Last November I was involved in disclosing the news that the UK intended to impose FATCA style agreements on the UK's Crown Dependencies, and then its Overseas Territories. When exposed the story was shocking to many in all those places. But it was also true.
First the Isle of Man agreed.
Now the FT carries the news that Guernsey has too.
The pressure on Jersey is, inevitably mounting as it makes clear by its very obvious reluctance to co-operate that it is at the centre of tax abuse in these three islands, but the signs are not good.
But what of Guernsey ? The FT report says:
The UK government and the crown dependency are poised to conclude a deal under which British holders of Guernsey accounts or trusts will have to report any unpaid tax to the Treasury by September 2016 or face penalties of up to 200 per cent.
Tens of thousands of UK citizens have accounts in Guernsey, where UK-sourced retail and trust deposits amount to around £4.2bn, including those held by wealthy “non-domiciled” foreigners.
Under EU agreements, European citizens with Guernsey accounts must already declare interest payments. But the UK deal also requires balances to be disclosed.
That last point, of course, is crucial. But it's also much more important than that. Under the existing European Union Savings Tax Directive (but not the one to come, probably soon) the EU deal only applied to individuals. It did not apply to companies or trusts. The new deal with Guernsey does. It applies to all arrangements in which a UK resident person - dom, or non-dom - has an interest and requires its automatic disclosure from 2016 at the latest. In other words, at least as far as tax authorities are concerned (but not with regard to the many other abuses permitted by the secrecy that places like Guernsey deliberately create) tax haven secrecy is shattered.
Now we have to shatter the rest of the secrecy that Guernsey deliberately supplies to those seeking to break the laws of other countries.
And let's make no mistake here: this agreement tacitly acknowledges that Guernsey knows it has been used for tax evasion, and is still being used for tax evasion now, despite all the claims to the contrary by its politicians and others over the last few years. This is, not to put it too bluntly a campaign for tax justice, but it's amusing that the island authorities claim otherwise, saying:
The island's authorities said the move to greater transparency will give it an advantage over other non-compliant jurisdictions. Peter Harwood, chief minister, said the agreement would safeguard “our position and reputation as a respected, well regulated, tax transparent jurisdiction”.
If that's the case why didn't they adopt my Plan B, some time ago? Sorry Mr Harwood, but I just don't believe you: you were dragged kicking and screaming into this.
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Richard, please could you expand on the following?
“And let’s make no mistake here: this agreement tacitly acknowledges that Guernsey knows it has been used for tax evasion, and is still being used for tax evasion now, despite all the claims to the contrary by its politicians and others over the last few years”
You don’t have a settlement agreement if you don’t think there’s evasion to disclose
Isn’t that obvious?
But many have said Guernsey is clean and does not want tax evaders. Now there’s tacit agreement they’re present or this would not be needed
Your logic doesn’t make sense. You say in your reply to my point that it’s obvious that Guernsey are admitting to tax evasion by signing the agreement.
Yet in your original post that it’s obvious Jersey is admitting to evasion by not wanting to sign the agreement.
Both are true
I am saying Guernsey may have less of a problem that Jersey
The world is not black and white – just shades of grey
Richard
Data quoted by the FT and others, presumably by our own Government? Well, that’s hardly a convincing statement. I don’t think any of that is remotely “fact”, nor it is actually attributable.
A limited non-dom carveout? That’s your opinion. Those who are looking after non-doms certainly don’t share that view. If the industry here was hopping mad then your comments might be credible. That is NOT the case.
You’ve made up your own mind about the nature of Guernsey’s finance industry and you have always been wrong. The proof of the pudding will soon be very clear to see.
I wonder if you ever will stop spinning?
Not “spinning” at all. Just correcting inaccuracies.
What would be the point of “spinning”? What does that achieve? Look at where we are in a year’s time. Any loss of business as a result of this development will be minimal and there is plenty of new business out there to be won. We are NOT dependent on UK tax evaders with plenty to hide. Such evaders will have seen this coming a while back. They are already long gone. Do you seriously think they will have ignored the clear warning signs that Guernsey would not offer them any protection? They’d have to be pretty sense to have not moved a long time ago!
Respectfully – that’s what you all say
Richard
Guernsey is absolutely not “tacitly admitting” to anything of the sort.
You seem to have forgotten that the UK has said that it will prevent Guernsey from signing up to the US FATCA deal unless Guernsey also signs up with the UK. I think you will find that this is the key driving factor towards Guernsey signing the deal, rather than “tacitly” admitting to anything.
There are very few people in Guernsey who seem to be concerned about signing this UK deal. Why do you think that is? Jersey on the other hand….
And by the way, I think you will find that Guernsey HAS procured a carve-out for UK-resident non-doms.
The carve out is v small
And as for the rest of what you say, pull the other one….
Richard
Sorry but you are completely wrong – the carveout is massive for Guernsey. We couldn’t care less about UK res-doms as that’s just not a significant business loss for Guernsey. Non-doms on the other hand are hugely important. Why do you think we fought so hard for that carveout?
As you well know, there is no tax leakage to the UK from Guernsey looking after non-doms as the non-doms’ foreign income and foreign capital gains are not subject to UK tax anyway unless remitted (assuming they are paying the annual RBC after living in the UK for the requisite period).
In my view this is a very positive move for Guernsey. I have no doubt that you will eventually realise that Guernsey has had very good reason not to fear “son of FATCA”, once the non-dom carve-out had been secured of course.
Jersey has every reason to fear it. I hear that their retail banking sector is in a real flap at the moment (several thousand are employed in that sector and that’s why they will be dragged screaming and kicking to the table). If they’ve got any sense then they will take the deal that’s on the table as its the best deal they will get. Otherwise, they may get a deal without a non-dom carve-out because of their beligerance.
Respectfully – that’s nonsense.
The data quoted by the FT and others and presumably from your government shows non-doms are less important.
And there is only a limited non-dom carve out.
So all in all – just wrong, again
Small technical point – you are right that the Savings Directive doesn’t currently apply to companies, but it does apply to trusts, partnerships and other “residual entities” in the same way it applies to individuals.
Totally wrong
Sorry – that’s completely incorrect
Couple of points
I agree the non-dom carevout is limited and will have a detrimental impact, which is a shame for genuine users of the islands as long-term wealth planning. Patrick (above) is clearly unaware of the full details of the carve-out. As you will be aware, there is no issue in non-doms structuring wealth in the islands (or anywhere else) as long as they are properly reporting remittances. The ultimate impact of this is that those legitimate individuals will just choose another jurisdiction to structure their assets; it won’t increase the tax take for the UK but it will impact perfectly acceptable business in the Islands.
There has been much debate around the disclosure facility and, as one poster has noted, the agreement is being forced on the islands due to the UK threatening to otherwise prevent signing of the US IGA. For you to claim that signing the agreement (including the disclosure facility) is the islands admitting to anything is a rather stupid thing to say as ultimately they had no choice.
There are of course UK res-dom accounts in the islands but they are such an insignificant part of revenues that the impact will be insignificant. It is the non-dom issue that is the real problem.
One major issue that bugs me is that the info to be reported exceeds what UK institutions are required to report domestically, which seems rather unfair.
Overall, I think that the agreements could hit the islands hard, the increase in UK tax take will be tiny and it is ultimately, from a UK perspective, a PR exercise for the gvt to claim they are fighting tax evasion.
Thank you for your candour. Some is refreshing
Now mine: the reason why more information is required is simple: there has been a pattern of evasion and there s no relationship of trust
In that case shall we agree I am right?
And as has been stated by Guernsey, non dom accounts are a smaller part of the UK total, the big issue is the resident ones. Why the continuing misinformation?
This is not PR – this is about hundreds of millions of tax
Rather like the other issues of tax avoidance addressed today
And it’s about beating an industry dedicated to abusive tax practices
Top Hat A matter of opinion I think. I have seen the draft
non-dom provisions but I don’t share your pessimism. Why do you
think its such a problem for the compliant non-dom? Richard There
hasn’t been “a pattern of evasion” or “no relationship of trust”
between Guernsey and the UK for many years now. Quite the opposite
in fact. I think you are confusing us with Jersey. I agree with Top
Hat re the res-Dom / res-nonDom impact. I really don’t know why are
you so adamant that you are right and we are wrong. Nobody here is
concerned about losing lots of res-Dom business and for very good
reason. There isn’t much of that here to lose.
Patrick
I’m not sure that the draft agreement is publicly available yet (please correct me if I am wrong though), so I would rather note the specific details once it is released. If it has now been released, I’m happy to note my thoughts now!
Richard’s comment re it being hundreds of millions in tax – I am unconvinved. As stated by numerous posters, res-dom accounts are, I believe, a very small part of business in the CI. In that respect, I would be surprised if it was hundreds of millions in tax that relates to these accounts at all, let alone the ones that are not being reported.
There are well above 2 billion of UK resident deposits
If only part of those are evaded funds my estimate could well be right
Richard
But Guernsey is already exchanging information automatically with the UK, directly and under the EUSD (since 2011), and so interest on those £2 billion deposits (supposedly) owned by UK residents is already being reported. The scope for evasion re. that interest is very limited indeed.
Furthermore, based on current interest rates of 1% per annum (if one is lucky), then on £2 billion of deposits, the amount of interest likely to be earned is around £20 million per annum. Assume an average tax rate of around 30% (not all top-rate tax payers I would suggest), and the total UK tax liability based on that entire £2 billion would be only £6m per annum. In light of my first para above, it would be astonishing if more than 10% of those deposits were being undeclared (are that really that many stupid people around who have not regularised their affairs by now?), which would be around £600,000 per annum of evaded UK tax. At the most.
It is always very useful to put things into proper perspective….Guernsey banks really are not causing a big leakage of UK tax on offshore deposits.
Top Hat
It is not publicly available yet, and I cannot reveal my source, so we will have to bide our time on that one.
Oh come on
You and I know that the money in guestion can be hidden behind a corporation, trust or whatever to prevent information exchange
Please don’t tell us utter nonsense
And nothing is known of how the balances got there as yet
Perhaps we’re speaking at cross-purposes. A trust or partnership is, by definition, not a legal person, not taxed as a normal business and not a unit trust or other fund. This brings it under the so-called residual entity provision in Article 5(2) of the Directive, so a person paying interest to it is treated as a paying agent and has to report (or, to be more precise, a paying agent has to establish that it’s not making a payment to an individual or residual entity before it can proceed to not report).
Were you disagreeing that trusts/partnerships fall within Art 5(2) or making a different point?
Emphatically is has never applied to trusts or partnerships – a point the EU acknowledge
So yes, I disagree
Erica
The current savings tax only applies to trusts if the beneficial owner is immediately entitled to the interest upon receipt by the trust. As this scenario is extremely rare, the savings tax hardly ever applies to trusts, e.g. discretionary trusts out of scope. And it’s not Art 5(2), it’s 4(2).
Furthermore, Jersey and Luxembourg, et al, allow all paying agent upon receipt (trustees) to opt out to be treated as a fund. This further allows tax planning. This will soon be halted.
Furthermore, Jersey and Guernsey illegally exempts all funds less than 15% debt claims. This is a home country rule and this exemption can only be granted by the country where the fund is based, not Jersey or Guernsey!
Furthermore Guernsey and Jersey illegally exempt UK non-doms from the savings tax. This will be corrected soon. LU was taken to the ECJ over this matter and they quickly lost.
Thanks Mark