2011 June » Tax Research UK

Jersey and vulture tourism

Corruption, Development, Jersey, Uncategorized 2 Responses »

Jun 282011

Tony Bellows has written a first rate review of vulture capital’s use of Jersey to purse its claims through the courts in Jersey.

Vulture capitalists – always based in tax havens – buy up third world debt at heavily discounted prices in the market place and then sue for full recovery of the money due on the bond from the developing country that issued it – usually many years ago, under another regime and with the funds having often been lost in the meantime – often with the assistance of tax havens and those who turn a blind eye to such things in such places.

The UK has finally outlawed such actions – but as a result vulture capitalists are now suing through Jersey courts where willing lawyers are more than happy to help, it seems.

As Tony says:

England has a toxic reputation for so-called “libel tourism”. If Jersey doesn’t enact legislation (which despite Senator Le Sueur’s 2007 remarks, is perfectly possible – the UK managed it), then we may well have the unenviable reputation of being a centre of “vulture tourism” as foreign companies pursue claims against third world countries in Jersey courts! While Senator Le Sueur cannot comment on a case under appeal, he can at least get the wheels in motion to pass legislation as soon as possible, even though it will probably now be beyond his tenure as Chief Minister. Let’s hope not commenting is not another means of avoiding the matter, so that it is “simply left to rest”!

I’m not holding my breath. It’s the sort of business that has strong appeal to a place like Jersey.

NB: See Jersey Evening Post comment on this here

The success of the neolioberal model is to deliver static income for most people

Conservatives, Economics 5 Responses »

Jun 282011

The FT made this observation yesterday:

Fork-lift truck drivers in Britain could expect to earn £19,068 in 2010, about 5 per cent lower than in 1978, after adjusting for inflation. Median male real US earnings have not risen since 1975. Average real Japanese household incomes after taxation fell in the decade to mid-2000s. And those in Germany have been falling in the past 10 years.

After thirty years if the neoliberal model of economics being in operation this one paragraph reveals what it is really all about: making the rich richer and leaving the rest behind.

I’ve never heard this stated more bluntly than by Alvin Rabushka, the creator of the concept of flat taxes, who told me when I interviewed him in April 2006 when I undertook research on flat taxes for the ACCA that:

The only thing that really matters in your country is those 5% of the people who create the jobs that the other 95% do. The truth of the matter is a poor person never gave anyone a job, and a poor person never created a company and a poor person never built a business and an ordinary working class guy never drove economic growth and expansion and it’s the top 5% to 10% who generate the growth for the other 90% who pay the taxes to support the 40% in government. So if you don’t feed them [i.e. the 5%] and nurture them and care for them at the end of the day over the long run you’ve got all these other people who have no aspiration for anything more than, you know, having a house and a car and going to the pub. It seems to me that’s not the way you want to run a country in the long run so I think that if the price is some readjustment and maybe some people in the middle in the short run pay a little more those people are going to find their children and their grandchildren will be much better off in the long run. The distributional issue is the one everyone worries about but I think it becomes the tail that wags the whole tax reform and economic dog. If all you’re going to do is worry about overnight winners and losers in a static view of life you’re going to consign yourself to a slow stagnation.

As for the role of government, he said:

I think we should go back to first principles and causes and ask what government should be doing and the answer is “not a whole lot”.

He was wrong.

But his view pervades. I hear it echoing through everything Michael Gove says about teachers.

And what I suspect Gove shares with Rabushka is a belief that the 90% really don’t matter: that they should get whatever they’re given and be grateful.

Thankfully the 90% are saying they’re aren’t grateful. And that this odious thinking is wrong. Which is why they’re right to take action, because their situation is not necessary, the government is choosing that they should suffer. We should never forget that.

A note from Colin Powell in Jersey on information exchange

Jersey Comments Off

Jun 272011

Colin Powell, the man many credit with being behind the success of Jersey as a secrecy jurisdiction, has sent me a note. I think it only appropriate I reproduce it in full. It says:

Dear Richard

I hope you are well.

I have noticed recent references by you and others to the fact that Jersey has only had 36 TIEA requests. That of course was as at June 2010 and I thought you should know that as at June 2011 Jersey has had 65 requests. With the exception of two cases, and a few that have only recently been received and are still being processed within our usual 40 day period, all have been responded to and to the requesting jurisdiction’s satisfaction. As has been said previously, the fact that many TIEAs have only come into force relatively recently has meant that it has taken a little time for the number of requests to build up. This is borne out by the increase in the number of requests from 36 to 65 in the space of one year.

I suspect you will not comment any more favourably on 65 than you have commented on 36 but at least the number quoted would be up-to-date.

Kind regards

Colin

I’m happy to put the record straight.

Of course, it would also be good to know what the problem is that currently seems to exist between Jersey and Norway, but I note no elaboration has been offered on that.

And Colin is right: I still find the totally ridiculously small. Something like £400 billion is recorded as being in Jersey. I really think that gives rise to more than 65 questions in four years. But, I accept, that’s more than 36.

The government is taking on all comers including doctors – and is bound to lose

Economics 8 Responses »

Jun 272011

Michael Gove has called teachers unprofessional for striking. He says they will lose their reputation with the public. he says the public will support the government in strike reform as a result.

But now the doctors are also saying they will not accept pension reform. I should declare a benefit: my wife is a GP. And as the Guardian reports today:

Doctors could take industrial action over the government’s “unwarranted and unfair assault” on their pensions, the profession’s leader has warned ministers.

Dr Hamish Meldrum, chairman of the British Medical Association, delivered a sharply worded rejection of the coalition’s pensions plans in his keynote address to the doctors’ union’s annual conference on Monday.

“Let me make it absolutely clear: we will consider every possible, every legitimate action that can be taken to defend doctors’ pensions,” he said in a speech to 500 doctors’ representatives in Cardiff.

“I have this message for ministers. Whilst we will be reasonable, whilst we will not rush to precipitate action, whilst we will not put patients’ lives at risk, do not in any way or for one single moment mistake this responsible attitude as a reason to underestimate our strength of feeling and our determination to seek fairness for those we represent.

“The profession will act responsibly, but we will not accept an unwarranted and unfair assault on our pensions.”

And I genuinely believe they might.

There is good reason. Teachers, doctors and the police (who will follow suit on this) have high status in society: they’re trusted. Politicians don’t enjoy that confidence. Take on two of these groups, or worse, all three and the government is bound to lose.

The reality is that all these groups do exceptional jobs for less than market rates precisely because of the pension benefit that compensates them for the burdens they take on – which few in the private sector face.

Of course the government can take on teachers, doctors and people working in law and order. But to call them unprofessional, or to suggest they are militant is madness on the government’s part. They’re not. They’re decent people doing a decent job who expect the governemtn to do the decent thing and pay them a decent reward for that work.

And people will side against the government if push comes to shove, as it might.

There;’s a difficult year for the coalition ahead.

Reflections on Greece – 4 – you can’t have politicians living in fear of banks

Banking, Economics, Uncategorized 9 Responses »

Jun 272011

I have argued that no country can devote its entire economic policy to maintaining an external marketplace, and yet that is what the existence of the Eurozone demanded of its member states. Of course, they have failed to deliver: that is the whole basis of the current Greek crisis.

Now we have a crisis there is another aspect of the Euro worth noting. When you put a currency at the core of your economic policy you put the bankers in charge. Unsurprisingly as a result the winners from this whole debacle have been the banks.

The losers have been politicians across Europe, who’ve universally shown themselves unable to face up to the demands of those banks, or to have the intellectual capacity to make appropriate decisions when faced with a crisis within their economies.

There should be no surprise to this: neoliberalism has ensured we have an enfeebled breed of politicians who think that anything that they do is bound to result in sub optimal outcomes for those they are meant to serve. Hardly surprisingly they are incapacitated as a result.

What we need is a new breed of politicians who do not live in fear of banks. And they are only likely to come from the left.

New on Forbes: We need the suspension of mark-to-market accounting, now

Accounting Comments Off

Jun 272011

Further thoughts on Greece from me, on Forbes where I argue that the suspension of mark-to-market accounting is vital, now.

Reflections on Greece – 3 – you can’t devote your entire economic policy to maintenance of a market

Economics 6 Responses »

Jun 272011

I have already noted the danger that the current developments in Greece pose because the logic of neoliberalism, inherent in the Maastricht Treaty and now imposed upon Greece, suggests that the state is secondary to the market. It isn’t, of course, And yet the whole logic of Maastricht, if it was to work, was that each and every state should manage its economic affairs with the sole priority of ensuring that the European common currency and European Common market take precedence over all other issues of concern.

Of course, this has not happened. Nor should it have happened. Democracy requires that countries have their own choice about what they can, and can’t do, what fiscal policy they will follow, and on what priorities they will set for their own economic management.

The Maastricht Treaty, and the Eurozone in particular, tried to take those rights away from the democratic governments of many European states. Of course they resisted that whilst times were good. They still resist that whilst times are bad. They’re right to resist it, but what this says is that the entire neoliberal logic that the market comes before democracy is wrong, and in the heart people know it.

The problem is that at its centre the Eurozone still thinks the opposite: it is seeking to impose a solution on Greece says the market is more important increases the state, more important than Greek democracy, more important than the Greek people. It will do the same in turn to Portugal, Ireland, Spain and Italy.

This is the conflict that is being fought out in Greece. It is not a minor issue of the Greeks borrowing too much, spending too much, and taxing too little, although all might be true. Those are mechanical and technical issues that will have to be solved, without a doubt. But at its core the problem inside the Eurozone is that it is built on a failed economic logic which is inherently antidemocratic and opposed to the will of the people of Europe.

And that is why although the European ideal of political cooperation, and tariff free trading must be upheld for the good of everyone in Europe and to preserve its peace, the idea that political and full economic integration should happen must now be carefully managed into a cul-de-sac where the vital role of independent states managing their own affairs can be re-established in an orderly fashion.

Reflections on Greece 2 – You can’t put markets ahead of the state

Uncategorized 2 Responses »

Jun 272011

I’ve already noted that the Greek economic crisis was inevitable, and the result of a series of logical errors, all driven by neoliberal economics.

Perhaps the most significant of all of these was the idea that markets were more important than states.

The EU ideal was to create a ‘common market’. But simple freedom from tariffs became something much more potent – and dangerous. It was taken over by the idea that market was by itself the most important part of the European ideal.

Of course nationalism has had a bad history in Europe. And of course moves to ensure greater political cooperation were always going to be, and are, welcome.

The fact is that markets are not more important than states. The state has much more to offer to the people of any country than its market ever can. The wrong priority was set in 1992. The wrong priority has remained. And now we are paying the price. A country is collapsing because of the demands made upon it by a market which was always going to be unsustainable. This is the ultimate neoliberal folly: nothing but the market counts according to that creed (for a creed it is, since it has no logical foundation). That creed does not, however, value democracy, the rights of people to self-determination, cultural differences, or respect for tradition.

If Greece fails because the demands of the market are met then it is not an isolated problem: it is indication that the state is secondary to the marketplace, and that’s not just a cause for concern, that calls for real fear, because the reaction will be severe.

Note to Jersey: the EU has not given any hint of approval of your tax system

Jersey 2 Responses »

Jun 272011

The Jersey Evening Post is reporting that the EU has given:

The strongest sign yet that the Island’s controversial zero-ten business tax regime is to be cleared by Europe.

The tax package took huge a step forward as a result of the outcome of a meeting of finance ministers of the 27 member states.

The European ministers issued a statement welcoming moves by the Island authorities to change aspects of the structure which are considered ‘harmful’.

To be as kind as I can be to the JEP that is complete and utter nonsense. The EU press release actually said:

“Jersey [has] informed the Group about the proposed legislative amendments to [its] legislation, with a view to removing any harmful elements. The Group welcomed these developments and agreed to review such legislative amendments when discussing the rollback of these harmful regimes under the Polish presidency.”

Which is diplomatic speak for:

We have your letter and will consider it later.

To claim any more than that is just absurd and shows how incompetent those dealing with this issue in jersey are.

They’ve clung to straws before. This time they’re clinging to threads.

And to make the point abundantly clear: what the EU is actually saying is Jersey’s tax system was considered harmful and will remain so until the EU say otherwise.

That’s the true state of play - and that’s exactly as I’ve always said things are, however Senator Ozouf wants to spin things.