I thought this amusing in the Guernsey Press:
GUERNSEY urgently needs to reposition itself as a different type of economy, the retiring Treasury and Resources minister Charles Parkinson said yesterday.
Speaking at the Chamber of Commerce April lunch, Charles Parkinson, who will step down from his position at the end of the month, said the island needed to move away from its reliance on tax loopholes.
He said Guernsey had a public relations problem that needed to be addressed and the newly-elected States needed to support the more traditional industries, such as tourism.
‘We have seen a lot of hostile action, particularly from the UK, in the tax area, including LVCR, Qrops and eurobond interest,' said Deputy Parkinson.
‘I'm afraid we will have to expect this to continue, at least for as long as we are seen to be a tax haven or, as George Osborne put it in his Budget, facilitating “aggressive tax avoidance”. We urgently need to reposition ourselves as a different type of economy.'
Some of us have been saying so for some time, in case he hasn't noticed.
If they need a plan they could try my Plan B for Jersey - they haven't used it yet.
And let's be clear why they also need to do this - and it's simply because, as I';ve always said, they're is no way they can survive on the taxes their current tax system raises. To put it another way, they have to change or go bust.
I suspect I'm being proved right, again.
Tat tip: Richard Allen
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Actually Richard, the Guernsey finance industry is already partially on the way, albeit not yet far enough, to not relying on tax loopholes. The substantial fund industry is based on tax neutrality, and many fiduciaries are focusing on estate planning structures for international clients from the BRIC and other emerging countries who have global wealth structuring and cross-border estate planning objectives, none of which are dependent on tax “loopholes”.
However, there are sectors of the fiduciary industry which are still dependent of exploitation of tax loopholes (which QROPS was not), and who are certainly feeling the pinch at present (even more so in Jersey). Those who were over-reliant on EBTs, EFRBS, SDLT planning schemes etc have to re-invent themselves. Some will succeed, but others won’t, and their days are numbered.
Your “Plan B” is not the answer. It would not be of interest to the marketplace and without demand there can be no supply. It is sinply not commercially viable.
Whilst the easy answer is to seek more diversification, that is far easier said than done. There aren’t many (any?) non-finance sector industries which are commercially viable for island economies. It is far more likely that we will witness wider diversification of the financial services industry.
But you overlook the ease by which Guernsey could introduce GST if it so wished to raise extra tax revenue. That could be done at a stroke of a pen overnight and wipe out the structural budget deficit instantly. That’s a short-term fix which help Guernsey to balance its books but it doesn’t provide the long-term solution. The situation is not ideal, but it is certainly not as bad as you suggest. Diversification has to happen regardless, and Charles Parkinson is quite right in that respect. Sadly, tourism is not the answer in 2012 (I wish it were as my family have tourism interests!).
I think we will see some short to medium-term financial pain, probably addressed by introducing GST and widening the “zero” category of the zero-10 tax regime (which is very easy but in effect just brings forward the payment of some tax which currently only gets receivable at a later date, rather than actually increasing the tax take), while existing financial services businesses reinvent themselves and develop new products and markets. Those who read the tealeaves correctly will realise that its all about Asia, the Middle East, India, Africa and Latin America rather than about the UK. Those who don’t will be out of business before long.
Tax neutrality is a weasel phrase
It menas no tax
Which is morally repugnant tax avoidance, or worse
Please tell the truth
Tax neutrality means not being taxed at investment vehicle level. Just about every fund vehicle everywhere in the world is “tax neutral”. If that’s “morally repugnant tax avoidance” then I’m afraid you are on a different planet.
What else is “tax neutral”? Let’s see – UK partnerships for a start – its the partners who are taxed, based on their personal circumstances, rather than the partnership. How about onshore UK funds? How about pension schemes?
And how about international clients who live in jurisdictions where they don’t pay tax, but who are investing into other countries? They aren’t avoiding tax at all as they aren’t liable. Residents of the Gulf states don’t have personal taxation so what tax are they avoiding by structuring the holding of their personal wealth in suitable vehicles designed to consolidate and administer their global wealth? Likewise residents of Hong Kong, Singapore and Malaysia who are taxed on a territorial basis – they simply aren’t liable to tax there in respect of foreign-source income and gains. How can that be “morally repugnant tax avoidance”? The clue is in the term itself – there has to be “tax avoidance” in the first place for it to even potentially be “morally repugnant tax avoidance”, which in itself is a highly subjective term.
Oh hang on – a UK partnership is taxable in full
You’re wrapping income from one place up in a way that it may not be taxable in another
That’s called double non-taxation. That’s the goal of your tax neutrality
Please stop dissembling
Rubbish. I thought you were supposed to be a chartered accountant and tax specialist….
Partners in a UK partnership are taxable based on their share of the profits of the partnership. Unlike a company, a partnership itself is not taxed. A partnership is a “lookthrough” entity.
How can something be “double non-taxation” where there aren’t even two taxing jurisdictions, as per my examples? The word “double” tends to suggest “two”. Where’s the second? Client in Kuwait holds personal wealth through a Guernsey company which generates exempt income and gains. Kuwait doesn’t tax income or capital gains. So exactly what taxes is he avoiding? He could of course hold those same investments personally and would similarly not be avoiding any tax. The role of the company is to provide him with estate planning advantages (no probate required on death and it is easier to structure his affairs so that the assets can pass on his death in accordance with Shari’a law, as desired, rather than under the succession laws of another country where the underlying investments are situated).
“Morally repugnant tax avoidance”? How ??!!!
I am exactly what you say I am
Which is why I know that you can come up with lots of examples like that
And use the same structure for other purposes
You have been rumbled by the world – even your own minister says so
Now give up your abuse – because it is morally repugnant
Well, for somebody who claims to be an expert in the media it is quite remarkable that you have forgotten something that a first year accountancy or tax student would know.
The irony of your comment is seemingly lost on you. Of course I could come up with many such examples. There is a huge global market out there who can and do use such structures, which is precisely why the situation isn’t anywhere as gloomy as you suggest.
The minister in question isn’t quite what he seems if you want to rely on what he says. He is on the board of several funds and financial services businesses – including a fiduciary group. He is quite right to say that Guernsey must evolve. He has not said that we should give up financial services!
As for your last paragraph, I challenge you to say what is morally repugnant about the example that I gave. I suspect it’s well beyond you judging by your astonishing ignorance of UK partnership taxation principles. I am still in a state of shock over that, as indeed will many of your readers.
It’s an interesting idea that I am ignorant of UK partnership tax as I ave been a partner for about 24 years and have accounts for hundreds of them
and it’s utterly disingenuous of you to suggest there is a link between UK partnerships and your untaxed funds
Pure and utter hypocrisy on your part
But that is why your minister says you ave a PR problem – and he’s right- and I am proud of my part in creating it
http://www.google.co.uk/url?sa=t&rct=j&q=panama%20death%20cruise%20&source=web&cd=1&ved=0CFIQFjAA&url=http%3A%2F%2Fwww.cruiselawnews.com%2F2012%2F04%2Farticles%2Frescue-1%2Ftwo-dead-fishermen-did-star-princess-cruise-ship-ignore-mariners-in-distress%2Findex.html&ei=VkePT9HPA8fl8QOZw7mRBA&usg=AFQjCNEePkTZ3abn2CGp3huTZra7n5Xgyg
secrecy jurisdictions don’t just cost us money. They can cost people’s lives. The “Star Princess” traded in the USA but was subject to Bermuda law.
If it had been subject to US law do you think the Captain would’ve sailed on ?
So why were you so adamant that UK partnerships are taxed at partnership level? Are you denying that you said that?
I did NOT state that there is a link between UK partnerships and untaxed funds. I said: “What else is “tax neutral”? Let’s see — UK partnerships for a start — its the partners who are taxed, based on their personal circumstances, rather than the partnership. How about onshore UK funds? How about pension schemes?” Its there in black and white! You then mentioned “double non-taxation” and I gave an example of a Kuwaiti individual. At no time did I say that I was using UK partnerships.
You appear to be ignoring what you actually said and what I actually said, and are deeming that I said something entirely different. Obviously the fact that I am from Guernsey is enough for you to be entirely blinkered.
Of course I never said what you claimed
Now stop being absurd
I think you must be needing a holiday…..
You ACTUALLY said:
“…and it’s utterly disingenuous of you to suggest there is a link between UK partnerships and your untaxed funds.”
Now you are denying that you said that!
Having a difference of opinion is one thing, and temporarily forgetting the basics of UK partnership tax law is another thing, but denying that you said something when its there in black and white on the same thread is bizarre.
You could of course hold your hand up, admit you made a mistake, apologise and in the process prove that you are human after all. Its not a crime to make a mistake or to admit having made a mistake.
To interpret that as you have is utterly ludicrous
There was no mistake
There is no link between UK partnerships and your funds – not least because since a UK partnership is taxed in the UK and is (or should be)transaprent about the fact its liability arises there no tax can be avoided as a result
Unlike your funds – which are designed to be as opaque as possible and are located in a place with no economic tie to the underlying transactions with the sole aim of securing a tax advantage
My argument was absolutely right – and you are, very respectfully, living in cloud cuckoo land
Don’t bother to reply. It will be deleted.
http://www.international-adviser.com/news/tax—regulation/guernsey-follows-isle-of-man-and-jersey-in-seeing