Third, when there is only room for one district general hospital in an area ( for example, that in Kings Lynn, which is the nearest one to me, is 40 miles distant from any other hospital in any direction) then to begin to piecemeal undermine the services it provides breaks down the integrity of the whole, undermining the whole credibility of health services in the community. And yet that is exactly what is threatened.

Fourth, the prospect of future training is almost virtually destroyed, because those will be cherry picking in the private sector will not be budgeting for training the vast number of staff who are required to undertake such activity every year if the continual flow of new staff is to be available to them. They have always enjoyed the opportunity of cherry picking from the NHS in the past, and will budget on this for some time to come. We therefore undermine our long-term well-being in this process.

Fifth, given that the NHS will be shrinking in real signs because the budget available to it is insufficient to meet the demand that will arise, if there is to be capacity diverted to the private sector some existing NHS services supplied by the state must close as a matter of fact. So we will have hospitals without intensive care. Accident and emergency units without cardiac backup. And so on. The market is absolutely appalling at dealing with externalities which is exactly why the NHS has survived on the basis of cross subsidisation for the supply of the service as a whole. And yet the model that is proposed will destroy this. Hospitals will be closing soon.

The economy will be critical to the success or failure of this government, but the NHS reforms could destroy it quicker than anybody can imagine.

That is why this issue is so important. And the Tories are so mad to pursue it when they said it was something they would not do. The result is for once it’s not just the economy that might make or break a government, it may be the NHS too.

What would Keynes have done?

ConDems, Economics 3 Responses »

Jan 172011

It’s interesting that Keynes is the subject of an article by Larry Elliott and an editorial, both in the Guardian. I agree with both articles, Keynes would have nothing to do with the coalition’s current policies, despite Vince Cable’s claim to the contrary.

It is true, Keynes would have been a critic of Labour’s policies during the period from 2003 to 2007. He would have argued for budget surpluses, without a doubt. I accept that. But just because he would have disagreed with what Labour did then does not mean he would agree with what the coalition is doing now.

Keynes was a monetarist: he believed that keeping long-term interest rates low was fundamental to prosperity, and he was right.

He also believe that in the face of recession you cut interest rates, but that when you had done so you did two further things. First, you did quantitative easing, and Labour did just that. Second, if cutting interest rates and quantitative easing did not solve the problem of the recession then you took further necessary steps to achieve the ultimate goal, which was full employment. Never doubt that this was what he sought to achieve. Those two further steps were to cut taxes, which Labour did in 2009, and to increase the deficit by spending to stimulate employment, to promote activity,which would result in the payment of tax, which in turn would repay the borrowing.

Keynes had no doubt that this would work, and time and again he has been proven to be right.

In that case for Vince Cable to argue that a policy of deficit-cutting, tax increasing, the deliberate promotion of unemployment, the threat of increasing interest rates and an indifference to double dip recession is anything approaching a Keynesian solution. Keynes was a Liberal – but I very much doubt he would have been happy in this coalition. Its economic policies are about as far removed from his as is possible, and are about as far removed as those that are needed by this country as it is also possible to get.

A leak in paradise

Uncategorized 14 Responses »

Jan 172011

Ruedi Elmer is a whistleblower.

I’ve never met him, but I respect the fact that he realised what he was doing as a private client manager in the Caribbean for a Swiss bank was wrong and took action to address the abuse he witnessed.

This morning in London he hands over more files – with, I stress, all names removed to Wikileaks. I won’t be at the press conference when he does so, but I support what Ruedi is doing (subject to a key condition – which is that he preserves the anonymity of those about whom disclosure is made – this is an issue for tax authorities alone. He must concentrate on the systemic point, in my opinion) – and the care he is taking. And I wish him well for his forthcoming trial in Switzerland – a trial for alleged offences that did not take place in Switzerland and over which, therefore, it seems its jurisidiction is very dubious indeed.

In the meantime, this is a trailer for a forthcoming film on the issue in which I note I appear:

The Financial Times on Treasure Islands – and why shareholders lose from tax haven activity

Secrecy jurisdictions, Tax avoidance, Tax Havens, Tax Justice Network 7 Responses »

Jan 172011

The Financial Times has published a review of Nick Shaxson’s book, Treasure Islands. it finds lots to praise, but I’ll address its negatives, which are:

Shaxson touches on what some would dismiss as conspiracy theory, arguing that tax havens with links to the US, such as Panama, are “a pointer to the fact that offshore finance has quietly been at the heart of neo-conservative schemes to project US power around the globe for years. Few people have noticed.”

It is not surprising that Shaxson has his own agenda in writing this book – he is also a long-term consultant to the Tax Justice Network, an anti-tax haven group. But the drawback to the sledgehammer approach is that the reader is left with unanswered questions. Why do multinationals shift their profits into low-tax havens and costs into high-tax countries? The only motives Shaxson gives are sinister.

But while he devotes a convincing chapter to rebutting the views of those who support tax havens, such as US economist Daniel J Mitchell, he makes little mention of shareholders in multinationals who benefit from extra profits. Whether a company’s duty lies more with society than shareholders is an important debate – and arguing convincingly for the former could cement Shaxson’s argument – but it is not one that this book enters into.

If the book anxwers all questions bar one it does pretty well, let’s be honest. But let’s deal with that one.

First, as Ha Joon Chang argues in ’23 things they don’t tell you about capitalism’, of all the groups whose interests should be put last when considering the management of a company – after all they are, without doubt, the people with least loyalty to it in the case of a quoted enterprise. And if, as is absolutely critical to a quoted company the emphasis should be on long term value creation with stability of earnings vital to the payment of stable income streams to owners then tax haven activity is the absolute antithesis of what is required.

Tax haven activity encourages a focus on financial engineering that is the antithesis of focussing on customer service. And it encourages the misallocation of resources to sub optimal locations to ensure tax is saved rather than ensuring that returns from productive activity are optimised. And it encourages risk taking on artifice which may be challenged by tax authorities long after those putting the structure in place have left the corporation but when some shareholders may still be left, or those who have replaced them will face rick they were not warned of since tax haven activity is almost entirely hidden from view in the corporation.

The reality is that tax haven activity does not benefit shareholders. It does benefit executives: their bonuses are often triggered by free cash flow, and reducing current tax is the easiest way to achieve that. And that free cash is, of course, of use to them in their own plans for aggrandisement. But is any of that for shareholder benefit? No, it’s not.

Shareholder benefit comes from making and supplying goods and services. And tax haven activity completely distracts from that in unsustainable short term fashion. It’s the antithesis of value. The FT’s reviewer has completely missed the point. But she’s not alone.

January 24th, Jersey – see you there

Jersey Comments Off

Jan 162011

From the blog of Attac Jersey:

Good news for those of you who live in Jersey. An important event not to be missed!

Richard Murphy will be speaking on:-

“Jersey – Let finance work for you”

7.pm at Hautlieu School Hall on Monday 24th January.

There will be plenty of time for questions.

Ample space for parking.

However, please come a few minutes early if you possibly can so as to begin promptly.

It’s my first visit to Jersey for some time. I’m looking forward to meeting friends and critics alike.

Tunisia – the role of corruption in the downfall of the regime

Corruption, Development Comments Off

Jan 162011

A new report from Global Financial Integrity (GF), “Illicit Financial Flows from Developing Countries: 2000-2009,” includes data on Tunisia, which GFI estimates is losing more than a billion U.S. dollars per year to illicit financial activities and official government corruption.

Report co-author and GFI Economist Karly Curcio has just published a piece on the blog of the Task Force on Financial Integrity and Economic Development offering an advance look at part of the report, which is not due to be released until Tuesday, January 18, 2011. In the blog, Ms. Curcio notes:

"If parts of the economy are growing and developing, why has persistent unemployment and a strong government hand driven Tunisians to violent protests?

"Political unrest is perpetuated, in part, by corrupt and criminal activity in the country. Global Financial Integrity estimates that the amount of illegal money lost from Tunisia due to corruption, bribery, kickbacks, trade mispricing, and criminal activity between 2000 and 2008 was, on average, over one billion U.S. dollars per year: specifically US$1.16 billion per annum.

"With a population of approximately 10.6 million that means almost $110 are lost per person per year in the unrecorded transfers of illegal capital. This is money, desperately needed by the people, that is siphoned off by the wealthy and political elite annually…"

The full blog post is available here.