Yesterday's decision by the House of Commons to impose public registers of beneficial ownership on the British Overseas Territories, but not the Crown Dependencies, is massively significant, as I have already explained. But the question has to be asked, what next?
The Overseas Territories
More than sixty years of UK policy of paying for the Overseas territories by letting them be tax havens has come to an end. They will not be havens anymore. Their secrecy has been shattered.
The UK will have to foot the bill: there will be a transitioning required for these economies. In places like the BVI, which has been dependent on selling abuse behind a veil of secrecy to fund itself, the shock will be big. Cayman, Bermuda and Gibraltar will also be heavily hit, and rightly so.
There will be loss of population: the transient professionals who largely staff the forms selling secrecy will leave these places quite soon, I suspect. The only constraint will be the time taken to wind arrangements up, and clients will be anxious to be out of there as soon as possible.
There will be loss of revenue: these places will have to tax more. But the UK government will also need to provide support: I have no difficulty with the aid budget being used for this purpose, and the need will be ongoing. It's a price well worth paying.
But look at the upside: these places are now much less likely to be sanctioned by the EU.
And look also at the upside: with finance declining the finance curse that has stopped anything else of value growing will abate: new, real, local and useful economies will emerge; of that I am quite sure. People adapt to change, albeit with smaller populations in all these places, I suspect.
The Crown Dependencies
There will be much smuggery in Jersey, Guernsey and the Isle of Man this morning for apparently having escaped this measure. It is misplaced.
All three are on the European Union tax haven greylist. Expect that to go black if they do not follow the enforced move of the Overseas Territories: their failure to do so will prove to the EU that they are choosing not to follow the norms of best practice and sanctions will follow. The threat is very real already, and growing.
The UK will, in time-honoured fashion, arm-twist all three into complying.
All three will comply: they will do so to protect the myth that they have free will knowing that if they do not the Uk will legislate.
They too will then have to transition. I suggest they apply to be part of the UK. I would give them parliamentary seats. I would allocate them funds to ensure that they can create new industry and services. I would ensure that they enjoy the public services that local people expect. I would eliminate their massively wasteful governments. And I would expect there to be significant declines in population as the fly by night tax secrecy vendors sell out. But that will create a massive tourist rental income market for local property that will sustain the local economy: these are places worth visiting. Again, the finance curse will be lifted. And I strongly suspect that they will self-sustain themselves in due course on a new basis.
Alternatively, they could now adopt my plan B. That would require a brave financial services sector, but for one of them this could be a real win.
The City
The City will be cursing: they have loved dealing with the flows of supposedly anonymous money the tax havens have supplied, and will no more.
But the City is in for a shock already. This is a minor blip in comparison to Brexit.
And if the City cannot survive without dirty money then it should not be there at all.
No one should be shedding tears for any imapct on the City.
The UK
We can hold our heads up high. We have done the right thing.
We made transparency the new standard.
The risk of the UK being sanctioned as a tax haven by the EU after Brexit has declined considerably.
Our standing in the world should rise, considerably.
We should raise more tax.
And face less crime.
We should have fairer competition.
But let's also be clear: we have to get our own house in o0rder: Companies House is an utterly ineffective company regulator and we too have to do a lot better to ensure that beneficial ownership is really on public record on this country.
The EU
The EU has to take note.
It has to threaten the Crown Dependencies.
But it has to ensure that this standard is really met across the EU as well. Right now the EU's company registers are dire (many making Companies House look good: I am researching the issue and it is not a pretty picture). There can be no-grandstanding. When all EU countries deliver we can be happy, but right now they also do not. So it's time for action there too.
The rest of the world
A new standard has been set. And now the Financial Action Task Force has to take note. And that standard has to become universal with action against places that do not comply.
And let's be clear where the biggest problem is: it is in the USA. That is now the world's biggest seller of secrecy. And that abuse has to end.
Campaigning
The above makes clear that there is still much to do, and many battles still to be won.
And beneficial ownership is not the end. Then we want all accounts, unabridged, on public record. Only then can we really beat abuse.
Summary
This was a big day.
There is much to do.
But those shedding tears need to smell the coffee, and the rest need to take note: transparency is the new norm. You can't stop it.
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I don’t quite see why places where “…new, real, local and useful economies will emerge;…” should suffer more than a temporary reduction in population.
Amongst the fleeing population there must be some very skilled and experienced financial professionals. If rehabilitated, some of them could be usefully employed in HMRC and Companies House perhaps.
Received wisdom says poachers make the best gamekeepers. With nifty footwork and given the facility of modern communication some of them could even keep on living in the sunny climes they’ve become accustomed to.
There’ll be some bargains to be had in office real estate.
Couldn’t resist the link – http://criminalminds.wikia.com/wiki/Frank_Abagnale.
Many congratulations
I was dubious when you predicted this victory a few days ago. What surprised me was Andrew Mitchell’s part https://www.theguardian.com/world/2018/may/01/how-labour-and-tory-duo-teamed-up-to-win-tax-haven-u-turn-margaret-hodge-andrew-mitchell
I had him pegged as a typical uncaring Tory. My option of him changed dramatically after Jo Cox’s murder when he spoke so honestly and movingly about the tragic event. The sincerity and genuine grief was clear, such a rare thing in politicians these days.
I have to say he surprised me
We have met and I was not charmed
But he delivered
Interesting article in the latest edition of Private Eye about how Mr Mitchell receives £90,000 p.a. from EY for a few days work. EY being active in IoM and CI providing tax-efficient services.
Something has to pay for his legal fees incurred a little while back….
When there was all that hoo ha about Mitchell and the policeman I smelt a rat. Someone wanted him down and out. This sometimes points to someone who has integrity?
There are many aspects to this. The Constitutional defence for the CDs is of course wrong and history demonstrates it to be so time and time again. The CIs will be dragging out their “Charter of King John” again which never existed although they keep waving it about as a credible document.
That Parliament was not constrained so far as the BOTs are concerned was also significant – especially since many of the CDs finance businesses operate in those places too and so will have to make public the companies etc they have registered there. Often the tails of the same worms that appear in the CDs.
In fact, so far as I understand it all this the initiative is from the EU and Parliament was only trying to “urge” all the territories to form a public register as requested by the EU. That request will have to be sorted before BREXIT is finalised so the CDs question will have to be resolved within a few months. Unless the UK disowns the CDs – or they declare independence – the public register will have to be implemented throughout all the British territories – near and far.
The question of whether such legislation might be “imposed” by Order in Council or Act of Parliament will also no doubt be given a fresh airing over the coming months and the Duke of Normandy will be much in evidence but the outcome is inevitable. Doubtless too the old “post colonial” discussion will have to take place about whether all these small places can remain tethered to London but the fragile UK Government has already more than enough to do with BREXIT and other matters to be able to devote much serious time to this.
But the same old question about the welfare of the residents of all these small territories will remain too. They cannot all operate your “Plan B” and many have been battered by hurricanes and already have serious financial problems. The UK does not want to be faced with a further huge liability for all these “British” people. So if the public register is as damaging to the finance sector as predicted then there will be a substantial social and economic problem to deal with. The post BREXIT EU won’t of course be interested or liable.
Jersey is already experimenting with the growing of hemp as an alternative to the Jersey Royal spud which has its own pollution problems but that is not likely to replace the golden finance income.
“Plan C” anybody ?
Plan B could only work for the Crown Dependencies, and one at most I suggest
As for the rest, nice to have a realistic Jerseyman here
Christian Aid, in their February 2018 paper “Questionable Values” critiquing (and demolishing) the report written for the BVI by Capital Economics, say this:
“the UK Government needs to initiate a serious discussion about alternative economic pathways for the British Overseas Territories and Crown Dependencies. Alternative futures for offshore tax havens are not only vital for the poorest countries of the world that lose tax revenues each year to the offshore system, but also for the ordinary women and men in places like the BVI, for whom a secure future is dependent on the creation of robust, equitable and sustainable economies.”
Quite so. Trouble is, as Mike points out, Brexit is sucking most of the oxygen out of the room.
Apologies – this is all being done today – and that will be corrected now!
Hi Richard I’m loathe to write but the name Lars etc if you remove the L and put an h in the gap between first and second names……..
I suspect the trolls have a competition to hide objectionable names.
I just can’t be bothered to think their way
It’s gone
Thanks
What will happen should the names D. Duck and M. Mouse appear on the beneficial owners registry? How will real identities be established, and to the satisfaction of whom?
That is the problem
Companies House are going to run this and they are useless
This would appear to be an entirely cosmetic victory then, laws being meaningless without effective enforcement.
You ignore the behavioural consequences
People will not know if they will be =found out – and tend as a result to assume that they will be
And so do their advisers
Do you know how many local people in the OTs will be directly impacted as they are ‘heavily hit’, what tax rises there will be, rates of unemployment etc? Does anyone have a plan for new emerging economies? Has anyone proposing these changes done any analysis of the impacts, or as so long as the registers are public it’s worth the trade off so who cares.
None of your commentators on this blog seem in the least concerned about the impact on local populations.
I am a lot more concerned than Thatcher was for the miners
Or those in tax havens appear to be for those who have not got benefit payments because the government says it cannot afford them due to a lack of tax revenue, aided and abetted by abuse
There is inevitably an issue when bad/wrong practice is reformed resulting in a negative impact on local employment, social security, etc. It’s a reason why governments are too often fearful of positive change and the subsequent loss of votes. Classically the arms industry is promoted because it creates well-paid high employment. But a monetary sovereign government such as the UK can take both long and short-term investment decisions to deal with such eventualities. So what’s to stop it from providing compensatory aid to tax havens enabling them to create legal and sustainable future economies?
J A Rank says:
“Has anyone proposing these changes done any analysis of the impacts, or as so long as the registers are public it’s worth the trade off so who cares.
Have you shifted the thread to Brexit here, J Arthur. ?
I expect we can expect exactly the same assiduous level of planning has been undertaken.
My point was, as I’m sure you know, that the proposers of this legislation should have provided an analysis of the impacts not just on the ‘illicit’ funds but also on the local economy and population. Otherwise, the vote is taken in ignorance of the outcome, which, as you state Brexit is an example.
Why?
Everyone knew what it will be
Everyone knew we would pick up the tab
Next?
Richard, I’m not sure why you call their governments ‘massively wasteful’. Total government spending in the BVI for 2017 was less than 10,000 US dollars a head, compared with UK government spending on the UK population of around 12,000 pounds a head. As in the UK, about a third of government spending is on health and education. While the BVI spends comparatively little on pensions because of its younger population, on the other hand it has to spend considerable sums because of its lack of natural resources – for example nearly 10% of government spending goes on providing water. On the more general point of the UK providing more direct assistance to the BVI (and the other OTs), bearing in mind that total BVI revenues are in the order of $300m a year, then if the UK exchequer were losing more tax than that due to ‘arrangements’ conducted in the BVI which it could recapture by closing it down as a tax haven altogether, then it would be a rational policy to do so at the price of subsidising the entirety of government spending there….
I suggest you go to St Helier to observe waste
If I was them, I would promise to be as diligent in this matter as the UK is. (Ha!)
But it that is not acceptable to their financial services industries – for some islands in the Caribbean, customers in the US or elsewhere in the world might be more important than the UK or the EU – Plan C might be independence. That would be a brave choice.
I don’t think independence viable
UK law underpins all they do via the Supreme Court / Privy Council
Much of the law in Ireland, Canada, Australia, etc. and most of the Commonwealth (indeed, even in most of the US) is still based on English law. You don’t need appeal to the Privy Council to have the common law, a stable political system, and the rule of law.
I doubt the BVI, Cayman, etc, want to become independent and I’m not sure they could afford it. But perhaps they cannot afford to be ruled by the UK Parliament (without representation, I might add).
They need the Privy Council
You miss my point
Richard
Why would the CDs being blacklisted by the EU be such a disaster for them? Hardly any business goes to the CDs from EU countries (not enough to worry about anyway) except from the UK which of course will no longer be in the EU in a year’s time. Continental Europeans use Luxembourg, Malta, Cyprus, Austria, Switzerland and Liechtenstein. The CDs barely register on their radars.
I am struggling to see being blacklisted by the EU as being something to fear.
Then think a little harder and imagine how it helps for AML with any bank, anywhere
Only EU banks. There are plenty of others.
Richard
‘Everyone knew what it will be’
‘Everyone knew we would pick up the tab’
Maybe they (whoever they are) did – can you show me an estimated costing of ‘the tab’? Can’t find anything in Hansard.
We have no idea
So why waste time guessing?
It will still be worth it
Some things, like honesty, fair competition, the rule of law, the right of democratic governments to rule without interference (and tax havens have delegated legislatures, not governments), cannot have a value placed on them
[…] has come to an end, They will not be havens anymore. Their secrecy has been shattered,” said prominent tax campaigner Richard […]
[…] That all comes from here. […]
Richard, I have only just caught up with this. You say you have no difficulty with using the aid budget to deal with this. Well I am afraid thT I have considerable difficulty, and I am very surprised that you don’t. By your own argument, the affected territories are financially underwritten by the UK, but the aid budget is intended for tackling poverty either in low income countries or at least in middle income countries with large populations of the truly poor. To meet OECD DAC standards it has to do so; to meet the UN requested 0.7% of GNI target that all the major parties are committed to it has to do so; so to meet the Government’s commitment to that 0.7% target it has to do so. The International Aid budget is absolutely not there to be dipped into to fix “domestic” financing issues. As you have pointed out any number of times the Government can just print some more money to fix s domestic spending issue, NOT spend the aid budget. You have come perilously close to adopting the arguments of the Daily Mail and Daily Express, and I hope that you will row back.
The aid budget is used for some OTs now
Without the artificial boost that relocated GDP gives these places may well qualify for aid
And in that case I see no reason to row back