2011 July » Tax Research UK

UK makes positive move to tax offshore gambling

Secrecy jurisdictions, Tax avoidance, Tax Havens 2 Responses »

Jul 162011

From the Financial Times and the Guardian yesterday:

Any gambling operator wanting to offer a bet and advertise their products in the UK will have to obtain a licence, the government has announced.. . . The change may lead to offshore operators, located in low-taxation regimes, paying the same 15 per cent tax on their gross profits in the UK as paid by land-based operators.

The UK Gambling Act is to be changed so “remote gambling” is regulated according to where bets are placed rather than on the bookmaker’s location. And then – then – we have John Penrose, the minister responsible for gambling, saying the following:

“The current system for regulating remote gambling doesn’t work. Overseas operators get an unfair advantage over UK-based companies, and British consumers who gamble online may have little or no protection depending on where the operator they deal with happens to be based.

The vast majority of bookmakers, including Ladbrokes and William Hill, have moved their online operations offshore because of the competitive advantage gained by overseas-based rivals. Mr Penrose said it was unfair that overseas operators took bets in the UK “without bearing a fair share of the costs of regulation” and of the treatment of problem gambling.”

In other words, tax havens have been corrupting markets, providing a wholly unproductive subsidy to users of tax havens, helping corporations free ride on the taxpayer, taking the cream from the activity while passing off the costs onto others – and providing a secrecy cover for fraud and abusive or nefarious activity.

Sign that man up as a member of the Tax Justice Network! For all the appalling things this government has done in the cause of tax justice only for the wealthy, this move looks like a welcome move in the other direction. Credit where it is due.

Levelling the playing field on gambling was being discussed in the 1990s. Why has it taken such a long time, well over a decade, to do this?

And why now can’t the idea be extended to other forms of gambling - including banking, hedge funds, offshore treasury functions and so on, so many of which are controlled from the UK?

Hat tip and thanks for some blog content to Tax Justice Network

We’re not meant to have economic crises in August

Economics 8 Responses »

Jul 152011

August is meant to be the quiet month of the year: the silly season when no news happens.

I don’t think it’s going to be that way this year.

The US dollar looks like it will default.

The Euro will begin to collapse.

We’re heading for one of the biggest all-time crises in economics in one supposedly quiet month.

It’s not a pretty prospect.

I’m worried.

The Edge: Ireland has ‘no problem’ with U2 tax status

Ethics, Ireland, Secrecy jurisdictions, Tax Havens Comments Off

Jul 152011

There’s a great article in The First Post Daily under the above headline.

‘The Edge’ – Bono’s best mate – has lashed out in the Baltimore Sun (for reasons best known to himself) describing:

the allegations about the band’s tax matters as “totally false and possibly libellous”.

He also claimed the Irish government had “no problem with U2 basing some of their business activities in Holland” and that “U2 and its members have paid many, many millions of dollars in taxes to the United States Internal Revenue Service over the years.”

Oh dear, he still doesn’t get it, does he?

Legality is not morality. U2s arrangements may be legal – in which case the Irish government may accept them. But they stink when this band demands action for the poorest countries in the world who suffer from abuse orchestrated through structures similar to those this band uses.

Candidly ‘The Edge’ looks like he’s fallen over it. And if he’s so tetchy maybe he needs to ask why that’s the case. Has his conscience been pricked after all?

More from the stand-up economist

Economics 1 Response »

Jul 152011

Anyone who can make comedy out of economics has something going for him!

Game ‘is over’ for Crown Dependencies

Guernsey, Isle of Man, Jersey 3 Responses »

Jul 152011

From the Guernsey Press yesterday:

THE three Crown Dependencies are in danger of going bankrupt, tax avoidance campaigner Richard Murphy claimed yesterday.

His comments follow an announcement that the Isle of Man will lose millions in its VAT subsidy after it was forced to change the terms of its agreement with the UK.

Mr Murphy said that the jurisdiction was now in a state of chaos, while Jersey had a deficit of around £80m. in 2010 and Guernsey was using its reserves with no prospect of growth.

‘This [the Isle of Man’s agreement] draws a line in the sand which says the game is over for the Crown Dependencies,’ said Mr Murphy.

‘Each of the islands’ politicians have to work out what they are going to do to sustain their economies and that can’t be on low rates of tax alone,’ he said.

But will they do that? That’s the big question.

Or will it still be ostrich time?

Note to the Isle of Man – I won’t be going away

Isle of Man 8 Responses »

Jul 152011

There was extensive coverage in the Isle of Man yesterday on my comments on the new VAT deal for the island, made here on Tuesday. Both Manx Radio and Isle of Man Today covered the story, reproducing much of my blog.

Both seemed to think that my comment that this campaign was now over might mean I will pay less attention to the Isle of Man in future. Far from it. There are still very good reasons for paying attention to it. It’s tax system is still illegal and subject to EU sanction. It is still a tax haven, of course. It is still offering pernicious secrecy. It is still offering only limited automatic information exchange. It is quite likely to go bust, which makes it a matter of particular interest.

And the ordinary people of the Isle of Man still need a government that represents their interest and not those of the finance industry.

So I promise you – you’ve not heard the last of things yet.

Shock: breaking news! Swiss bank investigated for helping tax evaders

Switzerland, Tax evasion 4 Responses »

Jul 152011

The FT reports:

The outlook for Credit Suisse darkened on Friday after the Swiss bank revealed it had been formally placed under investigation by the US authorities over allegations it helped rich American people evade tax.

The move marked a significant escalation in a near four-year battle between the US and Switzerland over the alleged role of some Swiss private banks in helping US clients with undeclared offshore accounts to avoid taxation.

Oh no, surely not? Not those nice Swiss bankers letting their banks be used for tax evasion? How could that be? There must be some mistake here…..

Please tell me that’s true.

Do Ernst & Young have a case to answer on News International?

Auditing, Ernst & Young 4 Responses »

Jul 152011

As the FT notes this morning:

Allegations of police bribery at the News of the World have raised fresh questions about the role of auditors and their responsibility for preventing corporate wrongdoing.

But as preparations are made for a judge-led inquiry into the disgraced tabloid, the firm that vetted its accounts seems unlikely to face investigation by audit regulators, at least not in the coming weeks.

As the they note, Ernst & Young has audited News Group Newspapers for more than a decade and never qualified its accounts. But they then note:

But the details that have so far emerged raise questions about whether Ernst & Young fully discharged its duties, according to Richard Murphy, a former auditor who runs the Tax Research UK consultancy.

“What Ernst & Young did or did not do is an issue of concern,” said Mr Murphy, who campaigns against corporate tax dodging.

Media coverage of questionable practices at the News of the World over several years ought to have caused Ernst & Young to suspect its internal controls, he said: “The auditors must surely have done the most basic of Google searches on their client.”

Ernst & Young is saying nothing, citing client confidentiality. Which is fair enough, but I note the FT found little problem finding people to defend them.

However, members of the financial establishment say it would be unfair to expect auditors to challenge small payments amid the flow of hundreds of millions of pounds in and out of the business – assuming any bribes were of the order of thousands of pounds, as reports suggest.

Mike Power, an accounting professor at the London School of Economics, said: “I don’t think they [the auditors] are on the hook.”

That’s an odd idea given the regulatory framework for auditing I noted here, which gave rise to this story. But as the FT notes, the profession is very reluctant to investigate anything until it has to, about which might as the FT says:

In the meantime, the News of the World saga could feed into a broader debate about whether audits have become irrelevant and need to be rethought.

It is a debate Ernst & Young knows well, given the adverse comment that its auditing of Lehman Brothers has already attracted.

I personally think this one will run, and run.

What would I do if I became PM of the Isle of Man?

Isle of Man 3 Responses »

Jul 152011

I was asked the other day what I would do if by some very odd chance (of which the probability is zero) I became First Minister of the Isle of Man this October.

Five policies were requested. Here they are, plus a few more:

1) I would adopt Plan B for Jersey – as they have not used it. This would set the Isle of Man on the whole knew economic trajectory, unique to it, which would give it a distinct selling point in the world’s financial services industry for time to come. When its existing business model is failing that seems to me to be absolutely essential, if only to buy a transition period to a better long-term economy.

2) I would offer full automatic information exchange to all countries with adequate human rights records to demonstrate that the Isle of Man walls now an economy that was open, transparent and accountable. A new policy of requiring that all accounts of all companies incorporated in the island be put on public record would go along with this, and a register of trusts would have to be created.

3) I would remove the cap on income taxes in the island.

4) I would increase income taxes on the island as an essential step to closing the budget deficit.

5) I would open urgent talks with the European Union to ensure that a successor to the zero 10 tax regime can be put in place as soon as possible, and would accept that this would, inevitably, involve positive income tax rate on corporate profits. I would, in the first instance, propose an increased tax rate on all financial services profits generated in the island.

6) In exchange for the new openness and cooperation with the United Kingdom I will be looking for a reciprocal agreements on tourism and transport links to make the island more accessible.

7) An immediate programme of research into the creation of new wealth generating opportunities on the island would be a priority: an industrial policy to the Isle of Man is needed.

Energy policy is vital to the island’s future: it does have territorial waters, it does have the means as a result to make claim to revenue arising from them, and there is a basis for negotiation as to how it can use that resource to enhance its current position, whether that be from existing energy sources or from new ones such as tidal flows.

9) The Island could do what Iceland has suggested it might – but has not done – and become a publishing centre for information that needs to be in the public domain that is hard to publish elsewhere by exploring whole new areas of intellectual property law designed quite deliberately to increase transparency and accountability. This is a whole new area in which the island could exploit its opportunity as a jurisdiction in a way that is beneficial rather than harmful.

10) Controversially, perhaps, I would be very aware of the risk the UK’s nuclear industry creates for the island. But, that is something I would seek to potentially exploit for the island’s advantage. Can revenue be generated from this risk, which exists now, like it or not, but over which the island might want some control?

That’s more than five. It will do for starters. Plenty could follow.