The European Union Savings Tax Directive is being amended
There’s a very good web site that explains what the amendments are all about. It’s technically very good. I recommend it to all who are interested.
FT.com / Currencies - Greek rescue speculation helps euro bounce back.
As the FT notes:
Concerns over Greece’s fiscal position have weighed heavily on the euro in recent weeks.
This has been the cause of outright glee amongst the libertarian right. There’s nothing like a crisis for a state to keep them happy.
But now the penny has dropped in Europe and as the FT notes:
But the euro rebounded on Tuesday on heightened speculation that officials would announce support measures for Greece at Thursday’s European Union leaders summit.
It so happens I’m not a fan of the single currency: I’d rather have more rather than fewer currencies. I like the opportunity to price economies into work. But if you’re going to have one currency the reality is that support for all members is not an extra, it’s a condition of membership. So, for example, Germany has no choice but use its surplus to support Greece.
Finally it looks like that reality is dawning on Europe. About time too.
Fiscal unity then has to follow, of course. It’s the next logical step.
The EU has issued a notice saying:
In order to ensure direct communication between the banking industry, consumers and the European Commission, a Group of Experts in Banking Issues (GEBI) will be set up with the following mandate:
1. To give advice and opinions on the policies and possible legislative measures of the EC in the field of banking (including capital requirements, supervision, conglomerates, bank accounting, crisis management, and deposit guarantee schemes);
2. To provide information, forecasts and analysis concerning the background, and possible impact of banking policies and legislative proposals on various stakeholders.
The requirement for membership?:
- proven knowledge, competence and experience, including at European or international level, in the field of banking regulation.
-commitment to European issues and the internal market in financial services, ability to talk to relevant industry and public entities, willingness to commit time, neutrality and fair judgement;
- interest in formulating policies in banking regulation to respond to the challenges created by the financial crisis;
And the reward?:
Members will receive no remuneration for their duties in connection with the activities of the expert group, nor will they receive reimbursement of travel and subsistence expenses in connection with their attendance at meetings of the group.
So what will we get? Bankers talking to bankers and saying stakeholders want what bankers want.
I despair.
The EU / EC should:
a) Allocate seats to stakeholder groups
b) Fund them
c) Make clear they can issue minority reports if need be
d) Provide them with technical support.
Then we’d have meaningful debate. Right now there will be none.
FT.com / Columnists / Wolfgang Munchau - What the eurozone must do if it is to survive.
Wolfgang Muchaus says amongst other things:
[T]he EU should at some point revisit the now almost totally decaffeinated proposals for financial supervision. What started off as a deeply unimpressive set of recommendations by the De Larosière committee ended up further diluted as it proceeded through the EU’s legislative mills. The financial system remains the single biggest threat to the long-term stability of the eurozone economy. Fragmented financial regulation makes no sense in a monetary union and is potentially lethal.
But is that what finance wants? Maybe they don’t want a Eurozone?
But it’s also fair to note the FT reports today that:
Greece will be told this week to cut public sector wages and improve tax collection under a European Union initiative to prevent its financial troubles from destabilising the eurozone.
Greece has an appalling record in collecting tax going back over many years. The reality that states that fail to collect tax will in due course suffer major crises, and a threat to their democratic well being must be faced. Of course it can be argued that in Greece this is the result of a massive shadow economy, but the failure to tackle it is the culture of neo-liberalism that has promoted the idea that the state is harmful.
The evidence that neo-liberal economics is the cause of the problems we’re in grows daily. What we can be sure of is that it offers no solutions at all.
The Channel Islands trust industry has come out fighting in response to an attack by Austria’s finance minister, who reportedly accused providers of promoting investor secrecy.
Ahead of December 2’s ECOFIN meeting of European finance ministers, at which political support for changes to the EU Savings Directive will be sought, Josef Pröll is said to have demanded action against trusts, and singled out the Channel Islands in particular for being responsible for helping mask the identity of settlors – those who set up the trusts – and therefore evade taxes.
Pröll has been quoted as threatening that Austria would use its veto on the proposed broadening of the directive unless trusts were included.
The exact meaning of his comments is unclear, however. Trusts are already included in the proposed broadening of the directive.
Some commentators believe there may be a hidden agenda aimed at extracting further concessions from the UK in relation to its trust sector in exchange for Austria giving up a withholding tax system that it currently operates under the EUSD.
Looks like dog eat dog.
And this has to go forward.
Lloyds facing £54m tax bill after HBOS ruling | Business | guardian.co.uk .
Lloyds Banking Group, which is 43% state-owned, has failed in its latest attempt to avoid a £54m tax bill.
In a new ruling last month, the judge, Howard Nowlan, disagreed with HBOS’s argument that the scheme was set up for commercial purposes, saying that emails shown to him “all confirm that this project was the acceptance by Treasury Services of a marketed tax avoidance scheme”. The bank said it would appeal the decision.
In May 2003, HBOS Treasury Services held various financial derivative contracts with the American insurer AIG, which had to be bailed out by American taxpayers at the height of the banking crisis last year. Keen to reduce its credit exposure to AIG, HBOS agreed to pay £2.2m to the insurer in return for AIG agreeing to monetise the swaps for £180m.
HBOS set up a new subsidiary called Dorus Investments, which was registered in the Cayman Islands to avoid UK stamp duty, and transferred the swaps to Dorus, which was then sold to Swiss Re for £150m.The scheme was designed to roll a £54m corporation tax liability into Dorus in the expectation that, the buyer of when Dorus was sold, the buyer would “somehow manage … to make the liability evaporate”, the judge said. “Treasury Services would then share the tax benefits with Swiss Re.”
HBOS Treasury Services thus recognised a deferred tax asset of £54m and, as a result of the transactions, recorded a pre-tax profit of £9m rather than a loss of £2.2m, the judgment shows.
The judge said he found it “absolutely untenable for it to be suggested that the eventual profit that it was hoped and expected would be made in this case was to be made in any way other than by avoiding the tax that would [otherwise] have been chargeable on a direct re-couponing of the swaps with a third party”. Of four disputed issues, Nowlan determined one in favour of the bank and the other three in favour of HMRC.
Good news.
Avoiding tax is not a business objective. It is abuse. Good to see this recognised.
Tax call: Jersey will not act in isolation » Business » News » This Is Jersey.
Classic pig headedness and unethical conduct from Jersey here:
JERSEY faces renewed pressure to disclose tax information about Island bank accounts to other EU countries.
The Foot Report into offshore finance centres has recommended that Jersey set a firm date for introducing the European Union Savings Directive (EUSD) – which would mean that the Jersey tax office would automatically disclose interest earned in Jersey bank accounts held by EU residents to their national tax authorities.
Both Jersey and Guernsey have opposed the move, saying that to sign up to the EUSD before their competitors could damage the finance industry.
Jersey’s current position is that it will do so when everyone else does – when there is a ‘level playing field’ – but the report states that Jersey should get on with it, and calls on the UK to put pressure on other countries to sign up too.
The European Union Savings Tax Directive has one objective: the ending of tax evasion.
The withholding option with no information exchange allowed as an interim measure under the European Union Savings Tax Directive permits continued tax evasion by the EU resident holders of bank accounts in Jersey. My information suggests at least 50% pof account holders deny their own government information on their income from Jersey bank accounts. It is inevitable that the vast majority will do so because they are tax evading. But Jersey will do nothing to stop this obvious criminal abuse of other countries’ tax law.
This is classic secrecy jurisdiction behaviour. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction. They do in addition 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.
The withholding option under the European Union Savings Tax Directive is such a veil of secrecy.
And then Jersey has the cheek to say it is transparent. The exact opposite is the truth - and it is not chance that is the case - it is deliberately so.
On this occasion Michael Foot and I are definitely on the same side.
FT.com / Germany - German industry warns on tax cuts.
Germany’s main industry lobby group has sounded the alarm over the tax cutting plans of chancellor Angela Merkel’s new government, warning that priority should be given instead to bringing the country’s spiralling deficit back under control.
The comments on Sunday by the president of the BDI business association highlight growing concern that the centre-right coalition in Berlin will jeopardise Germany’s reputation for fiscal prudence by pushing ahead with sweeping tax cuts.
Two things:
1) Soend, don’t cut - it will work better
2) Germany has to spend - it’s surplus is a problem for Europe as a whole
But good either way to see sanity from business. Will the politicians listen?
I have written extensively about the fact that the Crown Dependencies do not comply with the requirements of the EU Code of Conduct on Business Taxation. For those not familiar with my history on this issue – I was actually engaged by the States of Kersey to advise on it in 2005 – and got sacked for my efforts having caused a minor constitutional crisis along the way before being so. My report to them is available, here.
My advice was simple then: what Jersey planned did not comply. The same was true of the Isle of Man, I argued. Guernsey, maybe less so. And I have been consistently proved right for one good reason. The Code was designed to prevent the existence of tax ring fences which meant beneficial tax arrangements were offered to non-residents denied to residents.
Jersey and the Isle of Man, in particular, thought (using he abusive logic so well known to their local lawyers and accountants) that they’d just avoid this requirement by moving the location of the ring fence. Instead of offering two rates of tax on companies – zero per cent for offshore companies and 20% at the time for locally owned ones they claimed they introduced just one rate of zero per cent, for all but some banks who would (and the EU agreed this was acceptable) pay 10%.
That may have been acceptable to Europe bar one small point: as both governments realised this would mean that everyone ion the islands would incorporate and payment of tax would become entirely voluntary. And, like all governments, the administrations in the Crown Dependencies really don’t like their own taxes being avoided. So they introduced a new scheme whereby locally owned companies have to either distribute at lest 60% of their income as dividends, forcing local owners to then pay tax on the dividend – or if they refuse to do so then they are deemed to have done so and the company must pay the tax due by the local owner whether they like it or not.
To anyone but a tax abusing lawyer it is abundantly clear that this is a tax on the profits of locally owned companies which does not apply to those companies owned by people elsewhere – and is therefore a ring fence of exactly the same type as that which the EU Code sought to abolish. I told them so, loud and clear. i told the Isle of Man that as well, loud and clear. But Jersey didn’t like what I said so they recruited a flat tax supporting, libertarian hater of government of alls sorts and friend of the Cato Institute in the USA called Richard Teather – who works part time as a senior lecturer in tax at Bournemouth University to the undoubted misfortune of its students – to replace me. And no doubt he told them that all was fine with what was proposed, for they went ahead.
Except all was not fine. I have this morning been sent a copy of a letter dated today issued by Terry Le Sueur – Chief Minister of Jersey. In it he says:
On the back of the annual Crown Dependencies dinner hosted by Lord Bach from the Ministry of Justice, the Chief Minister of Guernsey and myself met yesterday with Stephen Timms at HM treasury. We discussed how the economic crisis is rapidly changing international and European norms for business taxation, much of which has been widely reported in the press. The views of the EU Member States seem to be evolving, and the UK felt that other Member States are increasingly unlikely to accept their stance that the fiscal regimes in the Crown Dependencies are fully compliant with the EU Code of Conduct on Business taxation. We have worked well with the UL’s support in implementing zero-ten corporation tax system, and the meeting also provided a useful opportunity to update the UK on plans to review our fiscal strategy. It is clear that we will need to continue to work in partnership with the UK on engagement with EU Member States so we can maintain a viable and competitive tax system supported by our European neighbours.
Let me decode that. First, the UK has withdrawn its support for Jersey is what I think that says. The reality is that if the UK is not willing to support the Crown Dependencies in the Code of Conduct Group then they can’t make the claim they are compliant to that Group because the UK is the only spokesperson they have go there, and I think this is what has actually happened. I think you can safely assume the same is true for the other Crown Dependencies. And of course the reason for the UK doing this is obvious: it is no longer willing to promote Jersey to the EU when Jersey is willingly and with open arms welcoming to its shores companies claiming to be leaving the UK for tax reasons, as most of those who have claimed to have left the UK this year have done. Why should it?
Second, this throws the whole fiscal regimes of Jersey and Guernsey into the same nightmare scenario that I forecast yesterday is about to erupt over the Isle of Man – again as foretold by me several years ago. All those governments had more than adequate warning – albeit, as far as I can see from me alone with support from my Tax Justice Network colleagues – that they were heading for the nightmare of running illegal and unsustainable tax systems, and we have been proven right.
Third, this means Jersey has put itself in the position of running an enormous fiscal deficit to pursue a tax haven policy only to find that the policy is illegal, must be altered – and cannot be changed to maintain what Senator le Sueur calls a ‘competitive tax system’ – by which he means one where non-residents pay nothing – without making that deficit much, much worse.
Which means we now face the prospect of all three of the Crown Dependencies going bankrupt rather sooner than I expected, about which in will try to blog later.
For now though, I do wonder whether Jersey should be taking issue with Teather.
And given I was right all along, if they’d like to call I’m still available to offer advice – if the fee is right.
Tory turmoil over EU as Ireland says Yes to Lisbon treaty | Politics | The Observer .
Three things to say.
First, although there are massive problems in the EU (the CAP, the fact that it gives capital priority over labour and much more, inclduing the need to enhance accountability) I’m delighted the Irish said yes. We need regulation at this scale to take on business abuse. And ultimately it is the dispute resolution mechanism that still may just prevent war when the crisis of the environment really hits.
Second, the reaction shows the complete nonsense that the Tories are a party - the two sides openly loathe each other even more than the labour Left hated Blair.
Third, let’s hope the Euro-sceptics deliver mayhem in Manchester. That will really open the political agenda.
