The extraordinary response from the UK's tax havens to Ed Miliband's demand that they create public registries of the ownership of the companies that are located in their jurisdictions is to say that the sanction that he has proposed is not tough enough. The message could not be more clear. They are saying that they will ignore the reasonable demands of a UK government so that they can continue to make available the secrecy that supports tax avoidance, tax evasion and a multitude of other crimes including money laundering and people trafficking unless they are forced to comply.
Perhaps as astonishing is the fact that the Conservative Party seems all too keen to queue up beside them.
In both cases rather than deal with the very real issues that the opacity of tax havens deliberately creates for governments like that of the UK in upholding the law those places and Conservative politicians would instead prefer to say that until a big enough stick is waved at them they will ignore any threat and will instead continue to make money from facilitating corruption.
The result is that more serious sanctions have to be threatened. Numerous are available.
First, we could legislate for these places. It was decided we had the right to do this in the 1970s in the Kilbrandon Report and nothing has changed since. We remain wholly responsible for these territories internationally and they are considered UK territory for international legal purposes. As such we can, of course, legislate for them. We choose not to do so if they act responsibly but have the right to do so if they do ignore reasonable requests or harm our foreign affairs, as their facilitationof tax abuse undoubedtly does. And for those who doubt our right to do this, please note we also have the right to impose direct rule if we wish, as we have done in the case of the Turks & Caicos Islands at present. This is our back stop: comply, or we will make you do so. No one would want to do this: everyone has to understand it is possible.
Second, we could impose far tighter money laundering regulation on these places to simply slow down the flow of funds to and from them by demanding that they be subject to much higher controls.
Third we could withdraw a wide range of concessions they currently enjoy. So, for example, the Channel Islands and Cayman stock exchanges could have their recognised status for tax purposes stripped from them. Or we could require that tax be withheld on all interest payment made to these places. And we could could sanction any organisation seeking financial services regulation that put arrangements in place to get round such measures. We could also require that Jersey, Guernsey and the Isle of Man be removed from the BACS bank clearing system. These are ecoinomic sanctions. They hbave worked against Russia. They certainly could against our tax havens.
So, the blacklisting that Labour proposed was a polite request. But if these places do not cooperate plenty more options are available, up to and including sending gunboats, which we have the absolute right to do. It just requires Labour to get tough. And the tougher they got the more popular they would be. The tax havens might be wise to take note. As too might the Tories.
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Where else in the World do you see a Public Listing of the Beneficial Ownership of Companies? Its utter nonsense and you know it.
The UK is to have one
If you think beating corruption is utter nonsense I do not
As you are aware the UK is one of the largest and dominant tax havens in the world and has yet done nothing change its tax regime and nothing to regulate CSPs or TSPs.
Other jurisdictions do not have a “non-dom” regime that encourages disparity in tax between residents and non-residents. Further several other jurisdictions have already regulated CSPs & TSPs and ensure that beneficial ownership information is available to all competent authorities.
The UK must tackle its own issues first.
Of course I am aware the UK is a tax haven
Haven’t you noticed the UK and I saying so, often?
But I do not think we need to deal with problems sequentially
Only someone who doesx not want them to be addressed would say so
Wouldn’t it be just great if the next thing which Ed promised was to get rid of non-dom status?
Yes
When the UK leads by example and provides a Public Register of Company Beneficial Owners then other places can be encouraged to do likewise.
Until then this is a ludicrous request.
We are doing that right now
The law is being passed by March
Places like the Isle of Man will ignore the reasonable demands of a UK government so that they can continue to ignore corruption and make available the secrecy that supports tax avoidance, tax evasion and a multitude of other crimes including money laundering and people trafficking, because that is what makes their clients rich, them rich and their victims increasingly poor – not to mention starving and possibly dead…
When you have more luck than us you will be a better man Gunga Din.
Just because it does not exist yet does not mean that we should not try.
Why is it that so many of us just seem to bend over and accept things as they are?
The game is up – the world has just undergone a costly economic crisis and there is now a possibility of change because there has been one too many of these crises. That’s the new context.
May I say a little something on Non-dom status.
The changes will come no doubt, mores the pity!
Ten or so years ago America did away with Non-dom status.
Before that we would see many many American Engineers and Specialists plying their trade in the Far East; -Hong Kong, Malysia, Phillippines etc.
You don’t see them anymore.
You may say who cares? But I think America is the looser because they are loosing the skill set and the experience those Engineers gained from working overseas.
Now of course the American companies are forced to run their business in the Far East using local staff. But these staff move around within Asia and so the American Parent and America is still loosing out big time. Over time they will just become un-competitive in the region.[we see this happening now!].
Asia, now and into the future is a dynamic place so I suggest for the Americans doing away with Non-dom status may have pleased the liberal left of communism, but the American economy and people are really the loosers.
The UK has many pre-eminent Design Engineering and Construction Companies and they continue to be very successful in China and the Far East generally.
It’s a multi billion pound industry.
Why in the name of sanity would anyone want to destroy that position.
Often times I think the Liberal Left have a death wish – not for themselves but for the rest of us.
The US has never had non-dom
Bermuda has had one since the 1940’s….
No it hasn’t
It is not public
I may have called it wrongly on the terminology, but they changed something.
It used to be their citizens paid tax in the country they were working in and so were not required to pay the usually much higher rate in the USA.
The law was changed so that they paid tax in the US on their workd wide income. [That killed their working overseas stone dead!].
If you do away with Non-dom status in the UK will you not be doing the same thing?
And that will put an end to UK Citizens being able to work overseas, will it not?
The US changed nothing of the sort that you suggest
You are very simply wrong
If I may ask, why are you against Non-dom status?
There is a whole section on non dom in the categories list
Go and read
Beneficial ownership info would be helpful for public. Alsoit would cause huge capital movements. Colonial money, narco money, corruption money, banking fraud money all need to stay undercover!
What are the chances of the USA taking serious measures to repatriate the profits of the corporations ‘domiciled’ in Bermuda?
To get an idea of how big the problem is, type ‘SPX Index’ and right-click to list the 500 biggest listed corporations in North America, by ticker or by RIC. Then list the ISIN codes, and count the ones that start ‘BM’ instead of ‘US’.
I mention this because tackling tax evasion in the British Overseas Territories means tackling Bermuda. And that, in turn, means taking sides in the economic war waged by America’s owners against America’s people.
That will need serious support from Washington.
Obama is on the case already
On a related note: just about everyone who works for hedge funds in London is employed by ‘service companies’ run out of brass-plate offices in Jersey and Bermuda.
I have no idea how much NI (and regular income tax) is lost to HMRC through such fictions. It’s a nice little earner for the Islanders.
I suspect that other industries are at it, too.
And London could shut it down at nine o’clock on Monday morning if we chose to do so.
The practice is, in fairness, being tackled
That’s good to hear.
Good in and of itself; and it’s also an administrative ‘shot over the bows’ – yes, we can take action when you collude with fraud and tax evasion – that warns of more serious action against greater offences.
A suitable encouragement to voluntary cooperation, without vulgar allusions to gunboats.
Sadly, very sadly, I fear that all those stable doors left open in the mid and late 20th means that all the horses have bolted and are now over the hills and far away in terms of global financial movements and systems. Add to that the astonishing pace of technical change in computing and allied systems it may be that there is no real hope of either catching the horses or stabling them ever again. It is likely that the amount of will, vigour of purpose and willingness to play hard ball against it is not and cannot be there given our present political and administrative arrangements. Whatever we think about it and detest it I think we are too late.
‘Sending gunboats’ !? To do what? Shoot everybody who won’t do as they are told.
Unbelievable
To uphold law and the right of democratic nations to collect tax?
And to oppose those engaged in economic warfare?
Can you seriously not think of a better use of a gunboat of we have to have one?
If the UK did indeed “send gunboats” to its Crown Dependencies and Overseas Territories (by which I assume you mean slaughtering innocent civilians) it would find itself an international pariah. It would also incite many residents of those territories to become freedom fighters. You may not have learned the lessons of Northern Ireland, but thankfully those who govern the UK are not so foolish.
Oh for heaven’s sake: it’s a metaphor
And a widely recognised one
I’m sorry to be rude but this comment is definitely a case of ‘colonic irrigation of the mouth’.
I hope he used mouthwash afterwards.
OK smartass – what would you have gunboats do?
No – not a metaphor as all other options were identified by RM
Max
‘Smart -ass’ – oh…………so you’re American then (or a Brit wanting to be one – we’ve plenty of them)!! How quaint.
I should have known – you lot are you’re SOOOO literal – no wonder so many Americans have swallowed all that neo-liberal testicular material over the years – it’s because a real person (like an ex actor as president) has made those promises! Oh wow of course!!
Who needs the bible or the bill of rights when you’ve got advertising eh? And Ayn Rand!!
Mind you, lets face it – how else could the so-called ‘American Dream’ survive when the facts have been telling you that the party’s been over for years.
And yes old chap – you are right – I am smart (it’s smart ARSE by the way – an ass is four legged mammal related to the horse) but then so are many others – smart enough to work out that markets and neo-lib economics does not work. Dream on ‘buddy’.
Two further points worth adding, Richard. First, the reaction of the secrecy jurisdictions demonstrates that there are many entities (be they multi-national companies, extremely rich individuals, or territories – The City would be another example), who nowadays believe they are too powerful/influential to be governed. It is, of course, no accident that these entities are in the main related in one way or another to finance and banking – the sector of western economies recognised as ‘too big to fail’.
Second, the reaction of the Tory party is entirely consistent with a point I made in a comment to one of your earlier blogs this week. That the Tory party’s interest in being in government is fundamentally to do with advancing and protecting the interests of the 1% and big business. Anything the vast majority of Tory politicians ever say about anything else – such as the NHS, for example, – is simply an aside to either draw attention away from this obsession, or as a secondary mechanism to further advance their primary objective (e.g. the re-franchising of east coast mainline has, in the Tory view, nothing to do with the needs and requirements of passengers, whatever the odd (sic) Tory politician may say).
I have to say that for once Ed Milliband has drawn a clear line in the sand to differentiate Labour from the Tories. He must now continue to hammer home the fact that asking commercial organisations and other related entities to act ethically and to both the letter and spirit of the law, or to legislation that a future Labour government may implement, is not an attack on big business but a fundamental requirement of the function of a democracy and of a free and fair capitalist system (e.g. it creates a level playing field, as you always emphasise).
Of course, if the representatives of big business and related entities such as tax havens continue to squeal and complain at such a reasonable approach it seems logical to me that we then need to ask whether the environment in which these organisations/individuals/entities operate has become so tainted and corrupted, so underpinned by practices of dubious ethical and moral standing, that much more far reaching and fundamental reform is required. That the citizenry of this country might see this to be so, through the smoke and mirrors that have been so carefully constructed to obscure this rottenness, is what big business is really worried about, and thus, so are the Tories.
You are in the same space that Prem Sikka was in at a talk he gave this morning
That’s a compliment indeed, Richard. Thanks.
Withholding tax on interest payments to the tax havens is not a particularly dire threat, given we do so already…
Not on most payments we don’t
Interest is most certainly subject to withholding tax at 20% paid to these jurisdictions – it is on all cross-border payments subject to treaty relief (which is not available under the limited tax treaties we have with tax havens).
What do you mean?
Inter bank payments are not subject to action
This exemption only applies where the bank is subject to UK tax on trading profits. So no tax is being lost.
Yes it is
Tax witholding is lost
And the same is true when interest is routed via CI stock exchange
If not the places would cease to be tax havens overnight
if you mean the exemption for payments by a UK bank in the ordinary course of its business then yes, it can apply to payments to tax havens, but it would be eccentric for someone in a tax haven to have a UK bank account. This is certainly not “most payments”.
And all inter bank payments have tax deducted do they?
Mr Murphy,
If these territories were to create registries, most of the companies or entities currently domiciled there would simply dissolve and re-incorporate or re-constitute in a jurisdiction where no such public disclosure exists.
The most natural destination would of course be the United States, where several states (SD, WY, NV, DE) allow corporations to issue bearer shares, and where any legislative attempt to force states to create a system of registries, including Senator Levin’s Incorporation Transparency and Law Enforcement Act, stand no chance under Republican leadership in Congress.
Best,
MR
So we pick them off one by one
But we will get them all in the end
This strategy is in line with the thinking on a solution to global warming.
We got to start somewhere; so we will start anywhere!
You are flogging a dead horse and you will die of exhaustion!
Our economy will go further down the tubes, if that’s possible, all the while others get stronger and stronger.
I am all for cleaning up the system but it is now global and you don’t want to be too unilateral on this.
As I have noted ove the last day or so, I am very used to being told I am wrong when it’s clear I am not
You’re wasting your time here
Richard,
This direct approach, in dealing with our possessions, is long overdue, and welcome. It is time that these populations understand and comply and participate with the burden we all share throughout the dominion.
I would not say there is a right or a wrong on these matters.
As with all things when you are dealing with the behaviour of people it becomes a judgement call.
Weighing in the balance; the benefits of your actions against the unintended consequences or perhaps unavoidable consequences of their reaction.
You may have the moral high ground but not the muscle to pull it off.
British Business when you are done may be worse off not better!
Jersey has nothing to fear, its all hot air from people who envy the success of its finance industry which is recruiting loads at the moment and making wads.
Remember Richard when you predicted our dear Jersey would go bust this year.
Well that was a load of cobblers in the end wasn’t it, so why should anybody take anymore of your scaremongering seriously?
The Jersey budget is dire and getting worse
I was right
I understand the move to disclosure as a point of principle and an example to others, but surely tax havens will just move to someone else’s jurisdiction?
And how exactly will China and Russia play ball?
So we pick people off one by one
Do we say it’s not worth prosecuting a speeding motorist because another may still speed? No, of course not: we do it even though we know that in itself it will not stop the problem
And as for Russia, that proves sanctions can work
The problem is of course that no sanctions can be applied towards the United States, which as one previous contributor noted, is now the preferred destination for those seeking to incorporate in secrecy. They are simply immune to this type of pressure.
What will happen when all trusts, companies and other entities now based in Cayman or Bermuda have upped sticks to Miami?
See also Nick Shaxson on this topic. http://www.financialtransparency.org/2015/01/26/loophole-usa-the-vortex-shaped-hole-in-global-financial-transparency/
It is interesting to see on one blog all your distaste at the bullying and threats to Greece from the EU over enforcing the EU’s interests while at the same time your intense desire to crush the Crown Dependencies with whatever it takes!
Frankly it is no more than we are used to with your wavering attendance to Democracy and Freedom completely disposable if people don’t do what you want!
One government is trying to work with a democratic mandate
The others are trying to support corruption
Please tell me you can spot the difference
Ouch!
Many here consider this action punitive against the population of these territories. They assume that these large financial service sectors benefit the general population. In fact it is highly unlikely to beneficial to the population.
The amount of money involves corrupts democracy. The industry does bring investment – sufficient to win over electorates and tame the politicians. However, this investment is often in the form of grand developments (resorts…) that don’t benefit the general population – in fact, often they cement the dependency on illegitimate international interest.
The OECD Group Forum on tax transparency has rated most UK overseas territories and crown dependencies at the same level as the UK, the US and Germany. The Isle of Man is actually rated higher.
http://www.oecd.org/tax/transparency/GFannualreport2014.pdf
(scroll down to page 27)
Ed Miliband’s main “threat” seems to be that any jurisdiction that doesn’t comply with his demands will be reported to the OECD to be placed on an “international blacklist”.
What do you think the chances are that this will in fact happen?
This is all rated on the paperwork of law
Not the reality of practice
But I would add, the UK is way below par and I wish Ed Miliband had siad he would do smeothing about that
I asked you what the chances were of the OECD doing anything – anything at all – in response to Ed’s “demands”. I take it you agree with me that it will do precisely nothing.
There is that risk
That is why I have proposed other sanctions
I am not the author of this policy from Labour
Why do you not mention that Bermuda has had a public register of beneficial ownership since the 1940’s and so is far ahead of the UK? The bottom line is that the UK tax regime does not capture tax where it is earned but depends on the place that a company is incorporated. It is not reasonable to expect Bermuda or any other so called tax haven to collect tax for the UK or for any other jurisdiction. Instead they need to reform the way they tax profits.
It’s utter nonsense that it has any such register
http://www.financialsecrecyindex.com/PDF/Bermuda.pdf
It’s not nonsence, it’s impossible to incorporate a compnay in Bermuda without providing details of the ultimate beneficial owners. i will accept that the register may not be public but that does not mean that the information is not collected which puts it way ahead of many jurisdictions. It has also entered into over 20 Tax Information Exchange Agreements with countries such as France, Germany, Holland, Australia and New Zealand.
The point that you have failed to address in your response is why offshore jurisdictions should collect taxes on behalf of the rest of the world or adapt their tax systems to accommodate the rest of the world? The UK etc should reform their tax systems to collect profits where they are made. However this would take significant multi national cooperation since no country would want introduce such a system alone. Instead it’s easier to bleat about so called tax havens.
I corproation data is not ongoing data
And it is not public
So it is a million miles from what has been demanded
And you are indeed talking complete nonsense
If what I am saying is just nonsense, can you explain why Bermuda was the first offshore jurisdiction to be put on the OECD’s “white list” for jurisdictions that have substantially complied with internationally agreed tax standards?
Substantially
To some degree companies avoiding tax internationally is a big issue but let’s look closer to home, not at commercial companies but at the government itself, particularly the NHS….. there are countless thousands of nurses and support staff being employed in the NHS who do not have NHS contracts. They are employed nominally by service companies who in turn employ them through separate owned employment agency companies. What happens is that the NHS pays the agency whatever the agreed rate is, this is then reduced for profit and passed to the owned employment agency…. the trouble is the payment is so low between the two that the employment agency goes ‘bust’ owing PAYE and often VAT . It’s a scam that the govt is quite well aware of but does nothing to close down. It could close it down very easily. This isn’t a political point, it started under labour and continues under the current lot… the issue is when the govt starts deliberately eroding its own tax base you really have to wonder who is conning who… the same nudge , nudge , wink , wink game is played in every govt department.It might seem like a good wheeze to department heads ( who save money nominally) but it’s really just a plain and simple con. If costs were properly allocated then the true cost of public services would be revealed as being very much higher , as it is they are artificially reduced by this internal tax con… ministers of both sides know about it and have been actively encouraging it for years. It is the taxpayer which suffers.
Let’s try to stop our own government deliberately eroding the tax base before we do anything else… it’s just not healthy… but of course it’s never talked about.
It is being talked about
Unite have just made a submission in the issue to HMRC
You have to wonder why it takes a union to do this when it has been going for ten plus years. Our own governments ( labour and coalition) have been at it for ages and it’s just plain and simple wrong.
This goes right to heart of the horrible politics we have today where none of them can seemingly act decently. Labour know this is going on because they started it , when they started it the conservatives and the lib dems didn’t squeal because they thought it was a jolly good wheeze and a good way of seemingly ‘reducing’ departmental budgets and showing the government was delivering a more efficient service. When it finally comes fully to light the budget hole is likely to be enormous….. all because governments wanted to selfishly cling to power by publishing good news and were prepared to do some pretty dodgy things to achieve it…. remember this is not only the NHS , it is happening in every govt department.
It has now reached ridiculous proportions….. tax take to one side… on a human level our politicians have created a monster whereby people could be working in the NHS for years without pension provision or even decent pay levels.
Re your mails with Frances above. In Bermuda beneficial ownership is provided at all times…not just when the company is incorporated. All beneficial interests of 10% or more in any company must be declared. Approval has to be sought from the Monetary Authority and all the info is already disclosed under tax treaties. I have no sympathy for tax evaders but I cannot see why this is not enough. Perhaps I am missing something here? The tax authorities in the UK and US etc have full access to the beneficial owners of any company they wish to look at without cause. This is true elsewhere. Please explain why it must be public?
The OECD does not agree
Sorry but I take their word, not yours
The arguments for public registries have been widely published
I do not rewrite them on demand
The OECD does agree… though it said more could be done to ensure that things were in compliance. I’d send you the link but considering your response to my quite reasonable question…I won’t bother.
So you’re happy to refer to the OECD when it suits you?
I refer to comments above:
The OECD Group Forum on tax transparency has rated most UK overseas territories and crown dependencies at the same level as the UK, the US and Germany. The Isle of Man is actually rated higher.
http://www.oecd.org/tax/transparency/GFannualreport2014.pdf
(scroll down to page 27)
Ed Miliband’s main “threat” seems to be that any jurisdiction that doesn’t comply with his demands will be reported to the OECD to be placed on an “international blacklist”.
What do you think the chances are that this will in fact happen?
Richard Murphy says:
February 9 2015 at 2:38 pm
This is all rated on the paperwork of law
Not the reality of practice
Of course I am happy to refer to the OECD
It would be bizarre if I did not
It’s a fact that some of what it does is good
And some is not
Why on earth do you think there is a linearity about all things dividing them in to black and white? What an absurd world view
On the basis that other readers might benefit from knowing that you not everything you say is correct I have relented ….look at the OECD report…..Tax Co-operation 2010 Towards a Level Playing Field: Towards a Level Playing Field….Bermuda section.
Like many people I do not believe the generalised public statements issued by those who try to drive public opinion for their own selfish ends a la Mr Miliband. The UK Government can find out the beneficial owner of any company registered in Bermuda if it wants to. It needs no reason. It just has to ask.
I’m all for people paying their taxes but I loath the trampling of Government and its apologists in a headlong rush to be more righteous than each other. This is often to the detriment of both the cause they purport to support and those who might suffer from collateral damage.
TJN have looked at this in detail
There is no public registry in Bermuda
Why claim there is?
I am right
I acknowledged in a previous response that it is not public, however it exists and, as stated above by GW, information will be provided to tax authorities in the UK on request. This puts it ahead of many other jurisdictions. I would also point out that Bermuda has never had any banking secrecy laws and in a survey done a few years ago, it was harder to open a bank account in Bermuda than in the UK.
All may be true
But the demand was for public record
And you don’t do it
So stop offering misleading answers
The words “pot” and “kettle’ spring to mind. Can you name a jurisdiction that currently has a public register? Bermuda has said it will consider making its register public once the UK has set one up. This is why Miliband’s threat was unreasonable.
UK will have the law in place next month
And in action soon
Cameron’s original announcement was a demand for central registers, open to tax authorities and law enforcement agencies. Not an issue.
It was only several months later when Cameron announced that it was now to be a public register. That was when the goalposts were moved.
Too tedious to correct, yet again