The following article has just been published on the website of International Tax Review. The implication is unambiguous as far as I see it. Using the precedent of the USA's Foreign Account Tax Compliance Act the UK is giving its own tax havens an ultimatum. I gather it's a not too subtle one either. It's either they give the UK the same data that they want to give the USA or the UK won't pass their laws to let data flow to the USA.
The unsubtlety comes from the fact that without their cooperation with the US on FATCA these places might just as well shut up shop since there would be almost no banks or other institutions willing to locate there. To say that the demand being presented is, therefore, an iron fist in a kid glove looks to be kind. For once the Treasury seem to have got this right.
And for once the demands for information exchange (which I have seen) looks to be appropriate. I can't say there are no loopholes, but my reading so far suggests the drafting is pretty good.
And the impact will be huge: in effect secrecy in these places will end as far as the UK is concerned. Of course, then the UK has to demand the same for the whole of Europe too, at least. But for now this is what International Tax Review have noted:
A leaked government document seen by International Tax Review reveals that the UK is planning to impose its own version of the US Foreign Tax Compliance Act (FATCA) on its Crown Dependencies and Overseas Territories. The move will deal an almost-fatal blow to tax evasion through the UK's tax havens.
Responding to an International Development Committee report earlier this week, the government publicly rejected the need for a UK version of FATCA the need for a UK version of FATCA, which would require tax authorities to automatically exchange information relating to UK citizens or corporations.
In private, however, the government has already drafted FATCA legislation which it will impose on its Crown Dependencies and Overseas Territories. These include some of the world's most notorious tax havens such as the Cayman Islands, the Channel Islands and the Isle of Man.
The draft agreement, seen by International Tax Review, will require the automatic exchange of information for each reportable account of each reporting financial institution. That will include full details of all beneficial owners of the account, including those whose identities might otherwise be hidden by trusts or companies
It will also require the account number, name and identifying number of the reporting financial institution as provided when registering with the IRS for FATCA purposes, and the account balance or value as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure.
The move will come as a huge blow to tax havens and companies and individuals hiding money in them. But it is a coup for the Tax Justice Network (TJN), which has long been arguing for automatic information exchange.
“This is a requirement for full, open disclosure,” said the TJN's Richard Murphy. “It looks through trusts, companies, who owns the assets. It's full automatic information exchange.”
Murphy says the UK Crown Dependencies and Overseas Territories will never be the same again and he has a simple piece of advice for anyone hiding money in these locations.
“The evidence is now clear: the writing is on the wall for secrecy in the UK's tax havens,” he said. “There are now two options for those hiding their funds in these locations. The first is to own up now. That's the wise option. It's the only safe option. The alternative is to flee. My suspicion is that it's already too late for that to work.”
Murphy says he understands that Jersey is strongly opposed to the legislation, but Guernsey and the Isle of Man are likely to “roll over and take it”.
Malcolm Couch, head of the income tax division at the Isle of Man Treasury would not comment on the prospect of a UK FATCA, but said that the Isle of Man has noticed that discussions on international tax cooperation have moved to a new place as it has become clear that FATCA will work.
“Discussions on automatic exchange of information have come to the fore,” Couch said. “The Isle of Man needs to determine its position appropriately as things move, but they are moving.”
The UK Treasury declined to comment, but said that it is assisting the Crown Dependancies and Overseas Territories in their response to FATCA.
International Tax Review expects an autumn announcement from the government, with the legislation coming into effect on January 1 2014.
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Is this and FATCA good news for Nevada and Delaware? Just asking.
They have to be tackled domestically..
If this is true it will change the rules of the game forever. I’ve always beleived that if offshore reform came it would be driven from Washington and if the Americans were determined the UK would have no choice but to acquiesce. In reality we have been a satellite of the US since the Second World War.
Max Keiser among others claims that the City of London and it’s offshore network has been the epicentre of many of the worst financial scandals over the past decades and that it helped to corrupt Wall Street which used to be much better regulated until it circumvented US regulation via its London back offices. This is a major reason why Clinton was pressured to repeal Glass Steagal with disastrous results.
Anyway I consider myself pretty left wing but I’m also Manx and I don’t want the finance industry shut down. We’d become like South Yorkshire after the pits were closed. However I don’t believe abolishing secrecy will be the end of the world for the Island or for low tax offshore jurisdictions. Offshore can have a useful role in tax planning. By reducing tax liablity it can reduce the commercial risk of an enterprise and enable it to go ahead thereby creating wealth and jobs. There can be a symbiotic relationship between the offshore world and the mainland.
But I’m all in favour of getting rid of secrecy. Secrecy can breed corruption like nothing else. There’s a role for commercial confidentiality but not for keeping your operation secret from the legitimate financial authorities in the jurisidictions with which you’re doing business.
The Isle of Man should welcome this. If Jersey wants to resist it they will lose and it will do their reputation no good.
Richard, I hope you don’t live to regret this premature endorsement. I remember you warmly welcomed Aaronson’s GAAR before you started criticising it only for David Gauke to quote your premature endorsement in Parliament. It seems naive to believe that the
UK can turn against secrecy to swiftly. I’d wait till I’ve seen the small prints.
Gauke quoted selected and knew it
And how do yo know I have not read the smll print?
I presume that this only deals with personal accounts and not with the much bigger issue of companies .. Or does it?
This is people
Richard,
I do get around on the web, I think you may have notice that…
http://sinoshipnews.com/news_content.php?fid=3w3c661
Would you mind explaining to a noob how this differs to the European Savings Directive that tax havens signed up to a few years back? That already enforced automatic declaration of interest and account holders etc to their home government. In what way does this newsletter legislation “kill” tax havens that the ESD failed on?
European Union Savings Tax Directive is interest only and only for individuals
This is for companies, trusts and partnerships too
And a very wide range of income
And is mandatory. Jersey does not do that even for interest
It’s a revolution if carried through
Let’s just see shall we, I predict Guernsey will still be a hugely prosperous Island long after Richard and TJ are a distant memory.
We are a low tax jurisdiction, not a tax haven and we are on all the white lists of international players. Individuals and companies will always want to trade with us and our business base is much wider than the EU. South Africa, Hong Kong, Singapore, Canada, India, the United Arab Emirates, China, Brazil lots of countries that want a foothold in the west to do business from without draconian government interference or bureaucracy.
We do very little US business in Guernsey and we could if we wanted not do any, so the US FACTA would not apply.
Dave Jones
Oh Dave, for someone in authority in Guernsey you really do let the side down, don’t you
a) You have to do FATCA or all banks with branches in the US will have to leave
b) You have no idea how much evasion there is
Why not drop the crap and talk sense?
Minister Dave Jones is an elected and very hardworking member of our Parliament. He has great interest in helping the underprivileged coming as he does from a background that began with being in care at Barnardos.He does much valuable charity work. He has worked very hard for everything he has. He is entitled to his views and does not “let the side down” or talk “crap”. I do not intend to enter debate with you ,however, as there is absolutely no point debating with someone who has such a clearly fixed (and ill informed) mindset and whose response to an opposite view is simply to be insulting.
Dave Jones is a minister in a tax haven – a place that promotes secrecy that might clearly permit tax crime to take place, albeit not in Guernsey
The whole world thinks Guernsey a tax haven for good reason – it is
And around the world people know you can’t help the poor by assisting the rich to avoid and sometimes evade their obligations to pay tax – both of which possibilities are assisted and supported by Guernsey
In that context Dave Jones comments were trite at best and certainly worthy of contempt – and that is exactly what I expressed
You excuse that by offer a trie excuse that he does valuable charity work – which is utterly irrelevant to the point I made
But I have the comfort of knowing I am supporting law, order, democracy and most especially those in real need
I don’t understand this post. We are doing FATCA. We are happy to be compliant.
We do not support tax evasion either. I think you could apply the comment of you don’t know how much tax evasion there is to any country. We have sound legal and regulatory controls to combat it. We take it very seriously. It is not something we wish to be associated with or be a part of. We make money without it – don’t need or want it.
You say you do lots of things….
“You say you do lots of things….”
Are you saying we engage in tax evasion Mr Murphy? The regulations and laws are not made up. There are regulatory bodies locally. We are inspected externally by the FATF and OECD and we are compliant with the FATF and the OECD lists has us on the white lists.
So no we don’t just say. We do operate in the manner I have described and it is verified. It is a poor argument to say otherwise with the evidence of zilch.
Why do yo think the US want to impose FATCA on you if they think you aren’t assisting tax evasion?
It’s not my opinion that matters
Let’s just use the evidence, shall we?
That’s totally disingenuous Richard. The US is imposing FATCA everywhere in the world. It is not specifically targeted at Guernsey or at any other finance centres. That is not “evidence” .
Sure that’s true
And they think it can apply to you
Which means they think tax evasion possible in Guernsey
That wsa being denied, and it was an absurd denial
Tax evasion is “possible” everywhere. I don’t see your point.
Some people don’t go out of their way to provide secrecy to help it happen
What was being denied was that anyone in Guernsey would deliberately facilitate tax evasion. You are trying to make it sound as if they do. Why would you attempt to do this?
Remove your veils of secrecy and then I will be happy to think otherwise
Remove the secrecy altogether
Then I will believe you
Richard we have the comfort of knowing that we are not billions of pounds in debt and do not owe anyone outside this island a single penny,
we have the comfort of knowing that we have out performed you on every level for forty years. We have low taxes and charges because we have no debt and we will be just fine.
We have done very well, mostly because we ignore advice from people and countries that can not run heir own affairs properly, especially where you live. the Labour govt you were so fond of trying to get to listen to you plunged the UK into bankruptcy probably on some of your advice and when you have driven all the wealth creators and entrepreneurs from your shores we will take some of them and prosper some more.
Good luck with getting out of the mess your in.
Dave.
I’m not sure I can be bothered to repeat my earlier comment…..
and “there is absolutely no point debating with someone who has such a clearly fixed (and ill informed) mindset”
You are entitled to your opinion
I think you will be aware not all agree with you
Unless, of course, you are of closed mind
No I do not have a closed mind Richard but I do have a duty to this Island and the people who elected me. We know that whatever happens in the future we will adapt and survive, we could become another Monaco the options for a small beutiful Island are endless.
I can tell you that since the screening of the TV programme Island Hospital my department at Housing is being inundated with requests on information from wealthy people who want to come and settle here. As I said people will always want to do bussiness with low tax jurisdictions and we will accommodate them in a well regulated, well governed Enviroment where bussines is encouraged not strangled at birth which it is across the EU and particularly in the UK.
Ah yes, you exist to serve the wealthy
By exploiting the poor
I think that says it all
Richard there is absolutely nothing wrong with low taxes, the freedom of people to keep the majority of what they earn is a right of all hard working families and individuals.
In the UK they tax people at levels that drive out people’s will to work or contribute as they feel they are mearly financial slaves to a wastful ,profligate government.
On top of that they are forced to contribute 50 odd million pounds a day to the EU, the most inward looking ,backward thinking, fraudulent, corrupt organisation in the western world. It is no wonder the British people are close to despair.
I have no problem if you want low taxes
I have massive problems with your secrecy
Dave, you say “the freedom of people to keep the majority of what they earn is a right of all hard working families and individuals”. That is all well and good, but most hard working families and individuals even if they kept 100% of their income could not afford to send their kids to school or pay their health bills unless the government is there to provide the service. That is why taxation exists, and you must never ever lose sight of that.
Sam
Those on income support have their healthcare costs paid for in Guernsey and there are good quality schools to go to provided by government.
When you ‘become like Monaco’ where will your cleaners and shop assistants live – in small boats in the Channel?
No we have social housing in Guernsey and some of it is really quite nice. Gardens and parking spaces etc where possible. No tower blocks. I do not believe were aiming to become like Monaco.
Mr Jones
“when you have driven all the wealth creators and entrepreneurs from your shores we will take some of them and prosper some more.”
& they’ll trade out of Guernsey will they ? Really ?
Or will they just route their existing business through a Guernsey office to reduce their tax liability ?
It is a rather important difference you know.
Ms Ozanne
you’re clearly v angry. Proof that the work of TJN is having effect !
I suppose most of us are uninterested in places like Guernsey except in that they facilitate international financial corruption and greed that damage societies elsewhere.
One can imagine the US pushing through such a measure and having the clout to show foreign jurisdictions it is in their interests to comply. But one does seriously wonder about the UK on both counts, what slips there will be between policy cup and lip. One wonders also whether measures such as these in the US and Europe could lead to a polarisation between the west and east with the ‘smart’ money fleeing east and ‘smart’ financial people in London (more than the US) hoping they can profit by riding the eastern tiger.
Of course east and west cannot in their present forms be economically separated and I have always thought there must come a point when governing classes in the west have to recognise that their interests and those of the financial class (with whom they are so interwoven) diverge and they have to make a choice between reforming taxation and driving democracy, if they can, into an even hollower shell.
These are just the reflections of an outsider.
Dave & Alison I assume are both in favor of letting the sunlight into your financial structures.
If they add true business value, and not just rather dodgy tax avoidance schemes, I assume you will continue to prosper.
Maybe the reason the British people are ‘close to despair’ is because large numbers of wealthy individuals are free loading on our society by fiddling their taxes.
You can look at newspaper and internet advertisements to see how they are doing it.
http://www.winchestercontracts.co.uk/
Does this look familiar?
We don’t have banking secrecy in Guernsey, which is why we are on all the white lists of cooperative jurisdictions, as I have said previously, we have been closely scrutinised by just about everybody, from the IMF, the OECD, the EU code of conduct group, the US Treasury who incidentally gave us lots of money for the cooperative stance we took on money laundering attempts by a Columbian drug cartel.
We are much better regulated than the UK and certainly the EU who haven’t had their own accounts signed off for 17 years in a row.
We do lots of legitimate business with many countries around the world and we are attractive because of our very low tax rates and the fact that business can work closely with government in a way that keeps us ahead of the curve in terms of adjusting quickly to world financial markets.
We do believe in banking confidentiality after all isn’t that what the UK data protection act is predicated on something we have willingly adopted.
Dave
Again, this is just simplistic rubbish
You have the right bits of paper in place – maybe
But tell me this – how many tax information exchanges have you ever done?
Right now your claim to be well regulated is akin to the book by the economist on 69 ways to make low, except he’d never had a girlfriend
The reality is no one knows if your claim is true
And the massive barriers of secrecy you erect mean we cannot know
Richard
We did not design the TIEA system – we have complied fully with what the OECD requested. If they wanted something different then something different would have been demanded. It wasn’t.
You seem to be reverting to your trick of demanding that we impossibly try to prove a negative. We have automatic exchange of information with the EU when we could have followed Jersey – why do you think we would have done that if we had anything to hide?
That sounds awfully like you may, or may not have stopped beating your wife
How is it rubbish?
We do have the right bits of paper in place to make sure of it like you say. 🙂
The reality is the situation is as Dave says. The claims are true All these bodies have said so. Why is this not good enough for you? Are you calling all these bodies liars?
The no evidence to the contrary demonstrates everything is above board.
Why you twist everything?
I have no need to distort anything
Read the Guardian today
Martin Chew
I must be missing something. What has Winchester Contracts have to do with the Crown Dependencies?
You make an interesting reference to “dodgy tax avoidance schemes”. Clearly there are schemes out there which go too far, but which are fully legitimate and operated within the scope of UK tax law, backed up by the UK’s legal system. Some really do bend the rules too far, and I’m not a fan of those, but the UK makes the rules and if it had better or different rules then it would be able to prevent such schemes. But that’s not what FATCA or “son of FATCA” or the EUSD are about – they are about countering tax evasion and neither Guernsey nor the Isle of Man seem to have any problem with that. Jersey on the other hand appears to have a massive problem with countering tax evasion.
I think it is completely inaccurate to tar Guernsey and Isle of Man with the same brush as Jersey.
Wrong: you are all secrecy jurisdictions by choice
And that’s why you are all in the same boat
“Thoroughly reviewed & tested by KPMG” about sums it up!
One wonders how this will pan out in the bigger picture….Here in the BVI we shelter a massive amount of Chinese investment wealth. Will this deal another blow to the already faltering Chinese economy ? I think we all knew that Damocles sword would one day fall…..
Are you sure you’re not misunderstanding this? If the UK forces the Crown Dependencies to sign Model I IGAs with the US then that means Cayman etc financial institutions will have to provide mandatory disclosure of US taxpayers’ accounts. It would have no effect on eg UK individuals evading tax by hiding money in those jurisidictions – FATCA simply doesn’t touch this.
Yes, I do think I understand this
The UK forcing information to the USA is one thing
Demanding the same data be given to the UK is something very different
And I believe that demand is on the table – with the UK getting the FATCA data as well, just for good measure
Do you think otherwise? With evidence?
Being objective and not knowing the personalties I would guess that Dave and Alison, although I think senior figures, don’t really know what goes on in the offshore finance industry. Perhaps not had any direct working experience in the industry.
It is easy to build wealth at the expense of others, but offshore is likely to take a knock soon and there will be wide ranging implications for the Islands infrastructure.
Tom
I think you will find that Advocate Alison Ozanne is a very longstanding and quite senior of the Guernsey Bar. To suggest that she doesn’t “really know what goes on in the offshore finance industry” beggars belief.
Why?
Sen Carl Levin created the MEGO principle to describe those who should know but don’t
The idea that the UK would refuse to pass its associated jurisdictions’ FATCA laws is ridiculous.
Taking the Caymans as an example, they would simply go to Washington and say “hey, we have taken every possible step to be FATCA-compliant, but the British Government is standing in our way”.
If that were to happen, the US would immediately deem the UK a non-cooperative jurisdiction on the basis that it is following a course of action that is against its own interest. Remember, it is “you are with us or against us”. In that case, the UK would be clearly against us.
As one of your readers wrote before, the UK is an economic pimple by global standards. This is the card you have to play. Not great.
Ridiculous?
Why?
Cayman is British. And that’s the very point that is being made in the negotiation taking place, I think
Dave Jones
On 30/12/97 my son was born at 26 weeks gestation, weighing 1’14”. During the next few hectic weeks nurses & Drs of the NHS wrought miracles every day to keep him alive.
Praise be, it all worked & he is now a healthy, young man.
If I tried to add up all the time spent by those nurses & Drs, all highly trained, & added in just the cost of juice for the various machines that were on 24/7, it would add up to well over £1m.
Did I have £1m, even if I’d sold our house in Nottingham ?
Nothing like. At best I could’ve paid, like, £250k if we sold our house & gave over all our possessions. I couldn’t get any more, there was nothing to get.
So, if people should, as you say, take responsibility for themselves & their families, my son would’ve died because we committed the ultimate crime of being insufficiently wealthy.
Thanks
William
Sorry William you have lost me ,I am pleased your son is now a very healthy young man but where did I say that people should “take responsibility for themselves & their families”?
In the low tax world you promote that follows, automatically
It’s why Christian Aid say, and I’m comfortable with them doing so, that tax havens like Guernsey kill children. Literally.
Just imagine if the Jersey Evening Post took its front page from information on a blogsite. Imagine further that they mention the name of the blogsite that is the source of the information. Imagine then that the government of Jersey was not quick enough to provide a spun comment in advance. Finally, imagine if people realised that the blogs are the only source of independent information in Jersey and that the official media are paid to play a tune.
Well done TJN for speaking the truth.
Thank you
The truth is what w tr to deal in
You’ve done it again Richard, first with the scoop, the facts and the truth. You said we’d have a £100 million black hole, you were right, you said the first version of zero ten would fail, it did.
Now you say the UK is threatening it’s own version of FATCA on us and you’re right again.
I do enjoy telling friends and colleagues what you say, arguing with them that you’re most often proven right then they laugh at me.
Oh what a smug smile I had yesterday afternoon when the JEP was printed.
I haven’t actually seen the JEP as yet
Anyone got a scan?
But thanks!
Richard
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