As the FT notes this morning:
Dozens of big and medium-sized UK companies are rushing to set up offices in tax havens such as Jersey, Malta, Ireland, the Netherlands, Luxembourg and Switzerland to take advantage of a policy introduced by the British government in April.
The policy, which creates an “ultra competitive” 5.75 per cent tax rate — a quarter of the full rate — for subsidiaries in tax havens that provide finance for other parts of a multinational group, has alarmed fair-tax activists. And it comes despite promises by David Cameron, UK prime minister, to crack down on tax avoidance by multinationals.
The enthusiastic uptake of the policy means it could end up costing more than the expected £325m a year, say advisers. The rules may end up being tightened. “The political risks are rising,” says one adviser.
Cameron and Osborne might argue that they had to adopt such a policy in the light of the EU's attitude to controlled foreign companies, but the low tax rate was never required by any such pressure. This scheme, which will result in a haemorrhaging of tax revenue from the UK, was created by choice and shows that Cameron & Osborne are dedicated to tax competition, a philosophy so closely related to a belief in tax avoidance that the two are for all practical purposes to be considered as part of one single mind-set.
Cameron & Osborne says they're opposed to tax avoidance.
If that's the case they fail to evidence it in their actions and I take the evidence of action as the true indication of belief in this case.
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How can this be tax avoidance if legislation has been specifically set up to to facilitate this.
This is a new policy, is obviously the intention of the legislature and therefore ipso facto cannot be referred to as avoidance. Therefore, neither Osborne nor Cameron can be regarded as tax avoidance advisers. No advice needed, the legislation makes provision for this and it is intended to be acted upon.
Just like an ISA.
It is bad legislation
It undermines the tax law of the Uk and other states
I’ll call it abuse of you like
If its legislation that has been created for a purpose, and the company is using it for the intended purpose, isn’t that called compliance rather than abuse?
No
Abuse can be done by countries as well as companies
Hence why tax havens are in the wrong
That’s why I can’t get behind your constant use of democracy as the reason tax avoidance must be stopped, because as you state here you could have a democratically elected government in a Country with full democratic support that creates tax law YOU think is wrong and therefore must be changed because of other Countries!
That is not democracy, that is mob rule and bullying.
A Country has a duty to its own population and interests before others, otherwise it is just pretending to have a free society.
A country is itself a part of a community
And it has a duty to them as much as to its own citizens
I think you’ll find there’s quire a lot of moral teaching on that point
How can it undermine the tax law if it is part of the tax law? Avoidance and competition are not the same thing.
The same as tax havens set out to undermine the law
If the UK is a tax haven it is seeking to undermine the law elsewhere
Richard you first have to identify what a Tax Haven is.
This from Guernsey’s Former Treasury Minister and later its Chief Minister.
Letter to the FT.
Sir
The so-called crackdown on “tax havens” has an important element missing from the debate – a definition of what constitutes a tax haven.
In order to aid those struggling with a description let me demonstrate what a simple task it is to piece together a definition of what a tax haven is not.
A tax haven is not a place that has never had banking secrecy; not a place that has voluntarily signed up to automatic exchange of tax information; not a place that regulates trust and corporate service providers and certainly not a place that has a corporate tax regime that has been given the all clear by the European Union.
It remains an inconvenient truth for the G8 members and others, that well regulated smaller international finance centres such as Guernsey are not, by any credible measure, tax havens. A clearer definition of what a tax haven is, will bring far greater clarity for all of course, but with it even greater inconvenience for some.
In the meantime Guernsey will, if the history books are anything to go by, continue to exceed each set of international standards that are imposed on it, by those who cannot meet them today and may never in the future.
Once the raw politics are stripped bare it should be clear from any objective test or comparison, that Guernsey is part of the solution to global tax evasion, and not part of the problem.
Lyndon Trott
Chief Minister of Guernsey 2008-12;
Minister for Treasury and Resources 2004-08
This is sophistry
As is now well known the issue is secrecy that permits abuse
That is why the term secrecy jurisdiction, which I defined, is now widely used
Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Trott seeks to play semantics to permit continued abuse. It ill becomes him
I deal in substance
Guernsey is very firmly part of the problem – not least as a jurisdiction captured by finance with the intent of perpetuating its abuse
Depressing, but not surprising. If the government is serious about stopping tax avoidance, they should stop saying that tax competition between states is a good thing, and start supporting the position that states have a right to collect tax from businesses.
Richard
The beneficial owners of companies are known to the Guernsey authorities and can be exchanged with other governments under treaty. The same is not true of companies incorporated in many other jurisdictions, including most of the G8 who have no idea who owns most of the private companies registered in their jurisdiction. Clearly,using your logic, Guernsey is less of a secrecy jurisdiction than the UK or US for example and most informed commentators readily concur.
Importantly, Guernsey has an EU compliant corporate tax regime. The consequence of tax neutrality in Guernsey is that companies invariably end up paying taxes elsewhere, like the UK. Zero/ten transferred 50 million pounds straight across to the UK Treasury by way of illustration. It didn’t have to be that way, if the UK authorities had chosen to object!
The reality is this; Guernsey is, in the words of the IMF one of the very best regulated international finance centres. In the words of the OECD, Guernsey is one of the worlds most tax transparent jurisdictions.
The IMF and OECD don’t deal in semantics. Although it could be said that in the absence of a global network of double taxation agreements with smaller jurisdictions like Guernsey, the G8 nations might!
You really should stop peddling this rubbish, when it is clear we are much better regulated than most including your country
So you get one thing right -except no one can ask under treaties because the real ownership is hidden from view to everyone but you – meaning that the standard you claim you reach is of no use to anyone
And that’s exactly what I mean about you being a secrecy jurisdiction
You deliberately create a veil of secrecy behind which abuse can and no doubt does happen – as everyone, the IMF and OECD included, says is the case
Sorry – but you are just kidding yourself and no one believes you
Should we not remember ‘the golden rule’ do unto others as you would be done by. The whole exercise of tax avoidance or evasion centres around the question ‘why should I be moral?’ if I can get away with not being so at an advantage to me. The answer must be – yes mate, you carry on but you will have to live a life of isolation and castigation. I think that is how Thomas Hobbes saw the solution in Leviathon
Quite so
I think this raises some very fundamental points about tax, democracy and the rule of law. If laws are passed that have constitutional validity in one country then how do we rank them against laws or aspirations in other countries?
I’m sure I’ve read comments on this blog from people saying that the UK should go it alone in tackling tax avoidance, act as a sovereign and democratic country, and ignore any possible legal arguments based on membership of things like the EU. But what approach do we take if the UK has itself passed this sort of legislation, with Parliamentary support (which is all you need in the UK to get laws passed)?
Can it be tax avoidance to comply with domestic law, even if that law runs counter to wider aspirations or even international laws and treaties?
It may be the Government is contradicting itself, or working against wider international aspirations, but is this not the outcome of being a sovereign country?
Agency is not a licence to abuse
Tax competition is not tax avoidance. Hopefully, the current G8/OECD clampdown on tax avoidance will succeed, so that governments can compete fairly again for tax revenue. At that point, the TJN’s colours will become clear: as an organisation that favours global co-operation to impose high taxes.
All competition has to permit the possibility of failure
Do you want failed states?
In whose benefit are they?
You have the odd title of Tax Justice Network.
I agree with Paula, your not so hidden aims are very clear you want high taxes in every jurisdiction regardless of the profligate governments that collect them and the criminal waste of people’s money, not much “justice” there then?
If you really are for Tax Justice, you would want lower taxes and you would start a campaign attacking wasteful governments and their appalling treatment of their citizens as little more than fiscal slaves.
Also as far as the Channel Islands are concerned you are being proved wrong about them time and time again, it seems to me that the label that you put on them is your personal hatred of these jurisdictions rather than the business they legitimately carry out.
Toby
If I am wrong on he channel Islands why does the UK government think it will raise £1 billion from cracking open their tax abuse?
It may not – but it will raise hundreds of millions I am sure
If that’s being wrong I would love to know what being right is
As for Tax Justice Network – please find where we say we want high taxes. What we do say is we want countries to have control of their taxes free from tax haven interference and we want everyone to pay what is due. I don’t think you’ll find that’s the same thing. As democrats we have said the ballot box must determine rates
I think it’s safe yo say everything you said is wrong
Richard
Toby, you and Paula are talking nonsense. The TJN and others campaigning for tax justice are trying to get certain individuals and organisations to stop avoiding paying tax by routing the profits they make through secrecy jurisdictions. In doing so, they will also make it much more difficult for criminals to hide their ill-gotten gains, and for terrorists to acquire weapons.
There’s plenty of evidence to show that this is exactly what secrecy jurisdictions have allowed. The tone of your post, Toby, shows the usual right wing libertarian attitude that government is fundamentally bad and has no right to collect tax.
Actually though, as Richard has pointed out, without effective government and the rule of law, you don’t have an effective market, prosperity, or justice. Those who make their money through economic activity in countries with government, but then seek to avoid paying tax on it are freeloading off those who do pay their taxes i.e. they are cheating.
Much of what they do in Jersey, Guernsey and the IOM is perfectly legitimate business that has nothing to do with the UK ,it is business from around the globe and Guernsey in particular has no banking secrecy laws it is tax neutral.
What TJN seem to despise is any low tax jurisdiction and I go back to my original question to Richard, which is why if you believe in tax justice do you not attack those governments that levy unjust levels of tax against their people? And before you say its democracy, remember that the previous Labour government and this present coalition were elected on a very small percentage of the vote
We have no idea if most business in the CDs is legitimate or not – opacity prevents us knowing
We do not believe there is an unjust level of tax passed by a democratic government that does not seek to undermine the tax systems of other states – high or low
If you are opposed to democracy why not say so?