The Bailiwick Express, which publishes Channel Island news, has reported:
A US sanctions-hit aluminium company linked to a controversial billionaire Russian oligarch accused of extortion and implicated in a murder is considering moving its financial centre away from Jersey.
Rusal — the world's second largest aluminium provider headquartered in Moscow - is currently incorporated in Jersey.
But the company's board is now looking to re-domicile to Russia, and is awaiting shareholder approval to make the move official.
The news comes as Jersey struggles to work out how to meet EU requirements that must now show that the substance of a company supposedly located in Jersey is actually present in the island. For the record, I don't know the events are linked. I am just saying it's possible.
And that's not just because those who know Jersey are aware of how little aluminium mining goes on there; those who know Jersey also know how little of substance of any sort there is in any of the supposed activities undertaken there, apart from the signing of the odd minute or two in the presence of a local lawyer, just to make it clear that someone had called in to the island for an hour or so to suggest that a decision had been made there when everyone knows that's a just a game offshore practitioners play.
This one has some way to run as yet. And I suspect that many more companies might move rather than jump through the new hoops Jersey is going to have to impose to stave off the EU sanctions blacklist which is otherwise coming its way soon.
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Many years ago I worked for the company secretary of a tobacco company. I remember the term “mind and management”, which was supposed to happen with Jersey businesses. Not sure if actual branches were established or whether just bank accounts were opened. I was able to conjure up the term when I did some temp work at a London international bank to help the manager struggling to find the right word on phone;o)
I’m sure the Code Group’s efforts will result in some relocations but I suspect this is not one of them. If Rusal just wanted to get away from the Code Group, it would be much easier to move to somewhere like Hong Kong. After all, that’s where it’s listed.
I’d guess that this is simply a result of Vlad the Bad quietly mentioning to his old mate Oleg that the offshoring of the Yeltsin era has had its day and its time to bring it all back home.
From the Moscow Times:
“Vladimir Putin signed into law this month a proposal to create Special Administrative Regions, offshore zones in Primorsky and Kaliningrad that will allow internationally registered companies to move back to Russia, while retaining tax benefits.”
So this is not about EU sanctions coming down the line, potentially, but is actually the expansion of the neoliberal project. There will be two ( maybe more ) special zones within Russia which provide all the benefits that the existing tax haven domiciles provide. There won’t be any mining for ore, or smelting going on in these SARs, that will still go on hundreds of kilometres away. The end game of all this is that every country in the world will become a tax haven or have a special sub-region of itself that is one.
As you’ve predicted for a long time, and had to keep predicting until it happens, Jersey is doomed, and following though on your reasoning, then so is Russia in the long-term.
The maps of the world will be re-drawn with little blobs from Delaware to Primorsky marked HHs for hell-holes.
call for “Jersey Jim ” Bergerac. He will sort it out.
This feels like good news!
And I note the fact that it is being reported by a Jersey media outlet. . Also the fact that some months back it was covered by the Jersey media that a number of Russians had moved into the island and that Abramovich was thinking of doing so. Abramovich however encountered the new hostility from HMG towards wealthy Russians following the Novichok poisoning cases, and decided to move to Israel instead.
Anyway back to this story. The matter of what to do about ensuring that jersey entities have “substance” is now out for consultation . . .
see here: https://www.gov.je/Government/Consultations/Pages/default.aspx
This is the gist:
Consultations
Introduction of substance requirements for companies tax resident in Jersey
We are seeking feedback from stakeholders on the actions required for the Government of Jersey to address concerns raised by the EU’s Code of Conduct Group (Business Taxation) regarding economic substance
Closing date: 31 August, 2018Type:White paperDepartment: Treasury and ResourcesDeadline for comments:31/08/2018
I am afraid I won’t have time….
Me neither..!
Back in December 2017 I posted on this blog to say that …
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The tricky bit is defining a business “without real economic activity in the jurisdiction”. If the business has employees doing a real job in the jurisdiction it would appear to satisfy the test that there is “real economic activity”. These “real jobs” would appear to be ones that further the aims of the business and would logically exclude professional directors and purely clerical work. This should protect major sectors like e-gaming, re-insurance, banking and others. It would hit the old brigade that engaged in providing companies, directors and clerical work relating to the operation of the company, a sacrifice the Crown Dependencies can probably live with.
—-
I was told that the soft test wouldn’t work like this, but it appears from the consultation document that my reading of “economic activity” was rather harsher than Jersey is now proposing. A small handful of significant sectors will need to show they have employees doing things, but many other sectors are being ignored.
I had originally thought that there would be a tax levied on the profits of companies without economic activity, but it appears they propose to simply strike those companies off.
We still need to see what the EU will say, but I would imagine this proposal has already been discussed with the EU. I don’t doubt that the goal posts will continue to move, but it appears that Richard’s desired end game could still be some years away.
In the meantime it appears there will be increased demand in the Crown Dependencies for people skilled in certain areas which may be good news for their workforces.
Jersey has a track record of not talking to the EU and ‘winging it’, rather like the May approach to Brexit where unworkable solutions are proposed as if they had a chance of success.
The Jersey Consultation Document suggests they have been speaking to the EU extensively, but it also looks like their proposal is little more than a rewording of the EU’s own Scoping Document released in June 2018.
They may have been speaking
But have they been listening?
I have opined for quite some time now that the whole brexit escapade was undertaken once the City understood that the UK veto was ineffective in stopping the new EU regime on transparency being put into place. The fall back was WTO terms, hoping to strongarm the EU into concessions. Using the social media, MSM and dodgy funding to effect regime change in the EU to achieve their ends. They succeeded with Macron but failed with Merkel and Italy. One last throw of the dice in Sweden with the dirty boys of brexit gang. Too late really to stop the implementation.
http://www.consilium.europa.eu/en/policies/anti-tax-avoidance-package/
I understand that my comment may well be considered political rather than economic. I think that Russia taking advantage of it by going all tax haven is hillarious. Good luck to them. But I can’t see the EU letting them get away with anything like the City has been doing.
I disagree
The drive for teansparency is coming from the OECD – the EU is a mere conduit
And we are not leaving the OECD or its influence
I am no expert Mr M, but i get the impression that the EU and OECD are not exactly on the same page. The EU may be more than a conduit and in the driving seat, where as the OECD appears to be trying to direct from the rear.
https://www.taxjustice.net/2018/03/21/press-release-european-commission-digital-tax-plan-is-a-nail-in-the-coffin-for-oecd-tax-rules/
If they are already diverting now, whence in the future? Thanks for your reply.
I agree their are issues: there always are
But the fact is that no Ione should think leaving the EU lets us off the transparency hook: it does not